Business Essentials, 8ce

Chapter 6: Managing the Business Enterprise

Business Essentials Canadian 8th Edition by

Ebert, Griffin and Starke ISBN 0134000099
9780134000091
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Chapter 6 Managing the Business Enterprise

6.1 Multiple-Choice Questions

1) Which of the following are managers?

A) President of IBM
B) Prime minister of Canada
C) Head of the business department at a local college
D) Shipping dock foreman
E) All of these are managers.
Answer: E
Diff: 1 Type: MC Page Ref: 123
Skill: Comprehension
Objective: 6.1

2) Top managers at Cortland are involved in the planning process, and they have just finished
setting goals for the company. What should they do next?
A) Develop plans to achieve the goals
B) Determine whether a gap exists between the company's current situation and its desired
situation
C) Assess the effectiveness of the plan before proceeding further
D) Implement the plans that are necessary to reach the goals that have been set
E) None of these
Answer: B
Diff: 2 Type: MC Page Ref: 123
Skill: Application
Copyright © 2017 Pearson Canada Inc. 6-1
 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

Objective: 6.1

3) Lenore is heading up a planning team at her company. The team has just completed the job of
developing plans to reach the company's goals. What should they do next?
A) Set new corporate goals
B) Determine whether a gap exists between the company's current situation and its desired
situation
C) Assess the effectiveness of the plan before proceeding further
D) Implement the plan that has been developed
E) None of these
Answer: D
Diff: 2 Type: MC Page Ref: 123
Skill: Application
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

4) Managers at Edson Corp. have decided to embark on a systematic planning process. What
should they do first?
A) Determine how well employees understand the current plan
B) Establish goals for the organization
C) Determine whether a gap exists between the company's desired and actual position
D) Develop plans to achieve the desired goal
E) Implement new plans
Answer: B
Diff: 1 Type: MC Page Ref: 123
Skill: Application
Objective: 6.1

5) The president of Bob's Barbecue is reassessing his company's goals with the expectation that
the company strategy will be modified. He is involved in
A) staffing.
B) planning.
C) directing.
D) organizing.
E) controlling.
Answer: B
Diff: 1 Type: MC Page Ref: 123
Skill: Comprehension
Objective: 6.1

6) Determining what a firm needs to do and how best to accomplish that is called
A) controlling.
B) staffing.
C) directing.
D) planning.
E) organizing.
Answer: D
Diff: 1 Type: MC Page Ref: 123
Skill: Knowledge
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

7) Which of the following best captures the difference between efficiency and effectiveness?
A) Efficiency means doing what the company's engineers want, while effectiveness means doing
what consumers want.
B) Efficiency means maximizing output, while effectiveness means maximizing profit.
C) Efficiency means doing things right, while effectiveness means doing the right things.
D) Efficiency means doing what production wants, while effectiveness means doing what
marketing wants.
E) Efficiency means working as fast as possible without regard to product quality, while
effectiveness means working more carefully and paying attention to quality.
Answer: C
Diff: 1 Type: MC Page Ref: 123
Skill: Comprehension
Objective: 6.1

8) The purpose of the four-part management process is to

A) determine what the organization needs to do.
B) create jobs for society.
C) monitor the organization's performance in order to ensure that goals are achieved.
D) increase employee satisfaction.
E) achieve the organization's goals of supplying various products and services to society.
Answer: E
Diff: 2 Type: MC Page Ref: 123
Skill: Comprehension
Objective: 6.1

9) When the CEO of Compaq Computers broke the company down into several smaller units,
each responsible for its own functions, he was engaging in the management function of
A) organizing.
B) staffing.
C) planning.
D) controlling.
E) directing.
Answer: A
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

10) Determining the jobs to be performed and how best to arrange the jobs into a logical system
is known as
A) controlling.
B) decision making.
C) management.
D) entrepreneurship.
E) organizing.
Answer: E
Diff: 1 Type: MC Page Ref: 124
Skill: Knowledge
Objective: 6.1

11) Organizing involves

A) developing an efficient plan for the use of time.
B) developing an organizational chart.
C) determining who reports to whom and what each employee does.
D) structuring the necessary resources to complete a particular task.
E) determining how best to use available material resources.
Answer: D
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

12) When Millie was appointed president of Goodcare Hospital, she noticed that the former
president had all the major functions reporting directly to him. She is analyzing the functions to
see how they could be restructured to be more efficient. She is engaged in the management
process of
A) planning.
B) staffing.
C) organizing.
D) directing.
E) controlling.
Answer: C
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

13) Guiding and motivating employees to meet an organization's objectives is called

A) controlling.
B) planning.
C) organizing.
D) leading.
E) staffing.
Answer: D
Diff: 1 Type: MC Page Ref: 124
Skill: Knowledge
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

14) The management process which involves interactions between managers and their
subordinates is
A) leading.
B) planning.
C) controlling.
D) organizing the jobs.
E) decision making.
Answer: A
Diff: 2 Type: MC Page Ref: 124
Skill: Knowledge
Objective: 6.1

15) Steve motivates employees by rewarding them with additional vacation time when standards
are achieved. Steve is involved in the management function of
A) leading.
B) controlling.
C) planning.
D) organizing.
E) It is not possible to tell with the information provided.
Answer: A
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

16) Doreen has been tracking product sales for McCoy Industries. She notices that sales of
surgical supplies have fallen off in the past six months and she is considering strategies to
reverse this trend. This is an example of what function of the management process?
A) Planning
B) Organizing
C) Leading
D) Controlling
E) Budgeting
Answer: D
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

17) Scott is the store manager at one of the Computers R Us retail stores. Each Monday he meets
with all the employees to review the assignments for the week and provide assistance for those
who need it. Scott is engaged in the management process of
A) planning.
B) organizing.
C) controlling.
D) staffing.
E) leading.
Answer: E
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

18) Scott, the manager of a Computers R Us store, in reviewing the sales results from last week
noticed that all but one employee was on target. As he contemplated how to fix the problem, he
was engaged in the management process of
A) controlling.
B) organizing.
C) planning.
D) directing.
E) staffing.
Answer: A
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

19) Cheryl is a newly appointed manager. She wants to do a good job with regard to the
controlling function of management. In terms of the control process, what is the first thing she
should do?
A) Adjust the standards
B) Continue with current activities
C) Compare performance with standards
D) Establish standards
E) Measure employee performance
Answer: D
Diff: 1 Type: MC Page Ref: 124
Skill: Application
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

20) The first step in the control process is to

A) establish standards.
B) determine the jobs to be performed.
C) determine what the organization needs to do.
D) measure performance.
E) define the problem.
Answer: A
Diff: 1 Type: MC Page Ref: 124
Skill: Knowledge
Objective: 6.1

21) At the end of the budget period, Mary compares actual performance against standards. When
she does this, she is performing the ________ function of management.
A) planning
B) organizing
C) leading
D) controlling
E) negotiation
Answer: D
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

22) Amy Madison has been tracking product sales for McCoy Industries. She notices that sales
of surgical supplies have fallen off in the past six months and she is considering strategies to
reverse this trend. This is an example of the ________ management function.
A) planning
B) organizing
C) leading
D) controlling
E) negotiation
Answer: D
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

23) Controlling involves

A) monitoring expenses and revenues to ensure that the company is profitable.
B) reviewing data to ensure that employees are doing what they are supposed to do.
C) reviewing all financial and productivity data to ensure that the company is achieving its goals.
D) monitoring the firm's performance and acting to bring it in line with the firm's goals.
E) ensuring that all policies and procedures are followed within a company.
Answer: D
Diff: 2 Type: MC Page Ref: 124
Skill: Comprehension
Objective: 6.1

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

24) Which of the following is correct with regard to the question of whether management is an
art or a science?
A) Management is clearly an art because it does not place much emphasis on quantitative
methods.
B) Because many management problems can be approached in ways that are rational, logical,
objective, and systematic, management is a science.
C) Because managers must rely heavily on interpersonal skills and on abstract conceptual
thinking, management is an art.
D) Management is partly an art and partly a science.
E) Management is neither an art nor a science; rather, it is a profession.
Answer: D
Diff: 2 Type: MC Page Ref: 125
Skill: Comprehension
Objective: 6.1

25) Vice-president, treasurer, chief executive officer, and president are found at the ________
level of management.
A) first-line
B) intermediate
C) top
D) middle
E) officer
Answer: C
Diff: 1 Type: MC Page Ref: 127
Skill: Knowledge
Objective: 6.2

26) The title "division manager" is an example of a ________ management position.

A) lower
B) middle
C) liaison
D) first-line
E) top
Answer: B
Diff: 1 Type: MC Page Ref: 128
Skill: Comprehension
Objective: 6.2

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

27) Middle managers can typically have any of the following job titles except
A) general manager.
B) operations manager.
C) plant manager.
D) production supervisor.
E) division manager.
Answer: D
Diff: 1 Type: MC Page Ref: 128
Skill: Comprehension
Objective: 6.2

28) A transit supervisor who monitors bus schedules, passenger safety, and the behaviour of bus
drivers is a ________ manager, while a plant manager in a manufacturing plant is a ________
manager.
A) middle; top
B) officer; supervisor
C) top; middle
D) middle; first-line
E) first-line; middle
Answer: E
Diff: 2 Type: MC Page Ref: 127-128
Skill: Comprehension
Objective: 6.2

29) A flight-services manager for a specific Air Canada flight is a ________ manager, while a
chief financial officer for a consumer products company is a ________ manager.
A) middle; top
B) officer; supervisor
C) first-line; top
D) middle; first-line
E) first-line; middle
Answer: C
Diff: 2 Type: MC Page Ref: 127-128
Skill: Comprehension
Objective: 6.2

30) Supervisor, office manager, and group leader are at the ________ management level.
A) middle
B) officer
C) top
D) intermediate
E) first-line
Answer: E
Diff: 1 Type: MC Page Ref: 128
Skill: Comprehension
Objective: 6.2

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

31) ________ managers are responsible for a company's system for creating goods and services,
while ________ managers are responsible for the development, pricing, promotion, and
distribution of products and services.
A) Marketing; production
B) Production; marketing
C) Financial; production
D) Human resource; marketing
E) Information; marketing
Answer: B
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.2

32) Mark is one of the managers who is responsible for getting his company's products from
producers to consumers. Mark is a(n) ________ manager.
A) production
B) operations
C) information
D) marketing
E) human resource
Answer: D
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.2

33) Rachelle is one of the managers responsible for hiring, training, evaluation, and
compensation of employees. She is a(n) ________ manager.
A) research and development
B) operations
C) financial
D) human resource
E) information
Answer: D
Diff: 1 Type: MC Page Ref: 128
Skill: Comprehension
Objective: 6.2

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

34) Leslie is one of the managers responsible for planning and overseeing the firm's accounting
function and publication of the annual report. Leslie is a(n) ________ manager.
A) marketing
B) financial
C) operations
D) human resources
E) information
Answer: B
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.2

35) The ________ managers are responsible for production, inventory, and quality control.
A) operations
B) finance
C) human resources
D) marketing
E) information
Answer: A
Diff: 1 Type: MC Page Ref: 128
Skill: Knowledge
Objective: 6.2

36) Mintzberg's research on managers showed which of the following?

A) Managers prefer written media.
B) Managers work under varying degrees of pressure, sometimes being very busy, and
sometimes much less busy.
C) Managers typically begin a task and then work on it until it is finished.
D) Managers have a preference for historical data rather than "live action."
E) None of these.
Answer: E
Diff: 2 Type: MC Page Ref: 129
Skill: Knowledge
Objective: 6.3

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

37) With respect to the concepts of management roles and management functions, it is correct to
say that
A) focusing on management functions is a more effective way to view management than
focusing on management roles.
B) the idea of management roles is more relevant for private sector companies, and the idea of
management functions is more relevant for government organizations.
C) managers who focus on roles have more highly satisfied subordinates than managers who
focus on functions.
D) management functions give us a good general idea of what managers do, while management
roles give us an understanding of the specific details of managerial work.
E) all of these are correct.
Answer: D
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

38) If a manager attends a subordinate's wedding, this is an example of the ________ role.
A) liaison
B) entrepreneur
C) figurehead
D) leader
E) disseminator
Answer: C
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

39) When a manager responds to a strike at a supplier, the manager is acting in the ________
role.
A) disturbance handler
B) liaison
C) monitor
D) resource allocator
E) leader
Answer: A
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

Copyright © 2017 Pearson Canada Inc. 6-13

 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

40) Ronald Koslowsky, a marketing manager at Wintron Co., receives a telephone call from
LeRoy Shelton, a marketing manager at Young-Times Inc. The two chat socially, occasionally
talking about different parts of their work. This is an example of a manager operating in
Mintzberg's ________ role.
A) disseminator
B) spokesperson
C) liaison
D) negotiator
E) resource allocator
Answer: C
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

41) Tom Smith Jr., a manager responsible for hockey stick tape production at StickStuck Corp.,
spontaneously tours the plant to check on what's going on. By so doing, Tom is functioning in
Mintzberg's ________ role.
A) resource allocator
B) monitor
C) figurehead
D) leader
E) liaison
Answer: B
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

42) Jack Leutens, senior manager of marketing research at Tromex Enterprises, calls in seven of
his subordinates to brief them on his recent research findings regarding new machinery that
might be relevant for Tromex. This is an example of a manager functioning in the role Mintzberg
called the
A) leader.
B) disseminator.
C) monitor.
D) spokesman.
E) resource allocator.
Answer: B
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

43) "Ms. Jensen, there's someone here from the radio station to interview you about the
explosion." Ms. Jensen is about to function in the role Mintzberg described as
A) monitor.
B) disseminator.
C) spokesperson.
D) resource allocator.
E) leader.
Answer: C
Diff: 1 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

44) Midge thought anxiously about how to position her company for the future. By so doing,
Midge functioned in the role Mintzberg called
A) negotiator.
B) spokesperson.
C) entrepreneur.
D) resource allocator.
E) figurehead.
Answer: C
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

45) "Hey Reg! I just caught two kids shoplifting! What do I do now?" the assistant manager said
to his boss, Reg Caluza. Reg was about to function in the role Mintzberg identified as the
A) spokesperson.
B) figurehead.
C) disturbance handler.
D) resource allocator.
E) monitor.
Answer: C
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

Copyright © 2017 Pearson Canada Inc. 6-15

 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

46) Cecil and Cyrus, two of Simpson's top employees, stormed into their manager's office. Both
were intent on securing approval from her for projects they were proposing for the company.
Shelly Simpson, manager at Soho, Howso, Tatso, & Associates, was about to function in the role
Mintzberg identified as the
A) resource allocator.
B) entrepreneur.
C) figurehead.
D) liaison.
E) monitor.
Answer: A
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

47) Burton Kinzel, vice-president of personnel at QVJ Corporation, sat down at the bargaining
table across from the leader of the union, Vladmir Ramonovitch. Burton's expertise in the
managerial role Mintzberg called ________ was about to be tested.
A) entrepreneur
B) liaison
C) disseminator
D) figurehead
E) negotiator
Answer: E
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

48) "Excuse me," the secretary began. "Don't you have a 3:30 appointment to present a gold
watch to Mr. Chung?" The manager froze in her tracks, realized the secretary was correct, and
immediately began preparing herself to fulfill the managerial role identified by Mintzberg as
A) figurehead.
B) leader.
C) disseminator.
D) liaison.
E) entrepreneur.
Answer: A
Diff: 2 Type: MC Page Ref: 129
Skill: Comprehension
Objective: 6.3

Copyright © 2017 Pearson Canada Inc. 6-16

 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

49) Mintzberg's research on managers showed which of the following?

A) Managers work at an unrelenting pace.
B) Managers work under varying degrees of pressure, sometimes being very busy, and
sometimes much less busy.
C) Managers prefer written media.
D) Managers have a preference for historical data rather than "live action."
E) Managers typically begin a task and then work on it until it is finished.
Answer: A
Diff: 2 Type: MC Page Ref: 129
Skill: Knowledge
Objective: 6.3

50) Technical skills are especially important for

A) middle-level managers.
B) members of the board of directors.
C) top-level managers.
D) company presidents.
E) first-line managers.
Answer: E
Diff: 1 Type: MC Page Ref: 130
Skill: Knowledge
Objective: 6.3

51) The ability to type, to create a spreadsheet, or to write a computer program are examples of
which basic management skill?
A) Decision making
B) Conceptual
C) Human relations
D) Time-management
E) Technical
Answer: E
Diff: 1 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

52) At what level of management are technical skills relatively unimportant?

A) Bottom
B) Top
C) Front-line supervisor
D) First-line
E) Middle
Answer: B
Diff: 1 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

53) The technical skills, human relations skills, and conceptual skills of managers
A) shift in their degree of importance as the manager rises to the top of the organization.
B) shift so that the technical skills become more important to the higher level manager.
C) retain the same degree of importance as a manager progresses "up the organization ladder" to
the top.
D) shift so that the conceptual skills become less important to the higher level manager.
E) shift so that human relations skills become more important than conceptual skills to the higher
level manager.
Answer: A
Diff: 3 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

54) All of the following statements about basic management skills are correct except
A) they include the ability to think in the abstract.
B) they include human relations skills.
C) they include time-management skills.
D) the emphasis on each skill remains the same regardless of the level of management.
E) they are skills that are needed by all managers.
Answer: D
Diff: 2 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

55) In his job, Marcus has found that the ability to think in the abstract, to diagnose and analyze
different situations, and to see beyond the present is crucial. Marcus must therefore possess
________ skill.
A) technical
B) intuition
C) conceptual
D) human relations
E) decision-making
Answer: C
Diff: 1 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

56) A study by Google of the "Habits of Highly Effective Google Managers" found that the top-
ranked managers were
A) strongest on technical skills, but also paid attention to human relations problems.
B) even-tempered bosses who made time for one-on-one meetings, and who helped subordinates
work through problems.
C) strong on conceptual skills and were able to envision the activities that needed to be carried
out in order for Google to be successful.
D) strong on human relations skills, but did not spend an excessive amount of time dealing with
subordinates.
E) strong on decision-making and time management skills
Answer: B
Diff: 3 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

57) A study by Google found that technical expertise ranked last among a list of eight "Habits of
Highly Effective Google Managers." What was at the top of the list?
A) Bosses who had a strong concern for social responsibility and ethics.
B) Bosses who completed their work in a timely fashion.
C) Bosses who did what they promised.
D) Bosses who were even-tempered, who made time for one-on-one meetings, and who helped
subordinates work through problems.
E) Bosses who protected their employees from harassment by managers in other divisions.
Answer: D
Diff: 1 Type: MC Page Ref: 130
Skill: Knowledge
Objective: 6.3

58) Selection of the best course of action in a particular situation is known as

A) organizing.
B) planning.
C) management.
D) decision making.
E) controlling.
Answer: D
Diff: 2 Type: MC Page Ref: 131
Skill: Knowledge
Objective: 6.3

Copyright © 2017 Pearson Canada Inc. 6-19

 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

59) Technical skills are especially important for Tim. He is likely a

A) first-line supervisor.
B) top-level manager.
C) member of the board of directors.
D) middle-level manager.
E) vice-president.
Answer: A
Diff: 1 Type: MC Page Ref: 130
Skill: Comprehension
Objective: 6.3

60) The basic management skill that is demonstrated in one's ability to think in the abstract and
to see beyond the present situation is ________ skill.
A) human relations
B) time-management
C) technical
D) decision-making
E) conceptual
Answer: E
Diff: 1 Type: MC Page Ref: 130
Skill: Knowledge
Objective: 6.3

61) Jim wants to apply the rational decision-making process to a management problem he is
facing. He has already recognized and defined the decision-making situation. What should he do
next?
A) Select the best alternative
B) Identify alternatives
C) Evaluate alternatives
D) Implement the chosen alternative
E) Follow up and evaluate the results
Answer: B
Diff: 2 Type: MC Page Ref: 131
Skill: Application
Objective: 6.3

Copyright © 2017 Pearson Canada Inc. 6-20

 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

62) Which of the following is correct with respect to the concepts of certainty, risk, and
uncertainty?
A) The majority of managerial decisions are made under conditions of certainty.
B) In a situation of risk, the alternatives are known, but costs are simply probabilities.
C) In a situation of uncertainty, the manager knows the alternatives that are available, but not the
outcomes that will result from a specific alternative.
D) There is very little difference between the conditions of risk and uncertainty because in both
the outcome is unclear.
E) Under a condition of certainty, profits are guaranteed.
Answer: B
Diff: 2 Type: MC Page Ref: 131
Skill: Application
Objective: 6.3

63) Marilyn is involved in making an important decision regarding the purchase of new
equipment for her company's only manufacturing plant. She has just identified several alternative
possibilities that will solve the problem that is facing her. What should she do next?
A) Select the best alternative
B) Identify alternatives
C) Evaluate the alternatives
D) Implement the chosen alternative
E) Follow up and evaluate the results
Answer: C
Diff: 2 Type: MC Page Ref: 131-132
Skill: Application
Objective: 6.3

64) When Boeing and Airbus were trying to decide how they should respond to the question of
how they could increase their international capacity, they were in what stage of the rational
decision-making process?
A) Select the best alternative
B) Identify alternatives
C) Evaluate alternatives
D) Implement the chosen alternative
E) Follow up and evaluate the results
Answer: C
Diff: 2 Type: MC Page Ref: 131-132
Skill: Comprehension
Objective: 6.3

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 Business Essentials, 8ce
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65) When Airbus decided to develop and manufacture a new jumbo jet to meet the demand for
increased international travel, it was involved in what stage of the rational decision-making
process?
A) Select the best alternative
B) Identify alternatives
C) Evaluate alternatives
D) Implement the chosen alternative
E) Follow up and evaluate the results
Answer: A
Diff: 1 Type: MC Page Ref: 131-132
Skill: Comprehension
Objective: 6.3

66) What does the term "escalation of commitment" mean?

A) As a project proceeds toward successful completion, managers make an increased
commitment to doing a good job
B) The actions that managers take as they try to get the outcomes they desire
C) As a project proceeds, managers become increasingly committed to it even if there is
evidence that it is not working out as planned
D) It refers to how much a manager is willing to gamble when making decisions
E) None of these
Answer: C
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.3

67) A study of 293 Canadian office workers found that ________ percent believed that office
politics was at least somewhat necessary in order to get ahead in their organization.
A) 11
B) 25
C) 41
D) 59
E) 71
Answer: E
Diff: 1 Type: MC Page Ref: 133
Skill: Knowledge
Objective: 6.3

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68) What is the primary purpose of setting a goal for an organization?

A) Determining if the firm is highly leveraged
B) Making workers think in quantitative terms
C) Identifying threats and opportunities
D) Assuring successes for the firm
E) Providing guidance and direction for all managers
Answer: E
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

69) Port Metro Vancouver's successful reduction of container "dwell time" illustrates which
basic purpose of goal setting?
A) Goal setting provides direction, guidance, and motivation for managers.
B) Goal setting helps firms allocate resources.
C) Goal setting helps to define corporate culture.
D) Goal setting helps managers assess performance.
E) It does none of the above.
Answer: D
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

70) When used as the means for measuring success or failure, goals are operating as
A) management tools.
B) budget standards.
C) bonus criteria.
D) performance targets.
E) motivators.
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

71) Beta Company has set a goal of increasing sales by 10% this year. This goal will most likely
have the effect of
A) motivating managers.
B) assisting in the allocation of advertising dollars.
C) assisting in the allocation of resources.
D) providing direction for managers.
E) all of these.
Answer: E
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

72) When Atco says it wants to provide products and services to the energy and resource
industries, that is their
A) corporate strategy.
B) mission.
C) purpose.
D) intuition.
E) goal.
Answer: B
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

73) Which of the following best describes a mission?

A) An objective that a business hopes and plans to achieve
B) A broad set of organizational plans for implementing decisions made for achieving
organizational goals
C) The shared experiences, stories, beliefs, and norms that characterize an organization
D) An organization's statement of how it will achieve its purpose in the environment in which it
conducts business
E) An organization's competitive standing in the marketplace
Answer: D
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

74) Rolex sells high-quality, high-priced watches through selected jewellery stores. This is their
A) corporate performance target.
B) long-term goal.
C) strategic goal.
D) purpose.
E) mission.
Answer: E
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

75) Both Rolex and Timex want to sell watches at a profit. They share a common
A) purpose.
B) corporate performance target.
C) mission.
D) long-term goal.
E) strategic goal.
Answer: A
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

76) Reebok wants to make a profit by manufacturing and selling athletic shoes and related
merchandise. This is their
A) strategic goal.
B) long-term goal.
C) purpose.
D) short-term goal.
E) mission.
Answer: C
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

77) A mission statement is

A) a statement of how an organization will achieve its purpose in the environment in which it
conducts its business.
B) solely for people visiting the company so they understand what the company does.
C) not necessary for smaller businesses.
D) the same as a purpose.
E) a statement developed by the board of directors to guide the business.
Answer: A
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

78) 3M Corp.'s stated goal of earning 30 percent of its profits from sales of products less than
four years old is an example of goals that
A) define corporate culture.
B) help assess performance.
C) help allocate resources.
D) provide direction.
E) help make decisions.
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

79) Mega Computer has decided that within the next five years it wants to become an industry
leader in disk drive technology, a technology that has little existing support inside the company
at this time. This goal will
A) help assess performance.
B) help make decisions.
C) help allocate resources.
D) provide direction.
E) help define corporate culture.
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

80) Toyota's goal to sell 200 000 vehicles in Canada in 2012 illustrated which basic purpose of
goal setting?
A) Goal setting provides direction, guidance, and motivation for managers.
B) Goal setting helps firms allocate resources.
C) Goal setting helps to define corporate culture.
D) Goal setting helps managers assess performance.
E) None of the above
Answer: A
Diff: 1 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

81) By looking at the sales potential for each product we can use goals to
A) help define corporate culture.
B) help allocate resources.
C) help assess performance.
D) help make decisions.
E) provide direction.
Answer: B
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

82) Long-term goals typically relate to time periods in the range of ________ years, while
intermediate goals usually cover a time period of ________ years.
A) 5 years or more; 1 to 5 years
B) more than 10 years; less than a year
C) 1 to 5 years; more than 10 years
D) more than 1 year but less than 3 years; 5 years or more
E) less than a year; more than 1 year but less than 3 years
Answer: A
Diff: 2 Type: MC Page Ref: 134
Skill: Knowledge
Objective: 6.4

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83) The mission of a company is usually set by

A) top managers.
B) a planning committee comprised of first-line supervisors and mid-level managers.
C) the board of directors.
D) shareholders.
E) All of these work together to determine the mission.
Answer: C
Diff: 1 Type: MC Page Ref: 133
Skill: Knowledge
Objective: 6.4

84) If Ben and Jerry's Ice Cream has a goal of investing 2 percent of their after-tax profits in
charitable contributions, that goal
A) helps allocate resources.
B) helps assess performance.
C) provides direction.
D) helps to define corporate culture.
E) helps make decisions.
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

85) The management of Critters Galore, a nation-wide retailer of pet supplies, has decided that
its share of the market is too small and they have a target of increasing their current market share
from 25 percent to 40 percent. Everyone is expected to do whatever it takes to achieve this goal.
The market is very competitive and Critters Galore will need to be very aggressive. The goal
A) helps to define corporate culture.
B) helps allocate resources.
C) provides direction.
D) helps make decisions.
E) helps assess performance.
Answer: A
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

86) Mega Computer has a goal of reducing its manufacturing costs by 15 percent over the next
three years. Each of the manufacturing managers has been given tasks to reach this goal. In this
case the goal
A) helps assess performance.
B) provides direction.
C) helps allocate resources.
D) helps make decisions.
E) defines corporate culture.
Answer: A
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

87) General Electric's goal is to have each of its divisions be #1 or #2 in its industry. The primary
effect of this goal is to
A) allocate resources.
B) assess performance.
C) provide direction.
D) define corporate culture.
E) make decisions.
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

88) With respect to the concepts of "purpose" and "mission," which of the following is correct?
A) A purpose is a statement of how an organization will behave with respect its stakeholders.
B) A mission is only relevant for not-for-profit organizations, while a purpose is relevant only
for profit-making businesses.
C) A purpose is an organization's reason for being.
D) There is really no difference between a purpose and a mission.
E) A purpose is only relevant for not-for-profit organizations, while a mission is relevant only for
profit-making businesses.
Answer: C
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

89) Which of the following best describes a mission statement?

A) An objective that a business hopes and plans to achieve
B) A broad set of organizational plans for implementing decisions made for achieving
organizational goals
C) The shared experiences, stories, beliefs, and norms that characterize an organization
D) How an organization will achieve its purpose in the environment in which it conducts
business
E) None of these
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

90) Which of the following is correct with respect to Bombardier's strategy of competing with
Boeing and Airbus?
A) The new C-Series jet was ready for the market sooner than expected, and customers were not
ready to make buying decisions.
B) Bombardier has so far been very successful at competing with Boeing and Airbus.
C) Cost overruns and delays in development of the C-Series jet have cause major problems for
Bombardier.
D) Bombardier has abandoned the effort to compete with Boeing and Airbus.
E) None of these are correct.
Answer: C
Diff: 2 Type: MC Page Ref: 136
Skill: Comprehension
Objective: 6.4

91) Maple Leaf Foods' plan to increase its earnings by more than 75 percent by 2015 is an
example of a(n) ________ plan, while Coca-Cola's plan to increase sales in Europe by building
European bottling facilities is an example of ________ planning.
A) tactical; strategic
B) strategic; tactical
C) efficiency; effectiveness
D) operational; tactical
E) effectiveness; efficiency
Answer: B
Diff: 1 Type: MC Page Ref: 136
Skill: Comprehension
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

92) A(n) ________ is a plan which is decided by a firm's top management and which reflects the
company's priorities, as well as the steps needed to meet strategic goals.
A) tactical plan
B) operational plan
C) standing plan
D) strategic plan
E) single-use plan
Answer: D
Diff: 2 Type: MC Page Ref: 136
Skill: Knowledge
Objective: 6.4

93) Top managers are to middle and lower-level managers as

A) a strategic plan is to an operational plan.
B) vertical integration is to horizontal integration.
C) a computer is to a server.
D) market penetration is to product development.
E) cost leadership is to differentiation.
Answer: A
Diff: 3 Type: MC Page Ref: 136
Skill: Comprehension
Objective: 6.4

94) Which of the following best describes a functional strategy?

A) A strategy for determining the firm's overall attitude toward growth and the way it will
manage its businesses or product lines
B) A strategy at the business-unit or product-line level that focuses on improving a firm's
competitive position
C) A strategy by which managers in specific areas decide how best to achieve corporate goals
through productivity
D) A strategy that assists first-line managers in making day-to-day decisions about motivating
employees
E) A strategy that integrates an organization's marketing goals into a cohesive whole by focusing
on the ideal product mix to achieve maximum profit potential
Answer: C
Diff: 3 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

95) Strategic goals are

A) derived from the environmental analysis.
B) intermediate goals derived directly from a firm's long-term goals.
C) long-term goals derived directly from a firm's mission statement.
D) derived from the organizational analysis.
E) derived from strategic plans.
Answer: C
Diff: 1 Type: MC Page Ref: 134
Skill: Comprehension
Objective: 6.4

96) Magna Corp. managers have just completed a top-level process that involved the setting of
strategic goals. What should they do next?
A) Match the organization and its environment
B) Do a SWOT analysis
C) Examine the threat of escalation of commitment to the strategic goals
D) Make sure that the production department can produce the necessary products at an
acceptable level of quality
E) None of these
Answer: B
Diff: 1 Type: MC Page Ref: 135
Skill: Application
Objective: 6.4

97) Lynne Smith, chief financial officer for Web Industries, is working on a broad set of
organizational plans for implementing the decisions made for achieving organizational goals.
Lynne is developing a ________ for Web Industries.
A) formula
B) blueprint
C) function
D) strategy
E) mission
Answer: D
Diff: 2 Type: MC Page Ref: 133
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

98) Suppose that within the next four years McDonald's wants to double the number of
franchised restaurants in the Toronto area. This is
A) a short-term goal.
B) an intermediate goal.
C) a strategic target.
D) a long-term goal.
E) a midrange goal.
Answer: B
Diff: 1 Type: MC Page Ref: 134
Skill: Knowledge
Objective: 6.4

99) The purpose of ________ strategy is to determine the businesses the firm will be in and how
these businesses will relate to each other.
A) corporate
B) business
C) mission
D) functional
E) fundamental
Answer: A
Diff: 1 Type: MC Page Ref: 133
Skill: Knowledge
Objective: 6.4

100) Strategy formulation is the

A) creation of a broad program for defining and meeting an organization's goals.
B) creation of a broad program for planning and meeting an organization's goals.
C) creation of a broad program for defining and structuring an organization's goals.
D) creation of a small program for defining and meeting an organization's goals.
E) creation of a small program for defining and structuring an organization's goals.
Answer: A
Diff: 2 Type: MC Page Ref: 134
Skill: Knowledge
Objective: 6.4

101) Strategic goals are set by

A) production employees.
B) middle management and first-line supervisors.
C) first-line supervisors.
D) top managers.
E) middle management.
Answer: D
Diff: 1 Type: MC Page Ref: 134
Skill: Knowledge
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

102) Strategy formulation involves, in order,

A) (1) creating a mission statement, (2) analyzing the organization and its environment, and (3)
setting strategic goals.
B) (1) creating a mission statement, (2) setting strategic goals, and (3) analyzing the organization
and its environment.
C) (1) setting strategic goals, (2) analyzing the organization and its environment, and (3)
matching the organization and its environment.
D) (1) setting strategic goals, (2) analyzing the organization and its environment, and (3) creating
a mission statement.
E) (1) analyzing the organization and its environment, (2) matching the organization and its
environment, and (3) setting strategic goals.
Answer: C
Diff: 3 Type: MC Page Ref: 134-135
Skill: Knowledge
Objective: 6.4

103) Strategic goals are

A) derived directly from the mission statement.
B) derived directly from tactical plans.
C) derived directly from operational plans.
D) the product of input from all customers.
E) the product of input from all employees.
Answer: A
Diff: 2 Type: MC Page Ref: 134
Skill: Comprehension
Objective: 6.4

104) The term SWOT analysis stands for the identification of

A) strengths, weaknesses, organization, and technology.
B) standardization, weaknesses, organization, and threats.
C) strategy, work-sharing, optimism, and technology.
D) structure, wi-fi, opportunities, and technology.
E) strengths, weaknesses, opportunities, and threats.
Answer: E
Diff: 1 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

105) Which of the following outlines how an organization intends to meet its mission statement
goals and includes the firm's responsiveness to new challenges and needs?
A) Goal setting
B) Controlling
C) Strategy
D) Tactics
E) Research and development
Answer: C
Diff: 2 Type: MC Page Ref: 133
Skill: Knowledge
Objective: 6.4

106) ________ are areas in which a firm can potentially expand, grow, or take advantage of
existing strengths.
A) Strategies
B) Tactics
C) Opportunities
D) Threats
E) Internal factors
Answer: C
Diff: 1 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

107) Which of the following would be most likely classified as an opportunity for an
organization?
A) Government regulations
B) Changing consumer tastes
C) Strong reputation with consumers
D) Recall of a competitor's product
E) Competition
Answer: D
Diff: 2 Type: MC Page Ref: 135
Skill: Comprehension
Objective: 6.4

108) Setting strategic goals is the first step in strategy formulation. What is the next step?
A) Analyzing the company and its environment
B) Segmenting the markets the company wants to penetrate
C) Preparing an organizational plan
D) Matching company strengths with environmental characteristics
E) Developing a mission statement
Answer: A
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

109) The analysis of a firm's strengths and weaknesses is known as

A) SBU analysis.
B) barrier analysis.
C) organizational analysis.
D) environmental analysis.
E) contingency analysis.
Answer: C
Diff: 1 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

110) Changing consumer tastes, hostile takeover offers, and new competitors would be classified
as
A) strengths.
B) natural responses.
C) threats.
D) opportunities.
E) weaknesses.
Answer: C
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

111) Which of the following would typically be considered a threat?

A) New products from competitors
B) A small share of the market
C) Less government regulation
D) New markets
E) Slow-paying customers
Answer: A
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

112) Which of the following would typically be considered an opportunity?

A) An improving economy
B) Quick-paying customers
C) High unemployment
D) Decreased demand from foreign countries
E) A large base of satisfied customers
Answer: A
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

113) Which of the following would usually be considered a corporate weakness?

A) An economic down-turn
B) Increased government regulation
C) A large base of satisfied customers
D) A strong competitor
E) A small bank account
Answer: E
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

114) Extensive marketing channels, a large base of satisfied customers, and a good reputation are
all examples of a company's
A) strategies.
B) weaknesses.
C) strengths.
D) opportunities.
E) threats.
Answer: C
Diff: 2 Type: MC Page Ref: 135
Skill: Comprehension
Objective: 6.4

115) In a SWOT analysis, strengths and weaknesses are factors that are ________ to the firm,
while opportunities and threats are factors that are ________ to the firm.
A) irrelevant; relevant
B) relevant; irrelevant
C) internal; external
D) external; internal
E) central; peripheral
Answer: C
Diff: 3 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

116) Which of the following would usually be considered a weakness in a SWOT analysis?
A) A small bank account
B) A large base of satisfied customers
C) A strong competitor
D) Increased government regulation
E) An economy that was turning down
Answer: A
Diff: 2 Type: MC Page Ref: 135
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

117) Which of the following would usually be considered a strength in a SWOT analysis?
A) Good managerial talent
B) A dedicated work force
C) Employees with good technical expertise
D) Surplus cash
E) All of these
Answer: E
Diff: 2 Type: MC Page Ref: 135
Skill: Comprehension
Objective: 6.4

118) The final step in strategy formulation is to

A) develop tactical plans.
B) develop operational plans.
C) conduct an environmental analysis.
D) match the organization and its environment.
E) conduct an organizational analysis.
Answer: D
Diff: 1 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

119) An organizational analysis involves looking for ________, while an environmental analysis
involves looking for ________.
A) threats; opportunities
B) opportunities; threats
C) strengths and weaknesses; threats and opportunities
D) threats and opportunities; strengths and weaknesses
E) strengths and weaknesses; competitors
Answer: C
Diff: 2 Type: MC Page Ref: 135
Skill: Knowledge
Objective: 6.4

120) XYZ Cake Mix Company is merging with the ABC Petroleum Company. This is an
example of
A) conglomerate diversification.
B) related diversification.
C) product development.
D) geographic expansion.
E) none of these.
Answer: A
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

121) ________ strategy takes place at the level of the business unit or product line and focuses
on a firm's competitive position.
A) Business
B) Fundamental
C) Corporate
D) Mission
E) Functional
Answer: A
Diff: 1 Type: MC Page Ref: 137
Skill: Knowledge
Objective: 6.4

122) ________ strategy focuses on how specific areas can achieve corporate goals.
A) Corporate
B) Mission
C) Functional
D) Fundamental
E) Business
Answer: C
Diff: 1 Type: MC Page Ref: 137
Skill: Knowledge
Objective: 6.4

123) Each business unit in an organization will develop a ________ strategy that focuses on how
it will achieve corporate goals.
A) corporate
B) business
C) fundamental
D) functional
E) mission
Answer: D
Diff: 2 Type: MC Page Ref: 137
Skill: Knowledge
Objective: 6.4

124) When Bell Canada diversified by forming BCE, it acquired interests in businesses like trust
companies, pipelines, and real estate. This is an example of
A) vertical integration.
B) cooperative diversification.
C) concentric diversification.
D) cost leadership.
E) conglomerate diversification.
Answer: E
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

125) What does "retrenchment" mean in terms of business strategy?

A) A change in the mission for the organization
B) Ceasing to do business
C) Cutting back some operations
D) An increase in the market share for two or more products
E) Growth at a modest rate
Answer: C
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

126) When an organization strives to provide goods or services that are distinctive from those of
its competitors, it is pursuing the strategic option known as
A) focus.
B) market development.
C) cost leadership.
D) market penetration.
E) differentiation.
Answer: E
Diff: 1 Type: MC Page Ref: 137
Skill: Knowledge
Objective: 6.4

127) An example of a business that must follow a differentiation strategy is

A) a fashion designer.
B) a resource-industry business.
C) an aluminum siding installer.
D) a discount retailer.
E) a local trucking company.
Answer: A
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

128) Collier Corp. has grown by boosting sales of present products by more aggressive selling in
the firm's current markets. This is an example of
A) concentration.
B) market penetration.
C) geographic expansion.
D) product development.
E) horizontal integration.
Answer: B
Diff: 2 Type: MC Page Ref: 136
Skill: Comprehension
Objective: 6.4

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

129) Brown Corp. has implemented a strategy of acquiring control of competitors in the same or
similar markets. The company is using which strategy?
A) Concentration
B) Market penetration
C) Geographic expansion
D) Product development
E) Horizontal integration
Answer: E
Diff: 2 Type: MC Page Ref: 136
Skill: Comprehension
Objective: 6.4

130) When Maple Leaf Gardens, which already owned the Toronto Maple Leafs, also acquired
the Toronto Raptors basketball team, this was an example of
A) concentration.
B) related diversification.
C) conglomerate diversification.
D) product development.
E) horizontal integration.
Answer: B
Diff: 3 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

131) Montreal-based Gildan Activewear is pursuing what kind of business-level strategy?

A) Investment reduction
B) Cost leadership
C) Differentiation
D) Focus
E) Horizontal integration
Answer: B
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.4

132) Contingency planning involves

A) identifying aspects of a business that require changes in organization in three to five years'
time.
B) developing plans for a business should there be a sudden decrease in revenue or increase in
expenses.
C) an organization's methods for dealing with emergencies.
D) developing plans for future growth.
E) identifying aspects of a business or its environment that might entail changes in strategy.
Answer: E
Diff: 3 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.5

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 Business Essentials, 8ce
Chapter 6: Managing the Business Enterprise

133) Crisis management involves

A) identifying aspects of a business that require changes in organization in three to five years'
time.
B) identifying aspects of a business or its environment that might entail changes in strategy.
C) ensuring that all the employees know what to do in an emergency.
D) knowing how to contain a crisis, should one happen.
E) an organization's methods for dealing with emergencies.
Answer: E
Diff: 2 Type: MC Page Ref: 138
Skill: Comprehension
Objective: 6.5

134) With respect to the concepts of contingency planning and crisis management, which of the
following is correct?
A) Contingency planning deals with events that have a smaller dollar impact than crisis
management.
B) Contingency planning deals with "things," while crisis management deals with "people."
C) Contingency planning focuses on what might happen, while crisis management focuses on
what has already happened.
D) Contingency planning is largely a "behind-the-scenes" activity, while crisis management is
largely a "public relations" activity.
E) Contingency planning is more important than crisis management because it is better to avoid a
problem than trying to fix a problem.
Answer: C
Diff: 3 Type: MC Page Ref: 137-138
Skill: Comprehension
Objective: 6.5

135) If a firm establishes a back-up plan, they are engaging in

A) contingency planning.
B) crisis management.
C) investment reduction.
D) differentiation.
E) none of these.
Answer: A
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.5

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136) If a firm is building a hotel and plans for two grand opening dates, they are most likely
engaged in
A) contingency planning.
B) crisis management.
C) investment reduction.
D) differentiation.
E) a SWOT analysis.
Answer: A
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.5

137) Marty uses computer forecasts to determine possible outcomes of an intended change in his
division. What element of management is Marty using?
A) Strategy formulation
B) Goal setting
C) Crisis management
D) Contingency planning
E) Related diversification
Answer: D
Diff: 2 Type: MC Page Ref: 137
Skill: Comprehension
Objective: 6.5

138) If a hotel burns down a day before its grand opening, the managers are most likely to be
engaged in
A) crisis management.
B) contingency planning.
C) investment reduction.
D) retrenchment.
E) divestiture.
Answer: A
Diff: 2 Type: MC Page Ref: 138
Skill: Comprehension
Objective: 6.5

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139) When Disney allowed for an extra two weeks between the time when a new cruise ship was
supposed to be finished and its first scheduled cruise, they were engaged in ________, while
they would have been engaged in ________ if the ship suddenly sank as it was launched.
A) crisis management; contingency planning
B) contingency planning; public relations
C) contingency planning; crisis management
D) crisis management; crisis management
E) none of these
Answer: C
Diff: 3 Type: MC Page Ref: 137-138
Skill: Comprehension
Objective: 6.5

140) What is corporate culture?

A) The shared experiences, stories, and beliefs that characterize a firm
B) The ethnic background of most of the managers in an organization
C) The extent to which the organization is accommodating to those of different races and creeds
D) The ethnic background of most of the employees in an organization
E) The shared experiences, stories, and beliefs of the management of a firm
Answer: A
Diff: 1 Type: MC Page Ref: 138
Skill: Knowledge
Objective: 6.6

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6.2 Critical Thinking Questions

1) The post-project review of the Alpha Supplement project is complete. It found failures in
planning. Too much time was budgeted to market research, leaving not enough time for product
development and quality assurance. As a result, the project could not have succeeded even if the
project had been run perfectly. But there were other problems as well. Constant conflicts
between team members demonstrated a failure of leadership. Finally, there were failures in
controlling. When component providers failed to deliver, project leaders did not locate and train
new providers in time.

Which of the following, if true, would most strongly suggest that the problems attributed to
controlling were actually caused by planning failures?
A) The team assignments in the project plan placed two employees on the Quality Control team
despite their long history of hostility toward each other.
B) The problems attributed to controlling were typical of the problems experienced by other
project leaders in the industry.
C) The project plan called for all possible component providers to produce components at their
maximum capacity.
D) The list of problems attributed to controlling also included the failure to adequately monitor
production output.
E) Even the most effective planning would not have made the project a success given the failures
attributed to controlling.
Answer: C
Diff: 3 Type: MC
Skill: Analysis

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2) The post-project review of the Alpha Supplement project is complete. It found failures in
planning. Too much time was budgeted to market research, leaving not enough time for product
development and quality assurance. As a result, the project could not have succeeded even if the
project had been run perfectly. But there were other problems as well. Constant conflicts
between team members demonstrated a failure of leadership. Finally, there were failures in
controlling. When component providers failed to deliver, project leaders did not locate and train
new providers in time.

Which of the following is most strongly suggested by the statements above?

A) Most of the conflicts between team members concerned questions of roles and determining
who had the authority to make decisions.
B) There were no actions that the project leaders could have taken that would have solved the
controlling problems of the Alpha Supplement project.
C) The insufficient time allocated for product development was the only failure related to
planning.
D) If the project leaders had located alternate component providers, the Alpha Supplement
project still would have failed.
E) The failure of the Alpha Supplement project will make it more difficult for other projects to
be approved.
Answer: D
Diff: 3 Type: MC
Skill: Analysis

3) The post-project review of the Alpha Supplement project is complete. It found failures in
planning. Too much time was budgeted to market research, leaving not enough time for product
development and quality assurance. As a result, the project could not have succeeded even if the
project had been run perfectly. But there were other problems as well. Constant conflicts
between team members demonstrated a failure of leadership. Finally, there were failures in
controlling. When component providers failed to deliver, project leaders did not locate and train
new providers in time.

Which of the following, if true, would most strongly suggest that the failures attributed to
leadership were also caused by failures in organizing?
A) Most of the conflicts between team members concerned questions of roles and determining
who had the authority to make decisions.
B) The market research was delayed because the firms hired to conduct customer interviews
backed out of the project after the market research began.
C) The reports of conflicts among team members were exaggerated in order to make the project
leaders seem less competent.
D) The failure to locate an alternative component provider is very similar to other failures that
have appeared in past projects.
E) Even the most successful projects encounter some problems related to each of the main
management functions.
Answer: A
Diff: 3 Type: MC
Skill: Analysis

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4) Product Director: We need to pick the best manager for the Prensabi software project. The
project involves the latest technology and is very complicated. For example, this project uses a
technology called Stage, which is a motion-capture technique that does not require actors to wear
specialized gear to record their movements. Since this is a technical project that requires strong
technical skills, we should pick the manager with the strongest technical skills.

Executive: The manager needs some familiarity with the technology, but he or she won't actually
be writing the software code. The bigger challenge here is to analyze the goals of the project and
make sure that it is being developed according to a strong overall vision. That's why we should
insist that the manager have outstanding conceptual skills.

The product director and the executive most likely disagree about which of the following
questions?
A) Does the manager need to have any technical skills?
B) In choosing the best manager for the Prensabi project, are conceptual skills more important
than human skills?
C) Would it be a mistake to choose the manager with the strongest technical skills if that
manager has weak conceptual skills?
D) Is it ever a good idea to require strong conceptual skills when choosing a manager for a
project?
E) Is it likely that the requirements of the Prensabi project will change after the project is
launched?
Answer: C
Diff: 3 Type: MC
Skill: Analysis

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5) Product Director: We need to pick the best manager for the Prensabi software project. The
project involves the latest technology and is very complicated. For example, this project uses a
technology called Stage, which is a motion-capture technique that does not require actors to wear
specialized gear to record their movements. Since this is a technical project that requires strong
technical skills, we should pick the manager with the strongest technical skills.

Executive: The manager needs some familiarity with the technology, but he or she won't actually
be writing the software code. The bigger challenge here is to analyze the goals of the project and
make sure that it is being developed according to a strong overall vision. That's why we should
insist that the manager have outstanding conceptual skills.

Which of the following is most similar to the reasoning employed by the product director?
A) The product requirements for the online collaboration tool are well-understood now, but they
may change as the project develops. Since we cannot tell what will be required, we must choose
a manager whose skills are outstanding in every way.
B) It is clear that we need a large truck in order to move all of our office equipment. Therefore,
we should choose the largest truck possible.
C) The project before us requires both human skills and conceptual skills. Therefore, we should
appoint two managers: one with outstanding human skills and one with outstanding conceptual
skills.
D) We need to choose a site for the sales conference. Choosing a place close to most employees'
workplaces would save travel costs, but some employees also prefer to travel to an exotic
location far away. Since it will be impossible to meet both goals, we should focus on the goal
that is easier to accomplish.
E) The design of the new office building should impress visiting guests, but that should not be
the dominant factor in our decision. Relatively few guests visit our offices. Instead, we should
save money by choosing an energy-efficient design.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

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6) Product Director: We need to pick the best manager for the Prensabi software project. The
project involves the latest technology and is very complicated. For example, this project uses a
technology called Stage, which is a motion-capture technique that does not require actors to wear
specialized gear to record their movements. Since this is a technical project that requires strong
technical skills, we should pick the manager with the strongest technical skills.

Executive: The manager needs some familiarity with the technology, but he or she won't actually
be writing the software code. The bigger challenge here is to analyze the goals of the project and
make sure that it is being developed according to a strong overall vision. That's why we should
insist that the manager have outstanding conceptual skills.

Which of the following, if true, would weaken the product director's argument?
A) The project manager with the weakest technical skills also has the weakest human skills.
B) The Prensabi project is so large that the project manager for the Prensabi project will be
unable to take on any other projects until the Prensabi project is finished.
C) The requirements of the Prensabi project are highly unusual.
D) The project manager with the strongest technical skills has no experience with motion-capture
technology.
E) The project manager with the strongest conceptual skills has the weakest technical skills.
Answer: D
Diff: 3 Type: MC
Skill: Analysis

7) Since the mid-1980s, Disney's strategic planning group turned the company into a huge and
diverse collection of media and entertainment businesses. The sprawling Disney grew to include
everything from theme resorts and film studios to media networks to consumer products and a
cruise line. The newly transformed Disney proved hard to manage and performed unevenly.
Recently, Disney disbanded the centralized strategic planning unit, decentralizing its functions to
Disney division managers. Since then, Disney's management has helped it perform strongly in a
competitive marketplace.

A strategic manager at Disney believes that the video-on-demand unit should be sold because the
return it has made on Disney's investment has been below Disney's standards. Which of the
following, if true, would most weaken the strategic manager's conclusion?
A) Other units at Disney have earned even lower returns on investment than the video-on-
demand unit has earned.
B) Video-on-demand is gaining in popularity over other methods of viewing videos.
C) Some companies expect lower returns on investment than Disney expects.
D) The video-on-demand unit uses a technology that was developed outside of Disney.
E) If Disney sold off its video-on-demand unit, the move would likely be seen as the start of a
trend in the media world.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

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8) Since the mid-1980s, Disney's strategic planning group turned the company into a huge and
diverse collection of media and entertainment businesses. The sprawling Disney grew to include
everything from theme resorts and film studios to media networks to consumer products and a
cruise line. The newly transformed Disney proved hard to manage and performed unevenly.
Recently, Disney disbanded the centralized strategic planning unit, decentralizing its functions to
Disney division managers. Since then, Disney's management has helped it perform strongly in a
competitive marketplace.

Which of the following, if true, would support the conclusion that disbanding the centralized
planning unit helped Disney perform strongly?
A) The centralized planning unit used a decision procedure that required business units to answer
the same fundamental questions each year.
B) In the entertainment industry, companies can be profitable if just a few of their projects earn
extraordinarily high returns.
C) The centralized planning unit was created in response to concerns that the company was
losing focus on its core business.
D) An economic downturn that took place after Disney disbanded the centralized planning unit
reduced Disney customers' discretionary income.
E) Disney's rivals often change their management structures as part of efforts to make their
organizations more efficient and customer-focused.
Answer: D
Diff: 3 Type: MC
Skill: Analysis

9) Since the mid-1980s, Disney's strategic planning group turned the company into a huge and
diverse collection of media and entertainment businesses. The sprawling Disney grew to include
everything from theme resorts and film studios to media networks to consumer products and a
cruise line. The newly transformed Disney proved hard to manage and performed unevenly.
Recently, Disney disbanded the centralized strategic planning unit, decentralizing its functions to
Disney division managers. Since then, Disney's management has helped it perform strongly in a
competitive marketplace.

Suppose that one of Disney's business units is a chain of sound studios. The studios have low
profit potential, and the chain commands a relatively small share of the market. On these
grounds, Disney is considering whether to sell the chain. Which of the following, if true, would
most strongly suggest that Disney should keep the chain instead?
A) The chain has reduced its operating loss in each of the last three years.
B) The chain has penetrated the market in coastal areas but not inland areas.
C) Other Disney companies use the chain's studios for a wide variety of projects, resulting in
significant cost savings for Disney.
D) The chain uses the most up-to-date technology in its sound studios.
E) The chain staffing levels are comparable to those of similar companies in the industry.
Answer: C
Diff: 3 Type: MC
Skill: Analysis

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10) Kohler makes and markets familiar kitchen and bathroom fixtures. But Kohler also offers a
breadth of other products and services, including furniture, tile and stone, and even small engines
and backup power systems. It also owns resorts and spas. Kohler ties this diverse product
portfolio together under the mission of "contributing to a higher level of gracious living for those
who are touched by our products and services." Kohler's overall objective is to build profitable
customer relationships by developing efficient yet beautiful products that embrace the "essence
of gracious living."

If Kohler became known as a provider of products and services that embrace the "essence of
gracious living," which of the following would be the most likely result?
A) Kohler would feel pressure to expand its business to include a wider range of products and
services.
B) Customers who had a positive experience with some of Kohler's products would be more
interested in trying other Kohler products.
C) Kohler's divisions would be more likely to create their own individual mission statements.
D) Sales of higher-priced goods and services would increase less than sales of lower-priced
goods and services.
E) Kohler's customers would be more likely to focus on price and less likely to focus on
customer service.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

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Chapter 6: Managing the Business Enterprise

11) Kohler makes and markets familiar kitchen and bathroom fixtures. But Kohler also offers a
breadth of other products and services, including furniture, tile and stone, and even small engines
and backup power systems. It also owns resorts and spas. Kohler ties this diverse product
portfolio together under the mission of "contributing to a higher level of gracious living for those
who are touched by our products and services." Kohler's overall objective is to build profitable
customer relationships by developing efficient yet beautiful products that embrace the "essence
of gracious living."

Suppose that Kohler is deciding whether to create a line of self-installed kitchen and bathroom
fixtures. In what way would Kohler's definition of its mission lead it to make a different decision
than it would make if it had no defined mission and merely attempted to follow widely accepted
business practices?
A) Kohler would focus on the customers' underlying needs instead of their demand for existing
Kohler products.
B) Kohler would pursue opportunities that are very different from the areas in which it has
competed successfully.
C) Kohler would alter its conception of "gracious living" to include activities such as installing
kitchen and bathroom fixtures.
D) Kohler would not produce the new line of fixtures if it determined that doing so would not fit
with its definition of "gracious living."
E) Kohler would create the new line of fixtures if the expected profits were higher than products
that could more reasonably fit under its definition of "gracious living."
Answer: D
Diff: 3 Type: MC
Skill: Analysis

12) Cathi Prokofit is a candidate for a position at Domino Grace, a financial services firm. She
knows that corporate culture can have a large impact on employees, and so she is trying to learn
as much as she can about the culture at Domino Grace. During one of her interviews, a Domino
Grace Human Resources representative describes the culture as very team-oriented, people-
oriented, and hard-working.

Which of the following best explains why Cathi should be skeptical about the description of the
corporate culture at Domino Grace?
A) Human resources representatives have no direct knowledge of corporate cultures.
B) Human resources representatives have an incentive to describe the company in a positive
light.
C) Human resources representatives have a strong role in determining corporate culture.
D) The description of the corporate culture at Domino Grace is self-contradictory.
E) There are no other reliable sources of information about the corporate culture at Domino
Grace.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

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13) Cathi Prokofit is a candidate for a position at Domino Grace, a financial services firm. She
knows that corporate culture can have a large impact on employees, and so she is trying to learn
as much as she can about the culture at Domino Grace. During one of her interviews, a Domino
Grace Human Resources representative describes the culture as very team-oriented, people-
oriented, and hard-working.

Which of the following questions would be most important to determine the attitude toward risk
that prevails in Domino Grace's corporate culture?
A) Have any initiatives produced extremely positive results?
B) How does the pay of the top executives at Domino Grace compare to that of top executives at
other companies?
C) Were failed projects more likely to suffer from insufficient attention to detail or ineffective
teamwork?
D) What procedures does Domino Grace use before deciding whether to proceed with a new
initiative?
E) Does Domino Grace ever place the interests of its employees ahead of its interest in financial
performance?
Answer: D
Diff: 3 Type: MC
Skill: Analysis

14) Cathi Prokofit is a candidate for a position at Domino Grace, a financial services firm. She
knows that corporate culture can have a large impact on employees, and so she is trying to learn
as much as she can about the culture at Domino Grace. During one of her interviews, a Domino
Grace Human Resources representative describes the culture as very team-oriented, people-
oriented, and hard-working.

Which of the following, if true, would support the conclusion that Domino Grace rewards
employees based on the process that led to results and not simply the results themselves?
A) When initiatives achieve especially strong results, employees often receive supplementary
bonuses in excess of what is called for in their bonus plan.
B) Employees are not punished when initiatives fail due to changes in external environment that
could not have been predicted.
C) Employees are often rewarded for successful initiatives even when the employees' efforts did
not contribute to the success of the initiative.
D) Employees are rewarded for positive outcomes but not punished for negative ones.
E) Employees are punished for negative outcomes but not rewarded for positive ones.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

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Chapter 6: Managing the Business Enterprise

15) Cathi Prokofit is a candidate for a position at Domino Grace, a financial services firm. She
knows that corporate culture can have a large impact on employees, and so she is trying to learn
as much as she can about the culture at Domino Grace. During one of her interviews, a Domino
Grace Human Resources representative describes the culture as very team-oriented, people-
oriented, and hard-working.

Cathi has learned that organizations that promote employees' knowledge of the organization's
history tend to have strong corporate cultures and that Domino Grace employees lack such
knowledge. Cathi concludes that Domino Grace lacks a strong corporate culture. Which of the
following points out a flaw in this reasoning?
A) It fails to consider the possibility that Domino Grace has a long history that would inspire
employees.
B) It mistakenly assumes that all companies with strong corporate cultures adopt the same
corporate culture.
C) It erroneously concludes that the strength of a corporate culture has no effect on that
company's performance.
D) It is based on the belief that a few exceptions invalidate a rule that applies in most cases.
E) It presupposes that employees' knowledge of company history is necessary in order to have a
strong corporate culture.
Answer: E
Diff: 3 Type: MC
Skill: Analysis

16) Cathi Prokofit is a candidate for a position at Domino Grace, a financial services firm. She
knows that corporate culture can have a large impact on employees, and so she is trying to learn
as much as she can about the culture at Domino Grace. During one of her interviews, a Domino
Grace Human Resources representative describes the culture as very team-oriented, people-
oriented, and hard-working.

Which of the following, if true, would best support the conclusion that Domino Grace has a weak
corporate culture?
A) Operations employees operate in a team-based environment; human resources employees
promote a people-oriented atmosphere.
B) The sales department is run in a highly competitive way; the executives at Domino Grace
seek a stable revenue stream instead of spending resources pursuing new revenue streams.
C) Sales employees are actively encouraged to take risks; accounts employees are rewarded
based on the percentage of their clients that stay with Domino Grace.
D) The operations staff pursues a philosophy of innovation; the accounting department follows
legally required procedures.
E) Accounts employees are expected to show great attention to detail. Sales employees are
judged based on the revenue they generate and not the steps they took to generate that revenue.
Answer: C
Diff: 3 Type: MC
Skill: Analysis

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17) Terrell is being considered for promotion from a plant manager to top management. He is
unsure whether he is qualified for the position. He wants to ensure that he is an effective
manager, and not simply having success in the workplace because of his multiple promotions in
the last few years. Although he's never been a top manager, there are some things he does in his
personal life other members of the management team think qualify him for the position.

What personal activity does management most likely think is a good indicator of whether or not
Terrell will be an effective top manager?
A) He is part of a theatrical group that gives performances to hundreds of people, showing that
he is not afraid to speak in front of a crowd.
B) He juggles being a parent, working as a middle manager, and having personal hobbies,
showing an ability to do well in all aspects of his life without going overboard in one or
neglecting another.
C) He has many siblings, showing that he knows how to share space with a large number of
people.
D) He quickly learns how to play new games by following the rules explained to him.
E) He was a member of the debate team in high school and consequently is well-versed in being
able to argue both sides of an issue.
Answer: B
Diff: 3 Type: MC
Skill: Analysis

18) An organization called Teach For Canada provides a critical source of well-trained teachers
who are helping break the cycle of educational inequity. These teachers, called corps members,
commit to teaching for two years in one of 39 urban and rural regions across the country, going
above and beyond traditional expectations to help their students achieve at high levels. Teach For
Canada's alumni are playing critical leadership roles in the effort to improve the quality of public
education in low-income communities. Armed with the experience, conviction, and insight that
come from leading children to reach their potential, alumni are working from all sectors to shape
our schools, policies, and investments in low-income communities. What objective might Teach
For Canada have, based on this description of its company mission?
A) Teach For Canada will transition from a nonprofit to a for-profit organization in 2015.
B) Teach For Canada will open a food bank in low-income communities in each of its 39
regional offices.
C) Teach For Canada will increase the number of its alumni in leadership positions within school
systems across the country by 10 percent each year.
D) Teach For Canada will change the corps member service commitment to four years, versus
two.
E) Teach For Canada will open ten new regional offices by the year 2020.
Answer: C
Diff: 3 Type: MC
Skill: Analysis

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6.3 True/False Questions

1) The same basic skills of management are needed in both small and large organizations.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 123
Skill: Comprehension
Objective: 6.1

2) A manager who focuses on being effective will likely also be efficient, but a manager who
focuses on being efficient may or may not be effective.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 123
Skill: Comprehension
Objective: 6.1

3) A manager is likely to be engaged in most of the functions of management during the course
of any given day.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 123
Skill: Knowledge
Objective: 6.1

4) The organizing function of management is concerned with mobilizing the necessary resources
to complete a particular task.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 124
Skill: Knowledge
Objective: 6.1

5) The first step in the planning process is to identify whether a gap exists between a company's
desired and actual position.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 123
Skill: Knowledge
Objective: 6.1

6) Leading is the management process that involves guiding and motivating employees to meet
the firm's objectives.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 124
Skill: Knowledge
Objective: 6.1

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7) The control process starts with establishing standards, then measuring performance, and then
analyzing the differences to see if the standards or performance need to be changed.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 124
Skill: Knowledge
Objective: 6.1

8) In large companies, management is a science, but in small businesses it is an art.

Answer: FALSE
Diff: 2 Type: TF Page Ref: 125
Skill: Knowledge
Objective: 6.1

9) Managers receive overtime pay if they work more than 40 hours per week.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 127
Skill: Knowledge
Objective: 6.1

10) Common titles for top managers include president, vice-president, treasurer, chief executive
officer, and chief financial officer.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 127
Skill: Comprehension
Objective: 6.2

11) A transit supervisor who monitors bus schedules, passenger safety, and the behaviour of bus
drivers is a first-line supervisor.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 128
Skill: Comprehension
Objective: 6.2

12) The flight-services manager for an airline is a middle manager.

Answer: FALSE
Diff: 1 Type: TF Page Ref: 128
Skill: Comprehension
Objective: 6.2

13) Operations managers are typically responsible for production, inventory, and quality control.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 128
Skill: Comprehension
Objective: 6.2

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14) Information managers are responsible for the firm's financial operations, including its
investments and accounting functions.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 129
Skill: Comprehension
Objective: 6.2

15) Describing managers' jobs by referring to functions like planning, organizing, leading, and
controlling gives us a good general picture of what managers do, but it may not give a clear idea
of the specific activities that managers are involved in.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 129
Skill: Comprehension
Objective: 6.3

16) Mary Lou is making a presentation to a long-standing employee who has contributed much
to the organization over the years. In this situation, Mary Lou is playing the role of "resource
allocator."
Answer: FALSE
Diff: 2 Type: TF Page Ref: 129
Skill: Comprehension
Objective: 6.3

17) Ben is coordinating his work with that of Charlie, who is not in the same vertical chain of
command that Ben is. When doing this coordinating, Ben is playing the role of "liaison."
Answer: TRUE
Diff: 2 Type: TF Page Ref: 129
Skill: Comprehension
Objective: 6.3

18) To be effective, all managers need an equal balance of technical, human, and conceptual
skills.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 130
Skill: Comprehension
Objective: 6.3

19) The two most important skills for a supervisor to have are technical and conceptual.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 130
Skill: Comprehension
Objective: 6.3

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20) A study by Google found that technical expertise ranked first among a list of eight "Habits of
Highly Effective Google Managers."
Answer: FALSE
Diff: 2 Type: TF Page Ref: 130
Skill: Knowledge
Objective: 6.3

21) Top managers depend on conceptual skills the most, while first-line supervisors depend on
these skills the least.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 130
Skill: Comprehension
Objective: 6.3

22) Human relations skills are needed at all levels of management.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 130
Skill: Knowledge
Objective: 6.3

23) The first step in rational decision making is identifying various alternatives that might solve
the problem that is facing the manager.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 131
Skill: Knowledge
Objective: 6.3

24) The growth of international air travel motivated Boeing and Airbus to see an opportunity to
increase the capacity of their planes. This is an example of the first step in the rational decision-
making process: recognizing and defining the decision situation.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 131
Skill: Comprehension
Objective: 6.3

25) Organizational politics refers to the support by business firms of political candidates that
agree with the firm's position on a variety of economic issues.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 132
Skill: Knowledge
Objective: 6.3

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26) A study of 293 Canadian office workers found that only a minority of them believed that
office politics was at least somewhat necessary in order to get ahead in their organization.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 132
Skill: Knowledge
Objective: 6.3

27) Managers with a high risk propensity are more likely than their conservative counterparts to
achieve big successes with their decisions, but they are also more likely to incur greater losses.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 133
Skill: Comprehension
Objective: 6.3

28) Escalation of commitment means investing more money in a project, but only after it is clear
that the project is worthwhile.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 133
Skill: Knowledge
Objective: 6.3

29) The primary purpose of setting goals is to determine which business market to enter.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 133
Skill: Knowledge
Objective: 6.4

30) Two companies may have the same purpose but very different mission statements.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 133
Skill: Comprehension
Objective: 6.4

31) Goal setting helps firms allocate resources.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 133
Skill: Knowledge
Objective: 6.4

32) Research shows that managers who set SMART goals have higher job satisfaction than
managers who don't set SMART goals.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 134
Skill: Knowledge
Objective: 6.4

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33) The first step in strategy formulation is the setting of strategic goals.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 134
Skill: Knowledge
Objective: 6.4

34) Environmental analysis is the process of analyzing a firm's strengths and weaknesses as they
relate to the external environment of the organization.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 135
Skill: Comprehension
Objective: 6.4

35) In a SWOT analysis, strengths and weaknesses are factors external to the firm that must be
considered.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 135
Skill: Knowledge
Objective: 6.4

36) A market penetration strategy involves boosting sales of present products by more aggressive
selling in the firm's current markets.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 136
Skill: Knowledge
Objective: 6.4

37) Vertical integration means acquiring control of competitors in the same or similar markets
with the same or similar products.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 136
Skill: Knowledge
Objective: 6.4

38) CN's diversification into trucking is an example of related diversification.

Answer: TRUE
Diff: 2 Type: TF Page Ref: 137
Skill: Comprehension
Objective: 6.4

39) A functional strategy is the basic course of action that each department follows so that the
business accomplishes its overall goals.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 137
Skill: Comprehension
Objective: 6.4

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40) Tactical plans flow from strategic plans and are directed toward attaining a stated strategic
goal.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 136
Skill: Comprehension
Objective: 6.4

41) Coca-Cola's decision to increase sales in Europe by building European bottling facilities is
an example of a strategic plan.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 136
Skill: Comprehension
Objective: 6.4

42) The final step in the strategy formulation process is matching the environmental analysis
with the organization analysis in an attempt to identify specific strategies.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 135
Skill: Knowledge
Objective: 6.4

43) A corporate-level strategy is developed to identify the various businesses that a company will
be in.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 136
Skill: Knowledge
Objective: 6.4

44) When Maple Leaf Gardens Ltd. acquired the Toronto Raptors, this was an example of related
diversification because Maple Leaf already owned the Toronto Maple Leafs.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 137
Skill: Comprehension
Objective: 6.4

45) Gildan Activewear pursues a cost leadership business-level strategy.

Answer: TRUE
Diff: 2 Type: TF Page Ref: 137
Skill: Comprehension
Objective: 6.4

46) Contingency planning is an organization's method for dealing with emergencies.

Answer: FALSE
Diff: 1 Type: TF Page Ref: 137
Skill: Comprehension
Objective: 6.5

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47) When Maple Leaf Foods had to deal with the problem of listeria contamination at one of its
plants, this was an example of contingency planning.
Answer: FALSE
Diff: 2 Type: TF Page Ref: 138
Skill: Comprehension
Objective: 6.5

48) The BP oil spill in the Gulf of Mexico in 2010 was an example of the need for crisis
management.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 138
Skill: Comprehension
Objective: 6.5

49) The shared experiences, stories, beliefs, and norms that characterize an organization are
referred to as organizational structure.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 138
Skill: Knowledge
Objective: 6.6

50) Corporate culture reflects the "personality" of the organization.

Answer: TRUE
Diff: 2 Type: TF Page Ref: 138
Skill: Knowledge
Objective: 6.6

51) Just as every individual has a unique personality, every company has a unique corporate
culture.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 138
Skill: Comprehension
Objective: 6.6

6.4 Short Answer Questions

1) What are the four management functions that all managers must perform?
Answer: Planning, organizing, leading, and controlling
Diff: 1 Type: SA Page Ref: 123-124
Skill: Knowledge
Objective: 6.1

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2) What is the difference between management efficiency and management effectiveness?

Answer: Efficiency means achieving the greatest level of output with a given amount of input.
Effectiveness, on the other hand, means achieving organizational goals that have been set. Thus,
efficiency means doing things right, while effectiveness means doing the right things. A manager
who focuses on being effective will likely also be efficient, but a manager who focuses on being
efficient may or may not be effective.
Diff: 2 Type: SA Page Ref: 123
Skill: Comprehension
Objective: 6.1

3) Define the term management.

Answer: Management is the process of planning, organizing, leading, and controlling an
organization's financial, physical, human, and information resources to achieve its goals.
Diff: 2 Type: SA Page Ref: 123
Skill: Knowledge
Objective: 6.1

4) Is management an art or a science?

Answer: Many management problems can be approached in ways that are rational, logical,
objective, and systematic, and managers can use quantitative models and decision-making
techniques to arrive at "correct" decisions. This approach is especially useful when managers
deal with relatively routine and well-defined issues. But managers also make many decisions that
are not routine, and when doing so they must rely heavily on interpersonal skills and on abstract
conceptual thinking. Thus, effective management is a blend of both science and art, and
successful executives recognize the importance of combining both the science and art of
management as their carry out the functions of management.
Diff: 2 Type: SA Page Ref: 125
Skill: Knowledge
Objective: 6.1

5) What are the two basic ways that individuals can acquire the skills necessary to be a manager?
Answer: The two basic ways are experience and education.
Diff: 2 Type: SA Page Ref: 125
Skill: Knowledge
Objective: 6.1

6) In the typical organization, what is the view about managerial jobs and the role of overtime
pay in those jobs?
Answer: Managers need to be aware of the expectations that the organization has for them. Put
simply, managers are expected to focus on completing tasks in an effective manner, and they are
not expected to worry about whether they are working too many hours per week. They should
not expect to receive overtime pay if they work more than 40 hours per week.
Diff: 2 Type: SA Page Ref: 127
Skill: Knowledge
Objective: 6.1

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7) What are the three basic levels of management?

Answer: Top management, middle management, and first-line management
Diff: 2 Type: SA Page Ref: 127
Skill: Knowledge
Objective: 6.2

8) List the five key functional areas in which managers work.

Answer: (1) human resources, (2) operations, (3) marketing, (4) information, and (5) finance
Diff: 1 Type: SA Page Ref: 128-129
Skill: Knowledge
Objective: 6.2

9) What are the three general categories of roles that Mintzberg identified in his study of
managers?
Answer: Interpersonal, informational, and decision making
Diff: 1 Type: SA Page Ref: 129
Skill: Knowledge
Objective: 6.3

10) At which level of management are technical skills most important?

Answer: First-line management
Diff: 1 Type: SA Page Ref: 130
Skill: Comprehension
Objective: 6.3

11) At which level of management are human relation skills most important?
Answer: Middle management
Diff: 1 Type: SA Page Ref: 130
Skill: Comprehension
Objective: 6.3

12) At which level of management are conceptual skills most important?

Answer: Top management
Diff: 1 Type: SA Page Ref: 130
Skill: Comprehension
Objective: 6.3

13) Why are human relations skills important for all managers?
Answer: A manager with poor human relations skills may have trouble getting along with
subordinates, cause valuable employees to quit or transfer, and contribute to poor morale.
Diff: 2 Type: SA Page Ref: 130
Skill: Comprehension
Objective: 6.3

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14) Why are conceptual skills particularly important for top managers?
Answer: Conceptual skills allow top managers to see the "big picture," to consider where the
organization is now and where the organization should be headed into the future. Conceptual
skills are utilized by all managers at all levels in organizations, but top managers utilize them
more critically in determining the long-term direction of the firm.
Diff: 2 Type: SA Page Ref: 130
Skill: Comprehension
Objective: 6.3

15) List the four leading causes of wasted time in the workplace.
Answer: Paperwork, telephone, meetings, and email
Diff: 1 Type: SA Page Ref: 130
Skill: Knowledge
Objective: 6.3

16) List the five basic management skills.

Answer: Technical, human relations, conceptual, decision making, and time management
Diff: 2 Type: SA Page Ref: 130-131
Skill: Knowledge
Objective: 6.3

17) Summarize the difference between conceptual skills and technical skills.
Answer: Conceptual skills refer to a person's ability to think in the abstract, to diagnose and
analyze different situations, and to see beyond the present situation. Technical skills are skills
needed to perform specialized tasks.
Diff: 2 Type: SA Page Ref: 130
Skill: Knowledge
Objective: 6.3

18) List the steps in the rational decision-making process.

Answer: Recognizing and defining the decision situation, identifying alternatives, evaluating
alternatives, selecting the best alternative, implementing the chosen alternative, and following
up/evaluating the results
Diff: 1 Type: SA Page Ref: 131
Skill: Knowledge
Objective: 6.3

19) What is organizational politics?

Answer: The actions that people take as they try to get what they want. These actions may or
may not be beneficial to the organization.
Diff: 1 Type: SA Page Ref: 132
Skill: Comprehension
Objective: 6.3

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20) What is intuition?

Answer: Making decisions on the basis of years of experience and practice without obviously
employing a rational decision-making strategy.
Diff: 1 Type: SA Page Ref: 133
Skill: Comprehension
Objective: 6.3

21) What is escalation of commitment?

Answer: Remaining committed to a decision in spite of the fact that there is clear evidence that
the decision was not a good one.
Diff: 1 Type: SA Page Ref: 133
Skill: Comprehension
Objective: 6.3

22) What are the purposes of goal setting?

Answer: Goal setting provides direction, guidance, and motivation; helps allocate resources;
defines the corporate culture; and help managers assess performance.
Diff: 1 Type: SA Page Ref: 133
Skill: Knowledge
Objective: 6.4

23) List the three types of corporate strategy.

Answer: Corporate, business, and functional
Diff: 2 Type: SA Page Ref: 136
Skill: Knowledge
Objective: 6.4

24) What are the three levels of plans?

Answer: Strategic, tactical, and operational
Diff: 2 Type: SA Page Ref: 136
Skill: Knowledge
Objective: 6.4

25) What is the difference between a goal and a strategy?

Answer: A goal is an objective or outcome that a business wants to achieve. A strategy is the set
of plans that are designed to achieve the goal.
Diff: 2 Type: SA Page Ref: 133
Skill: Comprehension
Objective: 6.4

26) What are the three types of time-based goals?

Answer: The three types of goals are long-term (over 5 years), intermediate (1-5 years), and
short-term (less than 1 year).
Diff: 1 Type: SA Page Ref: 134
Skill: Knowledge
Objective: 6.4

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27) What is a mission statement?

Answer: A mission statement is a statement of how the organization will achieve its purposes in
the environment in which it conducts business. It is an important way that a firm encapsulates
and communicates its core business to employees, clients, and a range of other stakeholders.
Diff: 1 Type: SA Page Ref: 133
Skill: Knowledge
Objective: 6.4

28) What is a SWOT analysis?

Answer: After strategic goals have been set, organizations usually go through SWOT analysis as
they continue to formulate their strategy. This process involves assessing organizational
(internal) strengths (S) and weaknesses (W) and environmental (external) opportunities (O) and
threats (T).
Diff: 1 Type: SA Page Ref: 135
Skill: Knowledge
Objective: 6.4

29) What is the difference between a "purpose" and a "mission"?

Answer: A purpose is an organization's reason for being (e.g., to make a profit). A mission
statement is an organization's statement of how it will achieve its purpose (e.g., to sell high-
quality watches).
Diff: 2 Type: SA Page Ref: 135
Skill: Comprehension
Objective: 6.4

30) What is environmental analysis?

Answer: Environmental analysis is the process of scanning the external environment for threats
and opportunities.
Diff: 2 Type: SA Page Ref: 135
Skill: Comprehension
Objective: 6.4

31) What is organizational analysis?

Answer: Organizational analysis is the process of analyzing a firm's internal strengths and
weaknesses.
Diff: 2 Type: SA Page Ref: 135
Skill: Comprehension
Objective: 6.4

32) What is contingency planning?

Answer: Contingency planning involves identifying the aspects of the business or its
environment that might require a change in the way the firm operates.
Diff: 2 Type: SA Page Ref: 137
Skill: Comprehension
Objective: 6.5

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33) What is crisis management?

Answer: Crisis management means dealing with emergencies that demand an immediate
response from the organization (e.g., battery fires in the new 787 Dreamliner).
Diff: 2 Type: SA Page Ref: 138
Skill: Comprehension
Objective: 6.5

34) What is corporate culture?

Answer: Corporate culture refers to the shared experiences, stories, beliefs, and norms that
characterize an organization and make it unique.
Diff: 2 Type: SA Page Ref: 138
Skill: Comprehension
Objective: 6.6

6.5 Essay Questions

1) What is management?
Answer: Management is the process of planning, organizing, leading, and controlling an
enterprise's financial, physical, human, and information resources in order to achieve the
organization's goals of supplying various products and services. Management is important for
both profit-oriented and nonprofit organizations.
Diff: 2 Type: ES Page Ref: 123
Skill: Comprehension
Objective: 6.1

2) What is meant by the phrase "management is universal"?

Answer: It means that the activities of planning, organizing, leading, and controlling are
required of managers in all organizations (e.g., government agencies, labour unions, charities,
business firms, military organizations, etc.).
Diff: 2 Type: ES Page Ref: 123
Skill: Comprehension
Objective: 6.1

3) List and describe the four management functions.

Answer: The four management functions are planning, organizing, leading, and controlling.
Planning is the process of determining what an organization needs to do and how best to get it
done. Organizing is the process of determining how best to arrange an organization's resources
and activities into a coherent structure. Leading is the management process of guiding and
motivating employees to meet the organization's objectives. Finally, controlling is the process of
monitoring an organization's performance to ensure that it is meeting its goals.
Diff: 3 Type: ES Page Ref: 123-125
Skill: Comprehension
Objective: 6.1

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4) Why is planning important?

Answer: Planning is important since it is the portion of a manager's job concerned with
determining what the business needs to do and the best way to achieve it.
Diff: 2 Type: ES Page Ref: 123
Skill: Comprehension
Objective: 6.1

5) List the steps in the planning process. Indicate the kinds of things that can go wrong at each
step in the process.
Answer: The planning process involves the following steps: (1) goals are established for the
organization, (2) managers identify whether a gap exists between the company's desired and
actual position, (3) managers develop plans to achieve the desired objectives, (4) the plans that
have been decided upon are implemented, and (5) the effectiveness of the plan is assessed. A
plan is effective only when there is a logical flow from one level in the management hierarchy to
the next, so if the planning process is not started properly by the board of directors, then the
process will not be effective. This is an example of the kind of things that can go wrong in step 1
of the process. Another example: if step 1 is not done well, managers will not be able to do step 2
because they will not be able to (identify whether a gap exists between the company's desired
and actual position.
Diff: 3 Type: ES Page Ref: 123-124
Skill: Comprehension
Objective: 6.1

6) Donna is going to open her own restaurant, and she is concerned that she gets off to a good
start. She feels that the "leading" function of management is probably going to be the most
difficult part of her new job. Why would she feel this way?
Answer: When leading, a manager works to guide and motivate employees to meet the firm's
objectives. Motivated employees would be essential to the success of a new restaurant business.
Diff: 2 Type: ES Page Ref: 124
Skill: Comprehension
Objective: 6.2

7) Describe the three general level of managers that are found in organizations. What mix of
skills is necessary at each of these levels?
Answer: The three basic levels of management are top, middle, and first-line management. In
most firms, there are more middle managers than top managers and more first-line managers
than middle managers. The authority of managers and the complexity of their duties increase as
we move up the pyramid. Technical skills are important at the lowest level of management, but
not as important at the top level of management. By contrast, conceptual skills are important for
top managers, but not as important for first-line managers. Human relations skills are important
at all levels of management.
Diff: 2 Type: ES Page Ref: 127
Skill: Knowledge
Objective: 6.2

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8) Identify the different levels and types of managers found in organizations.

Answer: There are three levels of management. The few executives who are responsible for the
overall performance of large companies are top managers. Just below top managers are middle
managers, including plant, operations, and division managers, who implement strategies,
policies, and decisions made by top managers. Supervisors and office managers are the first-line
managers who work with and supervise the employees who report to them. In any large
company, most managers work in one of five areas. Human resource managers hire and train
employees, assess performance, and fix compensation. Operations managers are responsible for
production, inventory, and quality control. Marketing managers are responsible for getting
products from producers to consumers. Information managers design and implement systems to
gather, organize, and distribute information. Some firms have a top manager called a chief
executive officer. Financial managers, including the chief financial officer, division controllers,
and accounting supervisors, oversee accounting functions and financial resources.
Diff: 2 Type: ES Page Ref: 127-129
Skill: Comprehension
Objective: 6.2

9) List the three basic levels of management and explain how both the power and complexity of
their duties increases as we move from the lowest level to the highest level.
Answer: Top managers are responsible for a firm's overall performance and effectiveness.
Middle managers implement the strategies and work toward the goals set by top managers. First-
line managers supervise the work of operating employees (i.e., individuals who are not managers
and have no subordinates). The power of top managers is greater than the power of middle
managers, whose power in turn is greater than that of first-line managers. The job complexity of
top managers is greater than that of middle managers because top managers must develop the
overall strategy for the organization. Likewise, the job complexity of middle managers is greater
than that of first-line managers because middle managers must translate top management
directives into actions that first-line managers must take.
Diff: 2 Type: ES Page Ref: 127-128
Skill: Comprehension
Objective: 6.2

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10) What is the difference between the "functions of management" and "roles of management"?
Answer: The functions of management are planning, organizing, leading, and controlling. These
functions give us a good general picture of what managers do, but they may not give a clear idea
of the specific activities that managers are involved in. The roles approach does give these
specific insights. For example, Mintzberg believes that a manager's job can be described as 10
specific roles in three general categories. There are three interpersonal roles: (1) figurehead
(duties of a ceremonial nature, such as attending a subordinate's wedding); (2) leader (being
responsible for the work of the unit); and (3) liaison (making contact outside the vertical chain of
command). There are also three informational roles: (1) monitor (scanning the environment for
relevant information); (2) disseminator (passing information to subordinates); and (3)
spokesperson (sending information to people outside the unit). Finally, there are four decision-
making roles: (1) entrepreneur (improving the performance of the unit); (2) disturbance handler
(responding to high-pressure disturbances, such as a dispute between two subordinates); (3)
resource allocator (deciding who will get what in the unit); and (4) negotiator (working out
agreements on a wide variety of issues, such as the amount of authority an individual will be
given).
Diff: 2 Type: ES Page Ref: 129
Skill: Comprehension
Objective: 6.3

11) What is the difference in the need for technical skills at first-line management levels and the
need at top management levels, and what accounts for this difference?
Answer: First-line managers spend more time with work-related problems which are technically
oriented and thus need higher levels of technical skills. By contrast, top managers deal with
much broader and conceptually more difficult issues where conceptual skills are more important
than technical skills.
Diff: 2 Type: ES Page Ref: 130-131
Skill: Comprehension
Objective: 6.3

12) What is the difference in the need for conceptual skills at first-line management levels and
the need at top management levels, and what accounts for this difference?
Answer: Top-level managers deal with abstract strategies, the future, and interrelationships
among different factors which require a higher level of conceptual skills. First-line managers
deal with quite specific work-related issues that require less conceptual skill.
Diff: 2 Type: ES Page Ref: 130-131
Skill: Comprehension
Objective: 6.3

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13) Explain the term "time management skills" and discuss the four leading causes of wasted
time. Suggest solutions to these problems.
Answer: Time management skills allow managers to make productive use of their time. The four
leading causes of wasted time are paperwork (spending too much time deciding what to do with
letters and reports), the telephone (on average, managers are interrupted by the telephone every
five minutes), meetings (many managers spend as much as four hours per day in meetings), and
email (many email messages are not important, and some are downright trivial). Solutions
involve having a strategy for overcoming each of the areas where time is wasted. For example, to
avoid being interrupted by the telephone, take messages on voice mail and then allocate a block
of time to return calls.
Diff: 2 Type: ES Page Ref: 130
Skill: Comprehension
Objective: 6.3

14) List and briefly describe the basic steps in the rational decision-making process.
Answer: There are six steps in the rational decision-making process (see Figure 6.4 for a
description of each step).
Diff: 2 Type: ES Page Ref: 131-132
Skill: Knowledge
Objective: 6.3

15) What is escalation of commitment, and how can managers avoid it?
Answer: Escalation of commitment refers to the situation where managers remain committed to
a decision in spite of evidence that the decision was not a good one. Managers can avoid
escalation of commitment by setting specific goals ahead of time that deal with how much time
and money they are willing to spend on a given project. These goals will make it more difficult
for a manager to interpret unfavourable news in a favourable light.
Diff: 2 Type: ES Page Ref: 133
Skill: Comprehension
Objective: 6.3

16) What are the characteristics of a good goal?

Answer: Good goals are SMART, that is, they are specific (focused on specific activities),
measurable (progress toward the goal can actually be measured), achievable (the manager can
actually achieve the goal), relevant (they apply to what the manager should be doing), and time-
framed (they contain deadlines for achievement of the goal). Managers who set SMART goals
have higher performance than managers who don't.
Diff: 2 Type: ES Page Ref: 134
Skill: Comprehension
Objective: 6.4

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17) Describe the three steps in strategy formulation.

Answer: The three steps in strategy formulation are:
- Setting strategic goals: long-term goals derived directly from a firm's mission statement
- Analyzing the organization and its environment: process of scanning the environment for
threats and opportunities
- Matching the organization and its environment: process of analyzing a firm's strengths and
weaknesses
Diff: 2 Type: ES Page Ref: 134
Skill: Comprehension
Objective: 6.4

18) Explain how plans differ at the strategic, tactical, and operational levels.
Answer: Plans can be found at three different levels:
- Strategic plans: plans that reflect decisions about resource allocations, company priorities, and
steps needed to meet strategic goals which are usually set by the board of directors and top
management
- Tactical plans: short-range plans concerned with implementing specific aspects of a company's
strategic plans involving upper and middle management
- Operational plans: for daily, weekly, or monthly performance developed by middle and lower
managers
Diff: 2 Type: ES Page Ref: 136
Skill: Comprehension
Objective: 6.4

19) Discuss the three broad levels of strategy that organizations may implement.
Answer: Organizations may develop corporate, business, and functional strategies. The purpose
of corporate strategy is to determine the firm's overall attitude toward growth and the way it will
manage its businesses or product lines. Business strategy, which takes place at the level of the
business or product line, focuses on improving the company's competitive position. At the level
of functional strategy, managers in specific areas decide how best to achieve corporate goals
through productivity.
Diff: 2 Type: ES Page Ref: 136
Skill: Comprehension
Objective: 6.4

20) Donna is going to open her own restaurant. She is concerned not only about her own
organization, but also about what her competitors are doing. Explain why a SWOT analysis will
be helpful to her.
Answer: To do a SWOT analysis, Donna must look at both the internal strengths and
weaknesses of her organization and at the environmental opportunities and threats that exist in
the external environment. Donna needs to know these things in order to develop an effective
strategy for her new restaurant.
Diff: 2 Type: ES Page Ref: 135
Skill: Comprehension
Objective: 6.4

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Chapter 6: Managing the Business Enterprise

21) Donna is going to open her own restaurant. How will a mission statement help her with her
new business?
Answer: To come up with a mission statement, she will have to decide how her business is
going to achieve its purpose (which presumably is to make a profit selling food to customers).
The mission will likely include the restaurant's main objectives, its organizational philosophy,
and what kind of service will be provided for customers.
Diff: 2 Type: ES Page Ref: 133
Skill: Comprehension
Objective: 6.4

22) Donna is going to open her own restaurant. Why is it important for Donna to be setting
goals? How will the types of goals that Donna will most likely set help her in growing her
business?
Answer: Donna can expect a number of benefits from the goal-setting process. Goal setting (1)
provides direction and guidance, not only for Donna but also for her employees, (2) will help
Donna allocate resources such as personnel and capital, (3) will help Donna to define the
organization's corporate culture, and (4) will help Donna determine if she has been successful.
Donna will be wise to set long-term, intermediate, and short-term goals. Long-term goals relate
to extended periods of time, typically five years or more. Intermediate goals are set for a period
of one to five years. Short-term goals are typically set for one year or less. These goals will be
signposts for business growth as the months and years pass.
Diff: 2 Type: ES Page Ref: 133
Skill: Comprehension
Objective: 6.4

23) Explain the importance of strategic management and effective goal setting in organizational
success.
Answer: Strategic management is the process that is required to ensure that an organization
maintains an effective alignment with its environment. The starting point in effective strategic
management is setting goals (objectives that a business hopes and plans to achieve). In most
companies, decisions are guided by a strategy, or a broad set of organizational plans for
implementing the decisions made for achieving organizational goals.
Diff: 2 Type: ES Page Ref: 133
Skill: Comprehension
Objective: 6.4

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24) Describe five of the different corporate-level strategies that a company might pursue.
Answer: A concentration strategy involves focusing the company on one product or product
line. Market penetration means boosting sales of present products by more aggressively selling
in the firm's current markets. Geographic expansion means expanding operations to new
geographic areas. Product development means developing improved products for current
markets. Horizontal integration means acquiring control of competitors in the same or similar
markets, while vertical integration means owning or controlling the inputs to the firm's processes
and/or the channels through which the products or services are distributed. Related
diversification means adding new, but related, products or services to an existing business, while
conglomerate diversification means diversifying into products or markets that are not related to
the firm's present businesses. Investment reduction means reducing the company's investment in
one or more of its lines of business.
Diff: 2 Type: ES Page Ref: 136-137
Skill: Comprehension
Objective: 6.4

25) Describe the three competitive strategies identified by Michael Porter.

Answer:
- Cost leadership: becoming the low cost leader in an industry
- Differentiation: a firm seeks to be unique in its industry along some dimension that is valued by
buyers
- Focus: selecting a market segment and serving the customers in that market niche better than
competitors
Diff: 2 Type: ES Page Ref: 137
Skill: Comprehension
Objective: 6.4

26) What is the difference between contingency planning and crisis management?
Answer: Contingency planning requires identification of the aspects of a business or its
environment that might require the company in the future to make a change in the way the
business operates (e.g., demographic changes in society that may reduce demand for the
company's products). Crisis management refers to an organization's plans for immediately
dealing with an emergency that has already occurred (e.g., a fire at one of the company's
manufacturing plants).
Diff: 2 Type: ES Page Ref: 137-138
Skill: Comprehension
Objective: 6.5

27) Why should managers develop a crisis management plan for their business?
Answer: A crisis management plan allows a business to continue operations if a major problem
occurs (e.g., a fire that destroys the business' physical plant). The plan could include a number of
"just-in-case" plans to respond to various emergencies.
Diff: 2 Type: ES Page Ref: 138
Skill: Comprehension
Objective: 6.5

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28) What are the benefits of a strong corporate culture?

Answer: A strong corporate culture provides several benefits. First, it directs employees' efforts
and helps everyone work toward the same goals. Second, it helps newcomers identify accepted
behaviors. Finally, it gives each organization its own identity, much like personalities giving
identity to people.
Diff: 3 Type: ES Page Ref: 139
Skill: Comprehension
Objective: 6.6

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