chapter 5

Business Essentials, 9e (Ebert/Griffin)

Chapter 5 Business Management

1) Business strategy focuses on improving the company's competitive position.

Answer: TRUE

Explanation: Strategic management is the process of helping an organization maintain an effective alignment with its environment. One specific type is business, or competitive, strategy.

Page Ref: 122

Difficulty: Easy

Objective: 5.4

Learning Outcome: Describe the skills and functions of management

Skill: Concept

2) Contingency planning seeks to identify how a company will respond to change.

Answer: TRUE

Explanation: Contingency planning is planning for change: It seeks to identify in advance important aspects of a business or its market that might change.

Page Ref: 130

Difficulty: Easy

Objective: 5.5


Skill: Concept

3) When a sales manager compares actual sales to the quarterly sales quota, she is performing the controlling function of management.

Answer: TRUE

Explanation: Controlling is the process of monitoring a firm's performance to make sure that it is meeting its goals.

Page Ref: 116

Difficulty: Moderate

Objective: 5.1


Skill: Concept

4) The first step in the control process is to compare actual performance to standards.

Answer: FALSE

Explanation: The first step in the control process occurs when managers establish standards.

Page Ref: 116


Objective: 5.1


Skill: Concept

5) Operations managers are responsible for production, inventory, and quality control.

Answer: TRUE

Explanation: In general, operations refers to the systems by which a firm produces goods and services.

Page Ref: 119


Objective: 5.2


Skill: Concept

6) Information managers are responsible for getting products from producers to consumers.

Answer: FALSE

Explanation: Information managers design and implement systems to gather, organize, and distribute information.

Page Ref: 119


Objective: 5.2


Skill: Concept

7) The last step in the decision-making process is the selection of the best alternative.

Answer: FALSE

Explanation: Implementing the chosen alternative is the last step in the process.

Page Ref: 120


Objective: 5.3


Skill: Concept

8) Changes in technology will result in a decrease in the amount of information that managers will use to make decisions.

Answer: FALSE

Explanation: In today's world, the amount of information has reached staggering proportions.

Page Ref: 122


Objective: 5.3


Skill: Concept

9) The starting point in effective management is setting goals.

Answer: TRUE

Explanation: In addition, managers must consider what actions will and will not achieve company goals.

Page Ref: 122


Objective: 5.4


Skill: Concept

10) Goal setting helps managers assess performance.

Answer: TRUE

Explanation: For example, if a unit sets a goal of increasing sales by 10 percent in a given year, managers in that unit who attain or exceed the goal can be rewarded.

Page Ref: 122


Objective: 5.4

Learning Outcome: Explain how economic performance is monitored

Skill: Concept

11) Long-term goals are derived directly from a firm's mission statement.

Answer: TRUE

Explanation: Long-term goals relate to extended periods of time, typically five years or more; long-term goals are strategic goals that are directly related to the firm's mission statement.

Page Ref: 124


Objective: 5.4

Skill: Concept

12) Doubling the number of merchants participating in a sales program over the next 10 years is an example of a long-term goal.

Answer: TRUE

Explanation: Long-term goals relate to extended periods of time, typically five years or more.

Page Ref: 124


Objective: 5.4

Skill: Application

13) Increasing sales by 4 percent in the next six months would be an example of an intermediate goal.

Answer: FALSE

Explanation: Increasing sales by 4 percent over six months would be an example of a short-term goal; short-term goals are set for up to a year.

Page Ref: 124


Objective: 5.4


Skill: Application

14) When IBM analyzes its internal strengths and weaknesses, it is conducting an organizational analysis.

Answer: TRUE

Explanation: In addition to analyzing external factors by performing an environmental analysis, managers can examine internal strengths and weaknesses via organizational analysis.

Page Ref: 127


Objective: 5.4


Skill: Application

15) Corporate culture is largely a result of state and local laws and regulations.

Answer: FALSE

Explanation: Corporate culture refers to the shared experiences, stories, beliefs, and norms that characterize an organization.

Page Ref: 130


Objective: 5.6

Learning Outcome: Discuss the factors that affect motivation and behavior in the workplace

Skill: Concept

16) A strong corporate culture directs employees' efforts and helps everyone work toward the same goals.

Answer: TRUE

Explanation: Managers must carefully consider the kind of culture they want for their organizations and then work to nourish that culture by communicating with everyone who works there.

Page Ref: 130


Objective: 5.6


Skill: Concept

17) It is not possible to change an organization's corporate culture.

Answer: FALSE

Explanation: Organizations must sometimes change their corporate culture.

Page Ref: 131


Objective: 5.6


Skill: Concept

18) Many managers spend as much as four hours a day in meetings.

Answer: TRUE

Explanation: Meetings are one of the four most common causes of wasted time in organizations.

Page Ref: 121

Difficulty: Easy

Objective: 5.3


Skill: Concept

19) The effectiveness of managers in using time can be undermined by frequent phone calls.

Answer: TRUE

Explanation: Because of the frequency with which managers are interrupted by phone calls, experts suggest having an assistant screen all calls and setting aside a certain block of time each day to return the important ones as an effective time management tool.

Page Ref: 121


Objective: 5.3


Skill: Concept

20) A firm first sets its strategies and then focuses attention on goals to accomplish them.

Answer: FALSE

Explanation: After a firm has set its goals, it then focuses attention on strategies to accomplish them.

Page Ref: 122


Objective: 5.4


Skill: Concept

21) Strategy has a wider scope than planning.

Answer: TRUE

Explanation: Planning is often concerned with the nuts and bolts of setting goals, choosing tactics, and establishing schedules; strategy tends to have a wider scope.

Page Ref: 125


Objective: 5.4


Skill: Concept

22) An organization retrenches by increasing its investment in a particular area.

Answer: FALSE

Explanation: Retrenching is a corporate strategy that involves reducing investment in a particular area.

Page Ref: 125


Objective: 5.4


Skill: Concept

23) SWOT analysis is usually conducted before strategic goals have been established.

Answer: FALSE

Explanation: Strategic goals are established first; THEN the internal strengths and weaknesses and the external opportunities and threats are evaluated through SWOT analysis.

Page Ref: 127


Objective: 5.4


Skill: Concept

24) Which business constituents analyze their competitive environments and plan, organize, direct, and control the operations of their organizations?

A) stockholders

B) managers

C) regulators

D) agents

E) customers

Answer: B

Explanation: B) Management itself is the process of planning, organizing, leading, and controlling an organization's financial, physical, human, and information resources to achieve its goals. Managers oversee the use of all these resources in their respective firms.

Page Ref: 114

Difficulty: Easy

Objective: 5.1


Skill: Concept

25) Which aspect of the management process involves determining what the organization needs to do and how best to get it done?

A) organizing

B) planning

C) controlling

D) processing

E) monitoring

Answer: B

Explanation: B) Planning is determining what the organization needs to do and how best to get it done.

Page Ref: 114

Difficulty: Easy

Objective: 5.1


Skill: Concept

26) Which type of manager is responsible for implementing the strategies, policies, and decisions made by top managers?

A) first-line manager

B) middle manager

C) supervisory manager

D) office manager

E) financial managers

Answer: B

Explanation: B) Just below top managers are middle managers, who implement strategies, policies, and decisions made by top managers.

Page Ref: 118

Difficulty: Easy

Objective: 5.2


Skill: Concept

27) Which type of manager spends most of their time working with and supervising the employees who report to them?

A) first-line managers

B) information managers

C) top managers

D) chief executive officers

E) operations managers

Answer: A

Explanation: A) Supervisors and office managers are the first-line managers who work with and supervise the employees who report to them.

Page Ref: 118

Difficulty: Easy

Objective: 5.2


Skill: Concept

28) What type of skills are needed to understand and work well with people in the workplace?

A) human relations skills

B) technical skills

C) conceptual skills

D) motor skills

E) decision-making skills

Answer: A

Explanation: A) Human relations skills are skills in understanding and getting along with other people.

Page Ref: 119

Difficulty: Easy

Objective: 5.3


Skill: Concept

29) Which of the following refers to a person's ability to think in the abstract, to diagnose and analyze different situations, and to see beyond the present situation?


B) decision-making skills


D) production skills

E) technical skills

Answer: C

Explanation: C) Conceptual skills refer to the ability to think abstractly as well as diagnose and analyze different situations.

Page Ref: 120

Difficulty: Easy

Objective: 5.3


Skill: Concept

30) What type of skills requires defining problems and selecting the best course of action to take?


B) production skills


D) decision-making skills

E) technical skills

Answer: D

Explanation: D) Decision-making skills include the ability to define problems and select the best courses of action.

Page Ref: 120

Difficulty: Easy

Objective: 5.3


Skill: Concept

31) What identifies performance targets used by organizations and their managers to measure success or failure at every level?

A) tactics

B) goals

C) strategies

D) mission statements

E) promotions

Answer: B

Explanation: B) Goals are objectives that a business hopes (and plans) to achieve.

Page Ref: 122

Difficulty: Easy

Objective: 5.4


Skill: Concept

32) If Kodak sets out to increase its share of the 35-mm film market by 10 percent during the next eight years, what kind of goal is the organization setting?

A) a short-term goal

B) an intermediate goal

C) a tactical goal

D) a long-term goal

E) an organizational goal

Answer: D

Explanation: D) A long-term goal is one set for an extended time, typically five years or more into the future.

Page Ref: 124

Difficulty: Easy

AACSB: Reflective thinking skills

Objective: 5.4


Skill: Application

33) When the finance department aims for a 3 percent increase in return on investment in three years, what type of goal is the organization setting?

A) a long-term goal

B) a tactical goal

C) a short-term goal

D) an intermediate goal

E) an organizational goal

Answer: D

Explanation: D) An intermediate goal is one set for a period of one to five years into the future.

Page Ref: 124

Difficulty: Easy


Objective: 5.4


Skill: Application

34) What does e-partnering involve?

A) buying shares of small companies that provide technology unavailable to the "purchasing" company

B) buying shares of small companies that are similar to the "purchasing" firm

C) linking up to the inventory records of another company

D) sharing a Web server with another company

E) advertising another company on the "purchasing" company's Web site

Answer: A

Explanation: A) E-partnering is buying shares of small companies that can provide technology that the buyer itself does not have. It is a corporate strategy for growth.

Page Ref: 125

Difficulty: Easy

Objective: 5.4


Skill: Concept

35) Which kind of strategy takes place at the level of the product line and focuses on a firm's competitive position?

A) functional

B) business

C) local

D) fundamental

E) environmental

Answer: B

Explanation: B) Business (or competitive) strategy takes place at the level of the business unit or product line and focuses on improving the company's competitive position.

Page Ref: 125

Difficulty: Easy

Objective: 5.4


Skill: Concept

36) Which element of an organization is defined by shared experiences, stories, beliefs, and norms?

A) its human resources

B) its product philosophy

C) its corporate culture

D) its mission statement

E) its organizational structure

Answer: C

Explanation: C) Every company has a unique identity, a corporate culture: the shared experiences, stories, beliefs, and norms that characterize an organization. This culture helps define the work and business climate that exists in an organization.

Page Ref: 130

Difficulty: Easy

Objective: 5.6


Skill: Concept

37) Which of the following is TRUE about corporate culture?

A) It can direct employees' efforts toward goals.

B) It is usually determined by outside forces.

C) It cannot be changed.

D) It is easy to change.

E) It rarely affects newcomers in an organization.

Answer: A

Explanation: A) Every company has a unique identity, a corporate culture: the shared experiences, stories, beliefs, and norms that characterize an organization. This culture helps define the work and business climate that exists in an organization.

Page Ref: 130

Difficulty: Easy

Objective: 5.6


Skill: Concept

38) Which description defines the planning function of the management process?

A) guiding and motivating employees to meet organizational objectives

B) discussing how best to arrange an organization's resources into a coherent structure

C) scanning the business environment for threats and opportunities

D) determining what an organization needs to do and how best to get it done

E) monitoring a firm's performance to make sure that it is meeting its goals

Answer: D

Explanation: D) Further, planning has three components. First, it begins when managers determine the firm's goals. Next, they develop a strategy for achieving those goals. Finally, they design tactical and operational plans for implementing the strategy.

Page Ref: 114


Objective: 5.1


Skill: Concept

39) Which description identifies the organizing function of the management process?


B) determining how best to arrange an organization's resources into a coherent structure


D) monitoring an organization's performance to ensure that it is meeting its goals

E) determining what an organization needs to do and how best to get it done

Answer: B

Explanation: B) This function is sometimes illustrated through the use of organization charts, which help everyone understand roles and reporting relationships.

Page Ref: 115


Objective: 5.1


Skill: Concept

40) Hewlett-Packard decides to move toward a more centralized structure. This is an example of which function in the management process?

A) planning

B) leading

C) organizing

D) controlling

E) monitoring

Answer: C

Explanation: C) Organizing is determining the best way to arrange a business's resources and activities into a coherent structure.

Page Ref: 115



Objective: 5.1

Learning Outcome: Discuss the factors that influence decisions about organizational structure

Skill: Application

41) Which description identifies the controlling function of the management process?


B) determining how to arrange a firm's resources into a coherent structure


D) monitoring a firm's performance to ensure that it is meeting its goals

E) determining what an organization needs to do and how best to get it done

Answer: D

Explanation: D) The control process begins when managers establish performance standards; they then compare results with those identified standards.

Page Ref: 116


Objective: 5.1


Skill: Concept

42) Comparing actual performance against standards is an example of which function of the management process?

A) planning

B) organizing

C) leading

D) controlling

E) strategizing

Answer: D

Explanation: D) Controlling is the process of monitoring a firm's performance to make sure that it is meeting its goals.

Page Ref: 116


Objective: 5.1


Skill: Concept

43) Steve motivates employees by rewarding them with additional vacation when standards are achieved. This is an example of which function in the management process?

A) leading

B) planning

C) organizing

D) marketing

E) strategizing

Answer: A

Explanation: A) When leading, a manager works to guide and motivate employees to meet the firm's objectives.

Page Ref: 117



Objective: 5.1


Skill: Application

44) Which type of business constituent has titles such as President and CEO?


B) top managers

C) middle managers

D) power brokers

E) stockholders

Answer: B

Explanation: B) These are titles given to top managers, who are responsible for the overall performance of the organization.

Page Ref: 117


Objective: 5.2


Skill: Concept

45) Which level of management is responsible for the overall performance and effectiveness of the firm?

A) top managers

B) first-line managers

C) middle managers

D) supervisory managers

E) human resource managers

Answer: A

Explanation: A) Top managers set general policies, formulate strategies, approve all significant decisions, and represent the company in deals with other firms and with government bodies.

Page Ref: 118


Objective: 5.2


Skill: Concept

46) Which level of management sets general policies, formulates strategies, approves all significant decisions, and represents the company in dealings with other firms and with government bodies?

A) operations managers

B) production managers

C) top managers

D) middle managers

E) first-line managers

Answer: C

Explanation: C) Top managers, through these types of activities, are responsible for the overall performance and effectiveness of the firm.

Page Ref: 118


Objective: 5.2


Skill: Concept

47) Titles such as plant manager, operations manager, and division manager designate which level of management?


B) middle managers

C) top managers

D) supervisors

E) technology managers

Answer: B

Explanation: B) Middle managers are responsible for implementing the strategies and working toward the goals set by top managers.

Page Ref: 119


Objective: 5.2


Skill: Concept

48) The titles supervisor, office manager, and group leader are examples of which level of management?

A) top management

B) middle management

C) first-line management

D) operations management

E) human resource management

Answer: C

Explanation: C) First-line managers spend most (but not all) of their time working with and supervising the employees who report to them.

Page Ref: 119


Objective: 5.2


Skill: Concept

49) Which of the following are responsible for production and quality control?

A) information managers

B) human resource managers

C) first-line managers

D) operations managers

E) marketing managers

Answer: D

Explanation: D) The term operations refers to the systems by which a firm produces goods and services.

Page Ref: 119


Objective: 5.2


Skill: Concept

50) Which of the following managers are directly responsible for getting products from producers to consumers?

A) human resource managers

B) public relations managers

C) information managers

D) marketing managers


Answer: D

Explanation: D) Marketing encompasses the development, pricing, promotion, and distribution of goods and services.

Page Ref: 119


Objective: 5.2


Skill: Concept

51) Who is responsible for designing and implementing systems to gather, organize, and distribute facts and data essential for the running of the company?

A) marketing managers


C) production managers

D) human resource managers

E) research and development managers

Answer: B

Explanation: B) Huge increases in both the sheer volume of information and the ability to manage it have led to the emergence of this important function.

Page Ref: 119


Objective: 5.2


Skill: Concept

52) Which of the following managers are responsible for planning and overseeing the firm's accounting functions?

A) financial managers


C) production managers

D) human resource managers

E) marketing managers

Answer: A

Explanation: A) Levels of financial management include chief financial officer, division controller, and accounting supervisor.

Page Ref: 119


Objective: 5.2


Skill: Concept

53) An accountant's ability to audit a company's records is an example of what type of skills?

A) motor skills

B) technical skills

C) human relations skills

D) conceptual skills

E) decision-making skills

Answer: B

Explanation: B) The skills needed to perform specialized tasks are called technical skills.

Page Ref: 120


Objective: 5.3

Learning Outcome: Identify the basic concepts of and tools used for business accounting

Skill: Concept

54) Camille Graham is a manager who works well with people and makes them feel excited about their work. What type of skills is she illustrating?


B) technical skills

C) accounting skills

D) conceptual skills

E) marketing skills

Answer: A

Explanation: A) Human relations skills enable managers to understand and get along with other people.

Page Ref: 120


Objective: 5.3


Skill: Application

55) How might an effective manager choose the best plan of action when making a decision?

A) making a self-generated list of pros and cons and choosing based on the list

B) using the results of a survey that was sent to key customers who will be affected

C) sending a feedback form to customers after the plan has been executed

D) creating only one plan with no alternatives so it has to work

E) reviewing what other managers have done in the same situation and doing the same

Answer: B

Explanation: B) An effective manager will consider the effects on all stakeholders before taking a certain action.

Page Ref: 120


AACSB: Analytic skills

Objective: 5.3


Skill: Synthesis

56) Which of the following managers depend most on conceptual skills?


B) top managers

C) middle managers

D) marketing managers


Answer: B

Explanation: B) Conceptual skills, closely associated with top managers, refer to a person's ability to think in the abstract, to diagnose and analyze different situations, and to see beyond the present situation.

Page Ref: 120


Objective: 5.3


Skill: Concept

57) What activity do company managers undertake in order to measure success or failure at every organizational level?

A) planning tactics

B) setting goals

C) devising strategies

D) auditing skills

E) publicizing promotions

Answer: B

Explanation: B) The starting point in effective strategic management is setting goalsobjectives that a business hopes and plans to achieve.

Page Ref: 123


Objective: 5.4


Skill: Concept

58) 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

Explanation: D) That purpose can be profits, the discovery and transmission of new knowledge, market share, the enforcement of public policies, etc.

Page Ref: 124


Objective: 5.4


Skill: Concept

59) What do a company's vision and mission statement have in common?

A) They are both used to generate profits.

B) They are both directed toward employees.

C) They are both used to keep management on track.

D) They are both directed toward customers.

E) They are both used to set profit objectives.

Answer: C

Explanation: C) A company's vision and mission statement are used to keep management moving toward defined goals.

Page Ref: 124



Objective: 5.4


Skill: Synthesis

60) Sometimes a corporation buys and operates multiple businesses in compatible industries as part of its corporate strategy. This is an example of what type of strategy?

A) customer-driven diversification

B) unrelated diversification

C) e-partnering

D) strategic diversification

E) complex collaborations

Answer: D

Explanation: D) When businesses a corporation operates are related to one another, the strategy is related diversification. If the businesses are not similar, the strategy is unrelated diversification.

Page Ref: 125


Objective: 5.4


Skill: Concept

61) Which of the following best describes business 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: B

Explanation: B) Further, a strategy outlines how the business intends to meet its goals and includes the organization's responsiveness to new challenges and new needs.

Page Ref: 125


Objective: 5.4


Skill: Concept

62) Which of the following best describes 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

Explanation: C) At the level of functional strategy, managers in specific areas such as marketing, finance, and operations decide how best to achieve corporate goals by performing their functional activities most effectively.

Page Ref: 126


Objective: 5.4


Skill: Concept

63) Which of the following is NOT a characteristic of a solid contingency plan?

A) contact information for an on-site crisis manager

B) information systems backup software

C) an evacuation plan

D) a prioritized list of critical operations

E) a summary of common types of emergencies

Answer: E

Explanation: E) A summary of common types of emergencies would not be of much assistance in a crisis. However, a good contingency plan will provide all of the other information listed in anticipation of an emergency situation.

Page Ref: 130



Objective: 5.5


Skill: Synthesis

64) Doreen 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 what function of the management process?

A) planning

B) organizing

C) leading

D) controlling

E) budgeting

Answer: D

Explanation: D) Controlling is the process of monitoring a firm's performance to make sure that it is meeting its goals.

Page Ref: 116

Difficulty: Difficult


Objective: 5.1


Skill: Application

65) CFO and controller are titles associated with what type of manager?

A) financial

B) information

C) human resource

D) marketing

E) operations

Answer: A

Explanation: A) Nearly every company has financial managers to plan and oversee its accounting functions and financial resources.

Page Ref: 118


Objective: 5.2


Skill: Concept

66) Terrell is being considered for promotion from a supervisory role 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

Explanation: B) This scenario shows Terrell's personal skills of time-management and interpersonal skills will contribute to his being an effective manager.

Page Ref: 118



Objective: 5.2


Skill: Critical Thinking

67) Starbucks has established itself as the premier marketer of the finest coffee in the world while maintaining its uncompromising principles and continuing to grow. This statement illustrates what aspect of Starbucks' organization?

A) its strategy

B) its tactic

C) its mission

D) its diversity

E) its profitability

Answer: C

Explanation: C) This is the mission statement for Starbucks.

Page Ref: 124


Objective: 5.4


Skill: Application

68) "Teach For America 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 America's 20,000 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 fulfill their potential, our alumni are working from all sectors to shape our schools, policies, and investments in low-income communities."

What objective might Teach For America have, based on its company mission?

A) Teach For America will transition from a nonprofit to a for-profit organization in 2015.

B) Teach For America will open a food bank in low-income communities in each of its 39 regional offices.

C) Teach For America will increase the number of its alumni in leadership positions within school systems across the United States by 10 percent each year.

D) Teach For America will change the corps member service commitment to four years, versus two.

E) Teach For America will open ten new regional offices by the year 2020.

Answer: C

Explanation: C) The mission emphasizes an importance of moving alumni toward leadership positions in public school systems throughout the United States.

Page Ref: 124



Objective: 5.4



69) Carlos wants to complete his M.B.A. in three years. This is an example of what kind of goal?

A) long-term

B) intermediate

C) short-term

D) objective

E) problematic

Answer: B

Explanation: B) Intermediate goals are set for a period of one to five years.

Page Ref: 124



Objective: 5.4


Skill: Application

70) Increasing sales by 4 percent in the next eight months is an example of what kind of goal?

A) tactical

B) strategic

C) short-term

D) intermediate

E) long-term

Answer: C

Explanation: C) Short-term goals are set for a period of one year or less.

Page Ref: 125



Objective: 5.4


Skill: Application

71) The marketing manager wants to increase regional sales by 2 percent each quarter over the next year. This is an example of what kind of goal?

A) long-term

B) intermediate

C) short-term

D) strategic

E) tactical

Answer: C

Explanation: C) Short-term goals are set for one year or less.

Page Ref: 125



Objective: 5.4


Skill: Application

72) Which of the following is the best example of unrelated diversification?

A) Ford Motor Company merging with General Motors

B) Northwest Airlines merging with Procter & Gamble

C) McDonald's merging with Burger King

D) Tootsie Roll merging with Hershey

E) Bath and Body Works merging with The Body Store

Answer: B

Explanation: B) Northwest Airlines provides air travel for the public, whereas Procter & Gamble manufactures consumer goods.

Page Ref: 125



Objective: 5.4


Skill: Application

73) The first step in the planning process is determining goals. What is the next step?

A) developing a strategic mission

B) developing a comprehensive strategy

C) developing an array of tactics

D) developing an operational plan

E) developing a functioning budget

Answer: B

Explanation: B) Planning begins when managers determine the firm's goals; next, a comprehensive strategy is developed. After that, tactical and operational plans for implementing the strategy are set.

Page Ref: 126


Objective: 5.1


Skill: Concept

74) Which variable of SWOT analysis identifies changing consumer tastes, hostile takeover offers, and new government regulations?

A) threats

B) opportunities

C) strategies

D) internal factors

E) weaknesses

Answer: A

Explanation: A) Organizational threats are external variables that may adversely affect the organization; they can be outlined through SWOT analysis.

Page Ref: 127


Objective: 5.4


Skill: Concept

75) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the strengths section of the analysis?

A) What external changes present interesting possibilities?

B) What aspect of the organization's vision can be altered?

C) What necessary skills do the organization's employees currently lack?

D) What does the organization offer that makes it stand out from other organizations?

E) What external economic forces can affect the organization's bottom line?

Answer: D

Explanation: D) This question will help management brainstorm an organization's internal strengths.

Page Ref: 127



Objective: 5.4


Skill: Concept

76) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the weaknesses section of the analysis?






Answer: C

Explanation: C) This question will help management brainstorm an organization's internal weaknesses.

Page Ref: 127



Objective: 5.4


Skill: Concept

77) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the opportunities section of the analysis?






Answer: A

Explanation: A) This question will help management brainstorm opportunities that external constituents may offer.

Page Ref: 127



Objective: 5.4


Skill: Concept

78) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the threats section of the analysis?






Answer: E

Explanation: E) This question will help management evaluate outside factors that may pose a threat to the company.

Page Ref: 127



Objective: 5.4


Skill: Concept

79) Which of the following would be classified as opportunities for an organization?

A) government regulations

B) highly unionized workers

C) new competitors

D) possible company expansion

E) economy fluctuations

Answer: D

Explanation: D) The other factors would typically be considered threats; possible expansion of the firm is an opportunity that could possibly lead to enhanced sales, increased market share, and a stronger market image.

Page Ref: 127


Objective: 5.4


Skill: Concept

80) What type of analysis focuses on external factors?

A) organizational analysis

B) governmental analysis

C) environmental analysis

D) functional analysis

E) financial analysis

Answer: C

Explanation: C) External threats and opportunities are revealed through environmental analysis.

Page Ref: 127


Objective: 5.4


Skill: Concept

81) Which of the following is NOT considered an organizational strength?

A) strong market position

B) dedicated work force

C) changing consumer tastes

D) technical expertise

E) recognized customer relation management

Answer: C

Explanation: C) Organizational strengths are any number of positive attributes within an organization from which the organization might benefit.

Page Ref: 127


Objective: 5.4


Skill: Concept

82) Marty uses computer forecasts to determine possible outcomes of an intended change in his division. What element of management is Marty utilizing?

A) strategy formulation

B) goal setting

C) crisis management

D) contingency planning

E) related diversification

Answer: D

Explanation: D) Contingency planning is planning for change: It seeks to identify in advance important aspects of a business or its market that might change.

Page Ref: 130



Objective: 5.5


Skill: Application

83) According to the CEOs of several companies that have undergone radical change in the last decade, what does NOT happen within such organizations?

A) At the highest level, analysis of the company's environment highlights extensive change as the most effective response to its problems.

B) Lower-level employees develop informal groups to plan for change.

C) The firm sets up new systems for appraising and compensating employees who enforce the firm's new values.

D) Top management begins to formulate a vision of a new company.

E) Change is characterized by much conflict and resistance.

Answer: B

Explanation: B) Conflict and resistance typically characterize this period. The purpose is to give the new culture solid shape from within the firm. Whatever the new vision, it must include renewed focus on the activities of competitors and the needs of customers.

Page Ref: 131


Objective: 5.6


Skill: Application

84) 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.

Explanation: Typically a manager's day would involve attention to all these aspects of the role.

Page Ref: 114

Difficulty: Easy

Objective: 5.1


Skill: Concept

85) What are the basic steps in decision making?

Answer: The basic steps are to gather facts, identify solutions, evaluate alternatives, and implement the chosen course of action.

Explanation: An important additional step is an evaluation process to determine whether the steps in the decision-making process have yielded the required results.

Page Ref: 120

Difficulty: Easy

Objective: 5.3


Skill: Concept

86) 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.

Explanation: It is an important way that a firm encapsulates and communicates its core business to employees, clients, and a range of other stakeholders.

Page Ref: 124

Difficulty: Easy

Objective: 5.4


Skill: Concept

87) Identify the four leading causes of wasted time in the workplace as outlined in the text.

Answer: The four leading causes of wasted time in the workplace include paperwork, meetings, phone calls, and e-mail.

Explanation: It is very important that managers at all levels are able to use their time effectively, since wasted time translates into added costs for the company.

Page Ref: 121


Objective: 5.3


Skill: Concept

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

Answer: A goal is an objective that a business hopes and plans to achieve. A strategy is a broad set of organizational plans for implementing the decisions made for achieving organizational goals.

Explanation: A strategy entails the goals that a company sets out to achieve. Therefore the strategy constitutes the way that the goals can be realized.

Page Ref: 122



Objective: 5.4


Skill: Concept

89) In the "Samuel Adams Makes Headway" case study, how has Koch likely used technical skills in developing his product?

Answer: First of all, Koch has likely relied on a lot of family experience; that is certainly a type of skill that cannot be learned in a recipe book. In addition, Koch has understood the value of using superior German ingredients, which have given his product its push into the marketplace. No doubt the actual production processes involved in his products have been learned and perfected over a long period of time.

Explanation: Technical skills cover the skills needed to undertake specialized tasks. Koch was able to successfully harness technical skills in producing a successful line of boutique beer.

Page Ref: 123



Objective: 5.3


Skill: Application

90) What is 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 strengths (S) and weaknesses (W) and environmental opportunities (O) and threats (T).

Explanation: A SWOT analysis is a widely used process for evaluating the current strengths and weaknesses of a company's business.

Page Ref: 127


Objective: 5.4


Skill: Concept

91) As CEO of Best Buy, Brad Anderson decided to stop paying commission to sales staff. Why was this decision considered risky, and how did it affect sales as well as the relationship with suppliers and customers?

Answer: When Anderson made this decision there was a large degree of uncertainty about whether this tactic would be successful for the company. Sales staff no longer received commission, but were paid salary instead. For many staff this decision represented a loss of income. Additionally, suppliers were concerned that sales staff would not push their premium products without the reward of a high commission. Customers, on the other hand, appreciated the break from high-pressure sales tactics.

Explanation: Customers appreciated the relief from high-pressure sales pitches, and revenue increased.

Page Ref: 128



Objective: 5.4


Skill: Application

92) Define the term corporate culture.

Answer: Corporate culture is the shared stories, beliefs, experiences, and norms that characterize an organization.

Explanation: Corporate culture helps define the work and business climate within an organization.

Page Ref: 130


Objective: 5.6


Skill: Concept

93) Discuss the four main purposes of organizational goal setting.

Answer: Goal setting provides direction and guidance for managers at all levels, helps firms allocate resources, helps to define corporate culture, and helps managers assess performance.

Explanation: However, the process of setting goals needs to be conducted in a disciplined fashion in order to support these purposes.

Page Ref: 122


Objective: 5.4


Skill: Synthesis

94) Discuss the three broad levels of strategy that organizations may implement.

Answer: Organizations may set 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.

Explanation: These three levels form a hierarchy in terms of strategic management and planning.

Page Ref: 125


Objective: 5.4


Skill: Synthesis

95) Describe Best Buy's "centricity" initiative.

Answer: The keys to centricity are demographics and segmentation. Best Buy realized that the best customers vary demographically from store to store and decided to tailor their product offerings to the customers at a given store.

Explanation: The keys to this initiative are based on demographics and market segmentation.

Page Ref: 128


Objective: 5.4


Skill: Concept

96) Differentiate between strategic, tactical, and operational plans.

Answer: Strategic plans reflect decisions about resource allocations, company priorities, and the steps needed to meet strategic goals. Tactical plans are shorter-range plans for implementing specific aspects of the company's strategic plans. Operational plans set short-term targets for daily, weekly, or monthly performance.

Explanation: Strategy needs to be translated into actual plans, which means that strategic, tactical, and operational plans are connected.

Page Ref: 129


Objective: 5.4


Skill: Concept

97) What are the purposes of having a strong corporate culture?

Answer: A strong corporate culture serves several purposes. 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 as personalities give identity to people.

Explanation: Corporate culture constitutes a unique identity giving every company a unique feel or signature. A well known example is the "work hard, play hard" culture that is part of the Google work environment.

Page Ref: 130



Objective: 5.6


Skill: Concept

Donna Hamilton is excited to open her own restaurant, the Westminster Inn. Although Donna has worked as a chef and even managed a number of restaurants during her career, she is concerned that she gets off to a good start. Donna spends several weeks before the restaurant opens setting goals.

98) Donna feels that leading may 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.

Page Ref: 116

Difficulty: Easy


Objective: 5.1


Skill: Application

99) Help Donna to understand 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.

Page Ref: 120

Difficulty: Easy


Objective: 5.3


Skill: Application

100) Donna is especially concerned about what her competitors are doing. Why would an environmental analysis help her?

Answer: An environmental analysis, which reveals the external opportunities and threats facing an organization, will reveal what competitors are doing.

Page Ref: 127

Difficulty: Easy


Objective: 5.4


Skill: Application

101) Why should Donna undertake an organizational analysis?

Answer: An organizational analysis reveals the internal strengths and weaknesses of an organization.

Page Ref: 127

Difficulty: Easy


Objective: 5.4


Skill: Application

102) After planning, what is the next step in the management process? Why will Donna need to follow this process?

Answer: After planning, the next step in the management process is organizing. Donna will need to make decisions about organizational structure. For example, Donna will need to determine how specialized each job should be and which employees will report to which supervisors.

Page Ref: 116



Objective: 5.1


Skill: Application

103) At the end of the month, Donna compares actual sales to the goal that she set during the planning phase. Which of the management functions best describes this activity? Why is this important?

Answer: Donna is now engaging in the process of controlling. It will be important to Donna that she track costs as well as profitability and make adjustments to her strategy if actual performance fails to meet her expectations.

Page Ref: 116



Objective: 5.1


Skill: Application

104) How might a mission statement help Donna with her new business?

Answer: A mission statement may help her identify and follow how her business will achieve its purposes in the environment in which it operates. The mission will likely include the restaurant's main objectives, organizational philosophy, and expected service to customers.

Page Ref: 124



Objective: 5.4


Skill: Application

105) How will the types of goals that Donna will most likely make help her in growing her business?

Answer: Donna will be wise to make 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.

Page Ref: 126



Objective: 5.4


Skill: Application

106) Donna is determined to spend a good amount of time on strategy formulation. How will she likely follow the process?

Answer: Donna will first focus on setting strategic, long-term goals. She will then analyze the organization and the environment, possibly through conducting a SWOT analysis. After she better understands what her internal strengths and weaknesses are, as well as her external opportunities and threats, she can begin to match the organization and its environment.

Page Ref: 124



Objective: 5.4


Skill: Application

107) Because Donna is not yet relying on other employees for the actual management of the restaurant, she has become concerned with crisis management. Explain why Donna may want to develop a crisis management plan.

Answer: If Donna can't manage the restaurant, a crisis management plan would allow the business to continue. The plan might include a number of "just-in-case" plans in the event that she faces any type of emergency.

Page Ref: 130



Objective: 5.5


Skill: Application

108) Why is corporate culture an important feature for Donna to examine? Can Donna significantly influence the corporate culture at the Westminster Inn?

Answer: Corporate culture includes the shared experiences, stories, beliefs, and norms that characterize the organization. It is likely that Donna can have a significant influence on the corporate culture.

Page Ref: 130



Objective: 5.6


Skill: Application

109) Why is it important for Donna to be setting goals?

Answer: Donna can expect a number of benefits from the goal-setting process. Goal setting will provide direction and guidance, not only for Donna but also for her employees. It also will help Donna allocate resources, such as personnel and capital. The goal-setting process will help Donna to define corporate culture. Finally, by setting goals Donna will be able to determine if she has been successful and make changes, if necessary.

Page Ref: 123



Objective: 5.4


Skill: Application

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.

110) 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

Explanation: C) The project leaders failed to locate alternate component providers, but if Choice C is true, then there were no alternate component providers. Every provider that could have been used was already accounted for. So if Choice C is true, the failure to locate alternate component providers was best described as a planning failure, not a controlling failure. Choice A suggests that the leadership problems were affected by planning issues, but that's a different issue. Choice B suggests that there was nothing special going on here, but that's no reason to blame it all on planning. Choice D mentions an additional problem related to controlling, and so Choice D doesn't shift the focus away from controlling. Choice E shifts the blame for the failure to controlling, which is the opposite of what we're looking for.

Page Ref: 114



Objective: 5.1


111) 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

Explanation: D) The planning failures guaranteed failure all by themselves. Therefore, the project would have failed even if the other problems (such as the component provider problem in Choice D) weren't there. Choices A and E are outside the scope of these claims. We don't know what typically happens (Choice A). Although it is possible that later projects will have a hard time getting approved (Choice E), the passage doesn't say what will happen in the future. Choice B: For all we know, the problems related to controlling were fixable. We just know that they were bad. Choice C: There could have been other problems related to planning.

Page Ref: 114



Objective: 5.1


112) 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

Explanation: A) The leadership problems included conflicts, but if Choice A is true, then those conflicts were caused by failures of organizing. That doesn't mean that leadership played no role here, but if Choice A is true, then problems of organizing contributed, too. Choice B makes the planning problems sound as though they were influenced by controlling problems. Choice C makes the leadership problem sound not as bad as they thought, but it doesn't tell us that those problems were caused by something else. Choice D makes the controlling problems sound as if they involved a failure to plan. Choice E says that some problems are expected, but this doesn't place the blame on organizing instead of leadership.

Page Ref: 114



Objective: 5.1


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.

113) 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

Explanation: C) The Product Director wants to choose the manager with the strongest technical skills, and that's it. The Executive says that some skills would be required, and so they would agree on Choice A. But the Executive wants to require strong conceptual skills, and so the two would disagree about Choice C. Choices B and E: neither speaker mentioned human skills (Choice B) or the possibility of changing requirements (Choice E). Choice D is tempting, because the Executive definitely would say "yes." But the Product Director doesn't claim that conceptual skills should never be required. So we don't know how the Product Director would respond to the question in Choice D.

Page Ref: 120



Objective: 5.3


114) 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

Explanation: B) The Product Director thinks that technical skills are important, and therefore wants the manager with the strongest such skills. Similarly, in Choice B size is important, and so the author recommends the biggest truck. In both cases only one factor is important, and the recommendation is to get the most (strongest/biggest) of that. Choices A and C are flawed, but have elements that the original doesn't, such as "outstanding in every way" (Choice A) and multiple managers (Choice C). Choice D: "impossible to meet both goals" has no parallel in the original. Choice E sounds like something the Executive would say.

Page Ref: 120



Objective: 5.3


115) 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

Explanation: D) Technical skills are required, and so the Product Director wants the person with the strongest technical skills. That isn't ridiculous, but what if that person doesn't have the specific technical skills that this project requires? If Choice D is true, then the person with the strongest technical skills does not have the technical skills required for this project. Choice A provides an additional reason not to choose the manager with the weak technical skills, but no one is recommending that manager anyway. Choices B and C: Knowing that the project is time-consuming (Choice B) and/or unusual (Choice C) doesn't tell us who should be managing it. Choice C might have been tempting, but we don't know why the project is unusual or how that would affect the requirements for the manager. Choice E would be a reason not to pick the manager with the strongest conceptual skills, but argues against the Executive and not the Product Director. Even on that task, Choice E is weak because the Executive believes that the manager should have some technical skills, and for all we know the manager with the weakest technical skills still has enough technical skills to do the job.

Page Ref: 120



Objective: 5.3


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 company 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.

116) 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

Explanation: B) The video-on-demand unit has earned less than Disney expects, but what about the future? If Choice B were true, then video-on-demand is likely to perform better in the future, which would be a reason to keep it. Choice A says that other units have done worse, but that is not a reason to keep something that has performed poorly. Choice C says that some companies have different standards, but we have no reason to believe that those standards would be appropriate for Disney. Choice D discusses where the technology was developed, which is irrelevant. The issue is performance, not origin. Choice E tells us about the effects of the sale but not whether the sale itself is a good thing.

Page Ref: 125



Objective: 5.4


117) 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

Explanation: D) Disney performed well after the centralized planning unit was disbanded, but so what? Maybe Disney performed well for other reasons. Maybe the economy did better, and as result everyone should expect to do better. Choice D rules out this possibility and thereby strengthens the argument. Choice A talks about a decision procedure. Asking the same fundamental questions might be a good thing or a bad thing. There's no way to tell, so Choice A does not weaken the argument here. Choices B and E are about the industry in general, and don't tell us anything about the centralized planning unit at Disney. Choice C would weaken the argument by pointing out the relevance of the centralized planning unit.

Page Ref: 125



Objective: 5.4


118) 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

Explanation: C) Normally, low profit potential and low market share indicate that selling might be the best option. But Choice C suggests a synergy benefit that provides a reason to keep the unit. If Choice C were true, then Disney might benefit from owning the unit despite low profits and low market share. Choice A says that things are not as bad as they used to be, but that's not an argument to keep it around. Losses are still bad, even if they are smaller than they were before. Choice B distinguishes coastal from inland areas, but there's no reason to believe that this makes a difference. Choice D, if anything, would weaken the argument. If the company can't succeed even though it has good equipment, then it might be time to sell it. Choice E says that staffing levels are typical for the industry, but that doesn't tell us if Disney should keep the unit or not.

Page Ref: 125



Objective: 5.4


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."

119) 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

Explanation: B) Customers who like Kohler's products and believe that Kohler stands for "gracious living" will associate "gracious living" with other Kohler products. This would make them more likely to try those products, Choice B. Choice A goes against the passage, which suggests that Kohler is more focused, adding only products and services that fit its mission. Choice C also goes against the passage, which suggests that Kohler is more unified in purpose. Choice D speculates about sales of higher-priced and lower-priced goods, but there is not enough information to make any solid conclusion here. Choice E goes against the passage, since the customers motivated by "gracious living" don't sound like the same people who hunt for the lowest price.

Page Ref: 125



Objective: 5.4


120) 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' un

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