Multiple Choice Questions CHAPTER 6: PLANNING 1. Current research suggests that an organization s is critical to the successful implementation of its strategic plans. a. complexity b. human capital c. creative potential d. mission statement Answer: b (p. 145, easy, integration) 2. An organization s are the future end states targeted by its managers; are the means by which managers achieve the organization s objectives. a. tactics; plans b. objectives; strategies c. objectives; plans d. plans; objectives Answer: c (p. 146, moderate, recall) 3. is a decision-making process that focuses on the future of an organization and how it will achieve its goals. a. Planning b. Benchmarking c. Forecasting d. Controlling Answer: a (p. 146, easy, recall) 4. What are the three types of plans typically used by complex organizations? a. strategic, tactical, and operational b. simple, compound, and complex c. analytical, theoretical, and functional d. ongoing, short-term future, and long-term future Answer: a (p. 147, moderate, integration) 5. Which of the following is NOT a feature of tactical plans? a. moderate interdependence b. high complexity and very broad scope c. focus on one to two years in the future d. focus on a strategic business unit Answer: b (p. 147, difficult, recall) 95
6. Strategic plans have. a. low levels of interdependence b. moderate interdependence and cross-functional relevance c. a narrow scope, a departmental focus, and a short time frame d. the potential to dramatically impact the survival and success of the organization Answer: d (p. 147, difficult, recall) 7. often focus on one-to-two years in the future. a. Strategic plans b. Tactical plans c. Operational plans d. Organizational plans Answer: b (p. 147, moderate, recall) 8. What is the purpose of operational plans? a. to focus on the broad future of the organization b. to underscore the interdependence of tactical and strategic plans c. to align tactical planning with the overall strategic direction of the company d. to translate tactical plans into specific goals/actions for small organizational units Answer: d (p. 147, difficult, recall) 9. Which of the following business plans has the broadest scope? a. strategic plans b. tactical plans c. operational plans d. organizational plans Answer: a (p. 147, moderate, recall) 10. translate specific plans into specific goals for specific parts of the organization. a. Strategic plans b. Tactical plans c. Operational plans d. Organizational plans Answer: b (p. 147, moderate, recall) 96
11. usually focus on small, homogenous business units. a. Strategic plans b. Tactical plans c. Operational plans d. Organizational plans Answer: c (p. 147, moderate, recall) 12. Typically, corporate-level executives do not ask. a. What industries should we get into or out of? b. What resources should be allocated to each of the businesses? c. In which businesses should the corporation invest money? d. What are our strengths and weaknesses? Answer: d (p. 148, moderate, recall) 13. What are the primary organizational levels of a corporation? a. objective and planning b. corporate, business, and functional c. sole proprietorship and partnership d. upper level and lower level Answer: b (pp. 148 149, easy, recall) 14. A manager of a local flower franchise is investigating her competitors strengths and weaknesses, as well as her own company s strengths and weaknesses. At which corporate level is she managing? a. Corporate b. business c. functional d. operational Answer: b (pp. 148 149, moderate, application) 15. Managers at the strategic business unit (SBU) level attempt to address all of the following questions EXCEPT. a. Who are our direct competitors? b. What advantages do we have over competitors? c. What do customers value in the products or services we offer? d. What activities does my unit need to perform to meet customer expectations? Answer: d (p. 149, moderate, recall) 97
16. In large organizations, strategic plans are typically developed at the level. a. corporate b. business c. functional d. none of the above Answer: a (p. 151, moderate, recall) 17. The planning responsibilities of functional-level managers largely focus on. a. the development of tactical plans b. the development of strategic plans c. the development of operational plans d. the development of strategic and tactical plans Answer: c (p. 151, moderate, recall) 18. According to the planning process discussed in this chapter, which of the following actions should be taken before any objectives are set? a. analyzing the environment b. monitoring outcomes c. developing action plans d. all of the above Answer: a (p. 151, moderate, recall) 19. Business level managers may be involved in developing for their business units and are usually involved in developing for their businesses. a. strategic plans; tactical plans b. operational plans; strategic plans c. tactical plans; operational plans d. strategic plans; operational plans Answer: a (p. 151, difficult, recall) 20. The manager of a residential construction business plans to build more houses next year because interest rates are falling and more people will be able to afford new homes. This plan is an example of. a. forecasting b. benchmarking c. contingency planning d. environmental certitude Answer: a (p. 152, easy, application) 98
21. How can managers cope with environmental uncertainty? a. by strictly following strategic and operational plans b. by imposing rigidity on markets and industries c. by making extensive use of forecasting in planning d. by building flexibility into their plans Answer: d (p. 152, moderate, application) 22. involves investigating the best results obtained by your competitors and noncompetitors and the practices that led to those results. a. Benchmarking b. Corporate espionage c. Contingency planning d. Operational planning Answer: a (p. 152, moderate, recall) 23. An export company ships a large quantity of goods to a country in which there has just been a revolution. This is an example of. a. forecasting b. environmental uncertainty c. benchmarking d. contingency planning Answer: b (p. 152, easy, application) 24. A manager of a local bookstore is trying to increase his store s productivity without hiring additional employees. He has noticed that a competitor is flourishing with relatively few employees, and decides to investigate. This is an example of. a. forecasting b. benchmarking c. inside information d. contingency planning Answer: b (p. 152, easy, application) 25. identify key factors that could affect the desired results of the planning process and specify what actions will be taken if key events change. a. Contingency plans b. Capital budgets c. Zero-based forecasts d. Pro forma financial statements Answer: a (p. 152, easy, recall) 99
26. When Procter & Gamble assessed the strengths and weaknesses among the countries of Eastern Europe prior to entering those markets, company executives were performing which step in the planning process? a. setting objectives and strategies b. analyzing the external environment c. determining corporate resources d. monitoring contingent outcomes Answer: b (p. 152, easy, application) 27. Which of the following is NOT a question managers might ask themselves when assessing available resources? a. Do we have financial resources available? b. Do we have the necessary human talent to meet requirements? c. Can we move people from their current projects to this new project? d. What do customers value in the products or services we offer? Answer: d (p. 153, moderate, application) 28. Why must managers determine priorities when they set their objectives? a. Not all objectives are of equal importance or value. b. The impact of key factors on the process must be assessed. c. Doing so is the first step in the assessment of the firm s human capital. d. all of the above Answer: a (p. 154, moderate, integration) 29. A community college has to decide how much of its budget to allocate for hiring new instructors and how much to allocate for new facilities. This is an example of. a. determining priorities b. assessing resources c. determining requirements d. environmental uncertainty Answer: a (p. 154, easy, application) 30. Which of the following is NOT a key element in developing an action plan? a. accountability b. sequence and timing c. monitoring the implementation d. none of the above Answer: c (p. 156, moderate, recall) 100
31. A Gantt chart can help managers devise an action plan in all of the following ways EXCEPT. a. showing the sequence in which the actions will be completed b. showing when actions will start and how long they will require for completion c. showing any expected overlap in the timing of specific actions d. showing the course of action to be taken if plans need to be changed during the course of their implementation Answer: d (p. 156, difficult, application) 32. Implementing plans is an important stage in the planning process because. a. the quality of the plan s implementation can affect the results achieved b. this phase overlaps the analysis of the firm s external environment c. high-quality implementation can minimize the effects of a flawed plan d. the objectives to be achieved will be determined during this phase Answer: a (p. 157, difficult, recall) 33. A manager at a local bookstore is about to allocate extra floor space to an espresso counter, when a new coffee shop opens next door. He stops implementation of his plan, and instead looks into opening a juice bar. What is this an example of? a. successful budgeting b. real-time adjustment c. sequence and timing d. management by objectives Answer: b (p. 158, moderate, application) 34. The final element in the planning process involves. a. monitoring outcomes b. implementing plans c. benchmarking processes d. making real-time adjustments Answer: a (p. 158, easy, integration) 35. Monitoring the implementation of a plan is essential; in particular, managers must examine. a. the progress of the plan and its implementation b. the level of resistance to the plan as it is being implemented c. the level of support the plan receives as it is being implemented d. all of the above Answer: d (p. 158, moderate, application) 101
36. What is "budget momentum? a. Money is allocated to a unit in the future because that unit will grow in the future. b. Money is allocated to a unit in the future because of the current performance of that unit. c. Money is allocated to a unit in the future simply because the unit had been allocated money in the past. d. Money is allocated to a unit in the future based on the forecast performance of that unit. Answer: c (p. 160, moderate, application) 37. The requires a manager to start with the previous year s budget and then present arguments for why the upcoming year s budget should be increased or decreased. a. forecasting approach b. zero-based budgeting approach c. capital expenditure approach d. incremental budgeting approach Answer: d (p. 160, moderate, recall) 38. A budget outlines how much money an organization needs, and it is submitted to a superior or budget review committee. a. contingent b. pro forma c. proposed d. sequential Answer: c (p. 160, easy, recall) 39. A catering company manager is proposing the purchase of a new van to enable the company to handle more deliveries. She is working on. a. an environmental forecast b. a capital expenditure budget c. an expense budget d. a monitoring plan Answer: b (p. 160, easy, application) 40. A manager with an approved budget. a. is not allowed to make large, capital purchases b. is authorized to spend a certain amount of money on certain activities c. has a great degree of latitude in how much money he or she can spend d. must plan how much money is needed to meet current goals Answer: b (p. 160, easy, recall) 102
41. Which one of the following is the benefit of zero-based budgeting? a. Items that cannot be justified on their current merits will not be allocated money. b. It takes less time to create than an incremental budgeting approach. c. Managers can rely on last year s budget for help. d. Expensive items can be justified on their historical merits. Answer: a (p. 161, easy, integration) 42. What is the major problem with the goal, We will achieve the highest possible performance by the end of the year? a. It is not specific enough. b. It is too constricting. c. It is not time-bound. d. It is not achievable. Answer: a (p. 161, moderate, integration) 43. Goal setting is a specific planning process for managing. a. performance b. budgets c. outcomes d. actions Answer: a (p. 161, easy, recall) 44. Which of the following is NOT one of the five characteristics of effective goals? a. specific b. abstract c. time bound d. measurable Answer: b (p. 161, easy, recall) 45. To be effective, the goals for the firm, its units, and subordinates should be. a. specific b. nebulous c. open-ended d. hard to quantify Answer: a (p. 161, easy, recall) 103
46. A manager tells his sales staff that he wants sales to increase by 18% in a year. Even though they are skeptical about whether this goal can be reached, most of them agree to it. However, after one year sales have not increased. Which of the following most probably explains the failure to meet this goal? a. If employees are only superficially committed to the goal, it will probably not be achieved. b. If employees do not believe it is possible to achieve a goal, it is probably not a realistic goal. c. If employees are skeptical that a goal can be reached, it is because they lack the motivation to reach that goal. d. If a goal is too specific, employees will work towards their own hidden agendas. Answer: a (p. 161, difficult, application) 47. Which of the following is NOT necessarily true about the goal, We will achieve a 12 percent return on assets in the next six months? a. It is specific. b. It is time-bound. c. It is measurable. d. It is realistic. Answer: d (pp. 161 163, moderate, application) 48. Which of the following is NOT a reason why goals that are too easy to achieve are usually ineffective? a. They do not motivate employees. b. They do not deliver substantial results. c. They encourage employees to perform below their capabilities. d. They are not specific enough. Answer: d (p. 162, moderate, application) 49. A sales force is given the target of increasing their sales by 200 percent in the next six months. Most of the sales representatives think this goal is unobtainable. What is a likely consequence of setting this goal? a. The sales force will be motivated to overcome this challenge. b. The sales force will ignore instructions and not work towards this goal. c. The sales force will try and achieve this goal over a longer time-frame. d. The sales force will become extremely competitive both internally and externally. Answer: b (p. 162, moderate, recall) 104
50. Adjusting the time-frame for a goal is most likely to affect. a. the specificity of the goal b. the commitment to the goal c. the realism of the goal d. the measurability of the goal Answer: c (pp. 162 163, moderate, recall) True/False 51. In today s world, a rigid business plan can be as fatal as no plan at all. Answer: True (p. 145, difficult, recall) 52. The setting of organizational objectives must be preceded by the development of organizational plans. Answer: False (p. 146, moderate, recall) 53. Without objectives or targets, plans are of little value. Answer: True (p. 146, difficult, integration) 54. A strategic plan translates tactical plans into specific goals for specific parts of the organization. Answer: False (pp. 146 147, moderate, recall) 55. Operational plans translate tactical plans into specific goals and actions for small units of the organization and focus on the near term. Answer: True (p. 147, easy, recall) 56. There are three primary levels of a corporation: strategic, tactical, and operational. Answer: False (p. 148, moderate, recall) 57. Managers at both the business level and the functional level have an interest in the strengths and weaknesses of their business or unit. Answer: True (pp. 148 150, moderate, integration) 58. Managers at the functional level focus on how they can achieve the competitive plan of the business. Answer: True (p. 149, easy, recall) 105
59. The planning activities of functional managers are focused on how they can support business and corporate plans. Answer: True (p. 150, moderate, recall) 60. Environmental analysis, actions, implementations and outcomes are all elements of the planning process. Answer: True (p. 151, moderate, recall) 61. The third element of the planning process is an environmental assessment. Answer: False (p. 151, difficult, recall) 62. Business-level managers typically are not involved in developing operational plans. Answer: True (p. 151, moderate, recall) 63. The greater the environmental uncertainty, the more important it is for managers to stick to their original plan. Answer: False (p. 152, easy, recall) 64. Managers should assess the firm s internal resources immediately following the analysis of the external environment. Answer: False (p. 153, difficult, recall) 65. One of the first challenges for managers as they set objectives is to determine priorities. Answer: True (p. 154, easy, recall) 66. Once the organization s objectives have been made clear to everyone, managers must establish how to measure the achievement of those objectives. Answer: True (p. 154, moderate, recall) 67. A Gantt chart tells us when actions should be started, but it does not tell us how long actions are expected to take for completion. Answer: False (p. 156, easy, recall) 106
68. No matter how carefully the implementation process has been designed, managers still must monitor and adjust implementation efforts when unanticipated events occur. Answer: True (p. 157, moderate, recall) 69. Knowing who is responsible for specific actions facilitates coordination, especially if multiple people are involved in the execution of a plan. Answer: True (p. 157, difficult, recall) 70. Once a sound plan is designed, monitoring the level of support that the plan receives as it is being implemented is not critical. Answer: False (p. 158, difficult, integration) 71. All organizations profit and non-profit have expense budgets. Answer: True (p. 160, easy, recall) 72. Budget momentum refers to allocating money for items merely because money had been allocated to those items in the past. Answer: True (p. 160, difficult, recall) 73. An expense budget specifies the amount of money to be spent on items such as equipment, land, or buildings. Answer: False (p. 160, easy, integration) 74. A proposed budget specifies what a manager is authorized to spend money on and how much he or she can spend. Answer: False (p. 160, easy, integration) 75. Goal setting is most effective when progress toward the goal is measured after the goal has been achieved. Answer: False (p. 161, easy, recall) 76. Zero-based budgeting assumes that all funding allocations must be justified from zero each year. Answer: True (p. 161, easy, recall) 107
77. One way to determine that a goal is specific enough is by whether its achievement can be measured. Answer: True (p. 161, easy, recall) 78. Setting specific goals and time periods that employees see as unrealistic can still help performance by keeping them on their toes. Answer: False (p. 162, moderate, recall) 79. A good way to gain commitment to a goal is to allow employees to discuss and participate in that goal s development. Answer: True (p. 162, moderate, application) 80. Even measured, specific, and realistic goals to which people are committed need to be time bound in order to be effective. Answer: True (p. 162, difficult, integration) Short Essay Questions 81. Define strategic plans. (pp. 146 147) Strategic plans focus on the broad future of the organization and incorporate both external environmental demands and internal resources into the actions managers need to take to achieve the long-term goals of the organization. 82. Define operational plans. (pp. 147 148) Operational plans translate tactical plans into specific goals and actions for small units of the organization and focus on the near-term. 83. How do tactical plans and operational plans differ in terms of time horizon and scope? (p. 147) Tactical plans often focus on one to two years in the future; operational plans focus on twelve months or less. The scope of tactical plans is normally focused on a strategic business unit; the scope of operational plans is usually centered on departments or smaller units of the organization. 108
84. What are the key issues that managers at the corporate level focus on relative to planning? (p. 148) Corporate-level executives primarily focus on questions such as the following: What industries should we get into or out of? What markets should the firm be in? In which businesses should the corporation invest money? 85. What is the focus of executives at the business level? (pp. 148 149) Executives at the business level consider who the direct competitors are, the competitors strengths and weaknesses, what customers may value in the products or services being offered, and what advantages the firm has over competitors. 86. What are the six key elements of the planning process? (p. 151) The six key elements of the planning process are environmental analysis, resources, objectives, actions, implementation, and outcomes. 87. What are contingency plans? (p. 152) Contingency plans typically identify key factors that could affect the desired results and specify what different actions will be taken if changes in key events occur. 88. What is benchmarking? (p. 152) Benchmarking can lead to strong positive results. It involves investigating the best results among competitors and non-competitors and the practices that led to those results. 89. How might a Gantt chart be used in the planning process? (p. 156) Gantt charts are used to graphically display the sequence and timing of specific actions. The chart shows when actions should be started and how long they are expected to take for completion. 90. What are the five key characteristics of effective goals? (pp. 161 162) The characteristics of effective goals are as follows: specific, measurable, commitment, realistic, and time bound Note: The remaining questions in this section will be based on the following scenario: Corporate managers at Metal Craft Ltd. announced that they intended to enlarge their product lines by the beginning of 2007. We see a lot of opportunity in the market, CEO Ernie Colfax explained, but it will take everyone s effort. Metal Craft s goal is to maintain its current market share while increasing profitability by five percent over the next two years. 109
Cal Able, VP of Sales, immediately met with his five district sales managers to formulate a plan. It ll be tough at first, Cal stated in the meeting. The competitive environment is nasty. Mr. Colfax wants to enhance product lines to offset that. But, in the meantime, we have to maintain market share while increasing profitability. After two days of discussions, Mr. Able met with Mr. Colfax to present the new plan for the sales force. Each salesperson will be required to increase his/her sales calls to fifteen prospects and eighteen customers each month, while keeping costs at a minimum. 91. Explain the organizational objectives in this scenario. (p. 146) The organizational objective is to enlarge Metal Craft s product lines by 2007. In order to support that objective, Mr. Able and the district sales managers set the following difficult (yet achievable) goals: increasing profitability, while maintaining market share; and finding new business, servicing customers, and minimizing costs. 92. What strategic plans are evident in this scenario? (p. 146) The overall strategic plan outlined in the scenario is to enhance Metal Craft s product lines by 2007 in an effort to offset competition. 93. What tactical plans are evident in this scenario? (p. 147) Tactical plans include the improvement of profitability by five percent and the maintenance of Metal Craft s market share over the next two years. 94. What operational plans are evident in the scenario? (pp. 147 148) On a monthly basis, each salesperson is responsible for calling on at least fifteen new prospects and eighteen current customers. 95. How might a Gantt chart be useful at Metal Craft? (p. 156) Individual salespeople could use a Gantt chart to display the sequence and timing of their sales calls. In addition, managers could use the chart to track the actual progress of each sales representative. 96. Assess the level of accountability among Metal Craft s salespeople. (p. 157) Salespeople share equal responsibility for achieving the overall objective. 97. What critical factors will Mr. Colfax need to monitor during the implementation of his plan? (pp. 157 158) Mr. Colfax will need to monitor the progress of the plan, the level of support that the plan receives, and the level of resistance to the plan. 110
98. Why might real-time adjustments in Metal Craft s plans be necessary? (p. 158) Salespeople may find that the projected number of sales calls made per month will have to be modified because extra time may be needed with existing customers or more calls may be required to secure new customers. Furthermore, Mr. Colfax may need to alter the five percent profitability goal, depending on competitive and economic conditions. 99. Are Metal Craft s goals effective? (pp. 161 162) The goals at Metal Craft exhibit four elements of effective goals: specific, measured, realistic, and time bound. In this scenario, however, the level of commitment to the goals may be in question. Managers will be committed to the goals because the vice-president of sales and the five district sales managers participated in developing them. Even so, a substantial number of the sales representatives must agree to the goals and be committed to their achievement, in order for them to be realized. 100. Did Mr. Able encourage the sales staff to develop a feeling of ownership toward the goals? (p. 162) Mr. Able and the five district sales managers met for two days to develop the action plan for the sales force. Because the sales managers were invited to discuss the situation and participate in the development of the plan, they developed a feeling of ownership. The sales representatives did not participate; therefore, their commitment to the plan must be obtained via other means. 111