Management 475

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Strategic fit between two or more businesses exists whenever one or more activities comprising the value chains of different businesses are sufficiently similar to present opportunities

to transfer competitively valuable expertise or technology or resources from one business to another and/or combine the related value chain activities of the separate businesses into a single operation to achieve lower costs.

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

A digital camera manufacturer acquiring a maker of athletic footwear.

Which one of the following is not among the strategic options for improving a diversified company’s overall performance?

Implementing a common competitive strategy for all of the company’s business units and striving for the same competitive advantage companywide

Which one of the following is not one of the ways for a diversified company to build competitive advantage by pursuing a multinational diversification strategy?

Increased ability to build well-protected profit sanctuaries in those foreign country markets where profit margins are highest

Businesses are said to be "related" when

they possess competitively valuable cross-business value-chain matchups.

When industry attractiveness ratings are calculated for each of the industries a multi-business company has diversified into, the results help indicate

which of the industries the company has diversified into are most attractive and least attractive and the overall appeal of the whole group of industries the company has diversified into.

Which of the following is not a part of checking a diversified company’s business units for cross-business strategic fits with competitive advantage potential?

Determining whether the diversified company has enough cash cow business units to cover the negative cash flows of its cash hog business units.

To create long-term economic value for shareholders by diversifying into one or more new businesses, a company must

diversify into businesses that pass the attractiveness test, the cost-of-entry test, and the better-off test.

One of the most significant contributions to strategy-making in diversified companies that the 9-cell industry attractiveness/competitive strength matrix provides is

that businesses having the greatest competitive strength and positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.

Diversification ought to be considered when

diversifying into closely-related businesses opens new avenues for reducing costs

Which of the following are negatives or disadvantages of pursuing unrelated diversification strategies?

Demanding managerial requirements and no potential for competitive advantage beyond any benefits of corporate parenting and demanding managerial requirements

The difference between a "cash-cow" business and a "cash hog" business is that

a cash cow business produces large internal cash flows over and above what is needed to build and maintain the business whereas the internal cash flows of a cash hog business are too small to fully fund its operating needs and capital requirements.

The value of determining the relative competitive strength of each business a company has diversified into is

to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.

Which of the following best illustrates an economy of scope?

Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

The basic premise of unrelated diversification is that

any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity.

Based on the information presented in Figure 8.1, which of the following would not be something to look for in identifying a diversified company’s strategy?

The generic competitive strategy each business is employing

Diversifying into related businesses where competitively valuable strategic fit benefits can be captured

puts sister businesses in position to perform better financially as part of the same company than they could have performed as independent enterprises, thus providing a clear avenue for boosting shareholder value.

Which of the following is not part of the procedure for evaluating the pluses and minuses of a diversified company’s strategy and deciding what actions to take to improve the company’s performance?

Checking for conflicts/incompatibility among the competitive strategies of the company’s different businesses

Which one of the following is not something that corporate executives must do to succeed in using a strategy of unrelated diversification to produce companywide financial results above and beyond what the businesses could generate operating as stand-alone entities?

Be shrewd in identifying opportunities to acquire businesses that can benefit from using the parent company’s potent brand name.

According to Figure 8.1, the things to look for in identifying a diversified company’s strategy include

whether the company’s diversification is based narrowly in a few industries or broadly in many industries, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest weak businesses, build positions in new industries, and strengthen the positions of its existing businesses.

Diversification merits strong consideration whenever a single-business company

encounters diminishing prospects for continued good performance in its present business–usually because the industry’s growth prospects and/or other important factors are making the industry’s future outlook unattractive.

Which of the following is the best example of related diversification?

A manufacturer of dining room furniture acquiring a maker of patio furniture

Which of the following is not part of the procedure for evaluating the pluses and minuses of a diversified company’s strategy and deciding what actions to take to improve the company’s performance?

Checking for conflicts/incompatibility among the competitive strategies of the company’s different businesses

Which of the following is not a part of checking a diversified company’s business units for cross-business strategic fits with competitive advantage potential?

Determining whether the diversified company has enough cash cow business units to cover the negative cash flows of its cash hog business units.

The two biggest drawbacks or disadvantages of pursuing unrelated diversification strategies are

demanding managerial requirements and no potential for competitive advantage beyond any benefits of corporate parenting and what each individual business can generate on its own.

Which of the following is not one of the appeals of related diversification?

It is particularly well-suited for minimizing business risk and capturing valuable industry attractiveness fits.

What makes related diversification an attractive strategy is

the opportunity to convert cross-business strategic fits into competitive advantage over undiversified competitors and competitors whose own diversification efforts don’t offer equivalent strategic-fit benefits.

Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?

Have all of the company’s businesses operate under a common brand name and craft new initiatives to build/enhance the reputation of this brand name worldwide

Using quantitative measures of industry attractiveness and competitive strength to plot each business’s location on the 9-cell industry attractiveness-competitive strength matrix

provides valuable guidance in deploying corporate resources to the various business units–in general, a diversified company’s prospects for good overall performance are enhanced by concentrating corporate resources and strategic attention on those business units positioned in the three cells in the upper left portion of the attractiveness-strength matrix.

A "cash hog" type of business

is one that generates cash flows that are too small to fully fund its operations and growth–such businesses require periodic cash infusions to fund internal operations and finance capital requirements.

Which of the following best illustrates an economy of scope?

Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

A strategy of diversifying into unrelated businesses

involves entering any industry and operating any business where senior managers see opportunity to realize consistently good financial results–there’s no deliberate effort to diversify only into businesses with valuable cross-business strategic fits.

Assessments of the long-term attractiveness of each industry represented in a diversified company’s lineup of businesses should be based on

selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

To create long-term economic value for shareholders by diversifying into one or more new businesses, a company must

diversify into businesses that pass the attractiveness test, the cost-of-entry test, and the better-off test.

Which one of the following is not something that corporate executives must do to succeed in using a strategy of unrelated diversification to produce companywide financial results above and beyond what the businesses could generate operating as stand-alone entities?

Be shrewd in identifying opportunities to acquire businesses that can benefit from using the parent company’s potent brand name.

The sources of a competitive advantage for a company pursuing a strategy of multinational diversification do not include

superior ability to capture cross-business and cross-country financial fits.

A business unit’s relative market share is

calculated by dividing a business’s percentage share of total industry sales volume by the percentage share held by its largest rival–it is a better indicator of a business’s competitive strength than is a simple percentage measure of market share; this is because a company with a 15% market share is in a much stronger competitive position if its largest rival has a market share of 10% (which means its relative market share is 1.5) than it is if its largest rival has a 30% market share (in which case the company’s relative market share is only 0.50).

Based on the information presented in Figure 8.1, which of the following would not be something to look for in identifying a diversified company’s strategy?

The generic competitive strategy each business is employing

Which one of the following is not one of the appeals of unrelated diversification?

It is quicker and easier to build a competitive advantage over undiversified or less-diversifed companies

According to Figure 8.1, the things to look for in identifying a diversified company’s strategy include

whether the company’s diversification is based narrowly in a few industries or broadly in many industries, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest weak businesses, build positions in new industries, and strengthen the positions of its existing businesses.

Which one of the following is not something that corporate executives must do to succeed in using a strategy of unrelated diversification to produce companywide financial results above and beyond what the businesses could generate operating as stand-alone entities?

Be shrewd in identifying opportunities to achieve greater economies of scope.

According to Figure 8.1, the things to look for in identifying a diversified company’s strategy include

whether the company’s diversification is based narrowly in a few industries or broadly in many industries, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest weak businesses, build positions in new industries, and strengthen the positions of its existing businesses.

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

A producer of men’s apparel acquiring a maker of golf equipment.

Businesses are said to be "related" when

they possess competitively valuable cross-business value-chain matchups.

Strategic fit between two or more businesses exists whenever one or more activities comprising the value chains of different businesses are sufficiently similar to present opportunities

to transfer competitively valuable expertise or technology or resources from one business to another and/or combine the related value chain activities of the separate businesses into a single operation to achieve lower costs.

Which of the following best illustrates an economy of scope?

Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

Diversifying into related businesses where competitively valuable strategic fit benefits can be captured

puts sister businesses in position to perform better financially as part of the same company than they could have performed as independent enterprises, thus providing a clear avenue for boosting shareholder value.

The two biggest drawbacks of pursuing unrelated diversification strategies are

demanding managerial requirements and no potential for competitive advantage beyond what each individual business can generate on its own.

The value of determining the relative competitive strength of each business a company has diversified into is

to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.

Calculating quantitative attractiveness ratings for the industries a company has diversified into involves

selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?

Have all of the company’s businesses operate under a common brand name and craft new initiatives to build/enhance the reputation of this brand name worldwide

The three tests for judging whether a particular diversification move can create added long-term value for shareholders are

the attractiveness test, the cost-of-entry test, and the better-off test.

One of the most significant contributions to strategy-making in diversified companies that the 9-cell industry attractiveness/competitive strength matrix provides is

that businesses having the greatest competitive strength and positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture.

Based on the information presented in Figure 8.1, which of the following would not be something to look for in identifying a diversified company’s strategy?

Actions over the past few years to substitute global strategies for multi-country strategies in one or more business units

A "cash cow" type of business

generates positive cash flows over and above its internal requirements, thus providing a corporate parent with funds that can be used for financing new acquisitions, investing in cash hog businesses, and/or paying dividends.

Which of the following is not part of the procedure for evaluating the pluses and minuses of a diversified company’s strategy and deciding what actions to take to improve the company’s performance?

Conducting a SWOT analysis of each business the company has diversified into

The basic premise of unrelated diversification is that

any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity.

Diversification merits strong consideration whenever a single-business company

encounters sour industry conditions that are expected to be long-lasting.

Which one of the following is not one of the ways for a diversified company to build competitive advantage by pursuing a multinational diversification strategy?

Increased ability to build well-protected profit sanctuaries in those foreign country markets where profit margins are highest

Which of the following is not a part of checking a diversified company’s business units for cross-business strategic fits with competitive advantage potential?

Determining whether the diversified company has enough cash cow business units to cover the negative cash flows of its cash hog business units.

Which of the following statements about implementing and executing a company’s strategy is true?

Good strategy execution requires a team effort; all managers have strategy-executing responsibility in their areas of authority, and all employees are active participants in the strategy execution process.

Which of the following statements about putting together a capable top management team is false?

Hiring capable managers is important in building an organization capable of proficient strategy execution but is nearly always less crucial than doing a superior job of hiring, training, and empowering employees.

In situations where it is relatively easy for rivals to readily duplicate the successful or innovative features of a company’s strategy (making it difficult or impossible to outstrategize rivals and beat them in the marketplace with a superior strategy), the chief way for a company to achieve a durable competitive advantage over its rivals is to

outexecute them by building a competitively powerful portfolio of competencies and capabilities that (1) allows the company to perform certain value chain activities in a superior fashion and (2) is time-consuming and expensive for rivals to match or trump.

Building organizational bridges with strategic partners and external allies is aided by

appointing "relationship managers" with responsibility for getting the right people together, promoting good rapport and information-sharing, nurturing interpersonal cooperation and communication, and ensuring effective coordination.

Which one of the following is not an execution-related benefit of outsourcing?

Reducing the risk of being stuck with stale or obsolete competencies and capabilities

Building an organization capable of good strategy execution entails

structuring the organization and work effort, staffing the organization, and acquiring, developing and strengthening the resources, competencies, and capabilities important to good strategy execution.

The process of creating and/or upgrading a strategy-critical competence or capability

is a three-stage process that requires first developing the ability to do something, however imperfectly or inefficiently; second, translating this ability into a competence and/or capability by learning to do the activity consistently well and at an acceptable cost; and then continuing to polish and sharpen performance of the activity in an effort to eventually become better than rivals at performing the activity.

Making those organizational units performing strategy-critical value chain activities the main building blocks in the enterprise’s organizational scheme

has the advantages of giving these organizational units the resources, decision-making influence, and organizational visibility they need to execute their piece of the strategy capably.

The two best signs of good strategy execution are

whether the company is meeting or beating its performance targets and has attained real proficiency in performing strategy-critical value chain activities.

Which of the following statements about creating dynamic and competitively valuable competencies and capabilities is false?

Most companies keep their portfolio of competencies and capabilities fresh and dynamic by either acquiring another company with recently remodeled resource capabilities or by entering into collaborative partnerships with suppliers that are highly regarded for their innovativeness and cutting-edge know-how.

As shown in Figure 10.3, which one of the following is not part of organizing a company’s work effort in ways that promote successful strategy execution?

Determining how much deciding-making authority to give those organizational units performing strategy-critical value chain activities and where to place them in the organizational hierarchy.

Which of the following is not a shortcoming or disadvantage of a decentralized organizational structure?

Raises employee anxiety levels, thus discouraging many company personnel from being deeply involved in the business and lowering their motivation levels

One of the disadvantages of a decentralized structure featuring employee empowerment is

how to exercise enough control over the actions and decisions of empowered employees so that the business is not put at risk in the event that empowered employees happen to make some unwise decisions.

The advantages of a centralized organization structure include

reduced potential for conflicting actions and decisions on the part of lower-level managers, facilitation of strong top management leadership in crisis situations, and tight control by the manager in charge–it is easy to know who is accountable when things do not go well.

Which of the following is not among the principal managerial components of the strategy execution process?

Selecting which leadership style to employ and deciding whether to institute a centralized or decentralized organizational structure

According to Figure 10.3, organizing a company’s work effort in ways that promote successful strategy execution does not include which one of the following?

Revamping and streamlining the performance of value chain activities in ways that lower operating costs

The process of creating and/or upgrading a strategy-critical competence or capability

is a three-stage process that requires first developing the ability to do something, however imperfectly or inefficiently; second, translating this ability into a competence and/or capability by learning to do the activity consistently well and at an acceptable cost; and then continuing to polish and sharpen performance of the activity in an effort to eventually become better than rivals at performing the activity.

A decentralized organizational structure is predicated on a belief that

decision-making authority should be put in the hands of the people closest to, and most familiar with, the situation.

Delegating greater authority to subordinate managers and employees

creates a more horizontal organization structure with fewer management layers and usually acts to shorten organizational response times.

Which one of the following statements about recruiting and retaining capable employees is false?

Recruiting and retaining capable employees is usually much more important to good strategy execution and the achievement of true operating excellence than is assembling a capable top management team.

Which one of the following statements falsely characterizes the managerial task of executing strategy?

What really makes executing strategy a tough, time-consuming management challenge is the long, drawn out process of trial-and-error experimentation required to identify and implement effective approaches to strategy execution.

The two best signs of good strategy execution are

whether the company is meeting or beating its performance targets and has attained real proficiency in performing strategy-critical value chain activities.

The key to leveraging a core competence into a distinctive competence (or a capability into a competitively superior capability) is

concentrating more effort and more talent than rivals on deepening and strengthening the competence or capability, so as to achieve the dominance needed for competitive advantage.

The disadvantages of a centralized organizational structure include

longer response times in deciding upon a course of action and discouraging lower-level managers and rank-and-file employees from exercising initiative.

Building organizational bridges with strategic partners and external allies is aided by

appointing "relationship managers" with responsibility for getting the right people together, promoting good rapport and information-sharing, nurturing interpersonal cooperation and communication, and ensuring effective coordination.

Which of the following is unlikely to be a primary building block in a company’s organizational structure?

Value chain activity departments

Building an organization capable of good strategy execution entails

structuring the organization and work effort, staffing the organization, and acquiring, developing and strengthening the resources, competencies, and capabilities important to good strategy execution.

Which of the following statements about creating dynamic and competitively valuable competencies and capabilities is false?

Most companies keep their portfolio of competencies and capabilities fresh and dynamic by either acquiring another company with recently remodeled resource capabilities or by entering into collaborative partnerships with suppliers that are highly regarded for their innovativeness and cutting-edge know-how.

Which of the following is not among the principal managerial components of the strategy execution process?

Revamping the value chain in a manner that maximizes operating efficiency

Which one of the following is not an execution-related benefit of outsourcing?

Reducing the risk of being stuck with stale or obsolete competencies and capabilities

In situations where it is relatively easy for rivals to readily duplicate the successful or innovative features of a company’s strategy (making it difficult or impossible to outstrategize rivals and beat them in the marketplace with a superior strategy), the chief way for a company to achieve a durable competitive advantage over its rivals is to

outexecute them by building a competitively powerful portfolio of competencies and capabilities that (1) allows the company to perform certain value chain activities in a superior fashion and (2) is time-consuming and expensive for rivals to match or trump.

The task of developing and strengthening a company’s competencies and competitive capabilities

is sometimes best accomplished via acquisition or merger with a company having the desired competencies and capabilities or by forming collaborative partnerships with suppliers or other companies having the expertise or capabilities the company lacks internally.

Which one of the following statements falsely characterizes the managerial task of executing strategy?

What really makes executing strategy a tough, time-consuming management challenge is the long, drawn out process of trial-and-error experimentation required to identify and implement effective approaches to strategy execution.

Outsourcing the performance of certain value chain activities can lead to such strategy-executing advantages as

heightened strategic focus, lower costs, less internal bureaucracy, a better arsenal of competencies and capabilities, and speedier decision-making.

Which of the following statements about creating dynamic and competitively valuable competencies and capabilities is false?

Most companies keep their portfolio of competencies and capabilities fresh and dynamic by either acquiring another company with recently remodeled resource capabilities or by entering into collaborative partnerships with suppliers that are highly regarded for their innovativeness and cutting-edge know-how.

Which of the following is not a shortcoming or disadvantage of a decentralized organizational structure?

Raises employee anxiety levels, thus discouraging many company personnel from being deeply involved in the business and lowering their motivation levels

Which one of the following falsely characterizes a centralized organizational structure?

Promoting the establishment of a collegial, collaborative work environment where decisions are made only after seeking the opinions and advice of many managerial and non-managerial personnel and arriving at a general consensus as to the best course of action.

The three components of building an organization capable of good strategy execution are

(1) staffing the organization, (2) acquiring, developing and strengthening the resources, competencies, and capabilities important to good strategy execution, and (3) structuring the organization and work effort–as shown in Figure 10.2.

One of the big weaknesses of traditional functional organization structures is

that pieces of strategically relevant activities and capabilities often end up scattered across many departments, with the result that no one group or manager is accountable—remedying this deficiency often entails reengineering the work effort and pulling the people who performed the pieces in functional departments into a group that works together to perform the whole process, thus creating process departments.

Which of the following is unlikely to be a primary building block in a company’s organizational structure?

Value chain activity departments

Management’s handling of the process of implementing and executing a company’s strategy can be considered successful

if a company is meeting or beating its performance targets and can perform strategy-critical value chain activities with real proficiency.

Which one of the following statements about recruiting and retaining capable employees is false?

Recruiting and retaining capable employees is usually much more important to good strategy execution and the achievement of true operating excellence than is assembling a capable top management team.

Which of the following is not among the principal managerial components of the strategy execution process?

Selecting which leadership style to employ and deciding whether to institute a centralized or decentralized organizational structure

As shown in Figure 10.3, which one of the following is not part of organizing a company’s work effort in ways that promote successful strategy execution?

Determining how much deciding-making authority to give those organizational units performing strategy-critical value chain activities and where to place them in the organizational hierarchy.

Delegating greater authority to subordinate managers and employees

creates a more horizontal organization structure with fewer management layers and usually acts to shorten organizational response times.

Six Sigma programs

are based on three principles: All work is a process, all processes have variability, and all processes create data that explains variability.

A useful guideline in designing policies and operating procedures that facilitate good strategy execution is

to prescribe enough policies to give organizational members clear direction in implementing and executing strategy and to place desirable boundaries on their actions, then empower them to act within these boundaries however they think makes sense.

The big difference between business process reengineering and continuous improvement programs like TQM or Six Sigma is that

reengineering is a tool for achieving one-time quantum improvement whereas TQM and Six Sigma programs aim at ongoing incremental improvements.

Which of the following statements about Six Sigma programs is false?

When performance of an activity or process reaches "Six Sigma quality," there are not more than 6.2 defects per million iterations.

Which of the following statements about total quality management (TQM) is false?

The centerpiece of TQM programs is the use of sophisticated information systems to give employees all across the company quick, accurate access to the data and resources they need to achieve continuous improvement in how value chain activities are performed.

The idea behind benchmarking is to

identify companies that are the best performers of an activity and then modify and adapt their practices to fit the company’s own specific circumstances and operating requirements.

The purpose of using benchmarking, best practices, business process reengineering, TQM, and Six Sigma programs is to

improve the performance of strategy-critical activities and to execute the company’s strategy more proficiently, possibly even winning an operations-based competitive advantage.

Good strategy execution requires that

a company’s expenditures for operations and capital improvements be both strategy-driven (in order to amply fund competent performance of strategy-critical value chain activities) and lean (in order to operate as cost-efficiently as possible)

From the standpoint of promoting successful strategy execution, it is important that the firm’s motivation and reward system

accentuate positive rewards but also carry the risk of punishment for poor performance.

Total quality management (TQM)

is a philosophy of managing a set of business practices that emphasizes continuous improvement in all phases of operations, 100% accuracy in performing tasks, involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction.

Which of the following is not characteristic of a compensation and reward system designed to help drive successful strategy execution?

A 50-50 balance between monetary and non-monetary rewards and a 50-50 balance between positive and negative incentives.

Business process reengineering is a tool for

addressing the suboptimal performance problems that can arise when pieces of strategy-critical activities are scattered across different work groups; typically it involves pulling the scattered pieces out of different departments and creating a single work group to take charge of the whole process and perform it in a better, cheaper, and more strategy-supportive fashion.

Which one of the following is not a tool that company managers can use to promote operating excellence in performing value chain activities?

Operating systems optimization

Which of the following motivational practices is least likely to be effective in spurring stronger employee commitment to good strategy execution?

Equal pay increases and high levels of job security for all employees

Which one of the following statements about the process of identifying and incorporating best practices is false?

Benchmarking involves identifying which company or organization is the best performer of an activity and then trying to imitate its approach.

Which of the following statements about benchmarking and best practices is true?

The more that a company’s organizational units use best practices in performing their work, the closer the company moves toward performing its value chain activities more effectively and efficiently–this is what progressing to toward operational excellence is all about.

Total quality management (TQM) emphasizes all but which one of the following?

Efficient, low-cost performance of all value chain activities

The purpose of using benchmarking, best practices, business process reengineering, TQM, and Six Sigma programs is to

improve the performance of strategy-critical activities and to execute the company’s strategy more proficiently, possibly even winning an operations-based competitive advantage.

From the standpoint of promoting successful strategy execution, it is important that the firm’s motivation and reward system

be based on accomplishing the right results, not on dutifully performing assigned tasks.

A strategy-supportive system of rewards and incentives

focuses the attention of jobholders on "what to achieve" rather than "what to do."

The statistical thinking underlying Six Sigma is based on the following three principles:

All work is a process, all processes have variability, and all processes create data that explains variability.

Which one of the following is not a tool that company managers can use to promote operating excellence in performing value chain activities?

Operating systems optimization

Which of the following statements about total quality management (TQM) is false?

TQM produces significant results very quickly–very little benefit emerges after the first six months.

Six Sigma’s DMADV process of define, measure, analyze, design and verify is a particularly good vehicle for

developing new processes or products at Six Sigma quality levels.

Which of the following statements about Six Sigma programs is false?

There are two important types of Six Sigma programs: DSAMR and DMACB.

A properly designed system of rewards and incentives is important to good strategy execution because

the use of incentives and rewards is the single most powerful tool management has for mobilizing employee commitment to good strategy execution and operating excellence.

Instituting policies and procedures that facilitate good strategy implementation and execution is an important managerial task because

they place limits on independent action, paint the white lines for channeling company personnel to adopt behaviors and work practices that are conducive to good strategy execution, help enforce consistency in how things are done in geographically scattered operating units, and promote the creation of a work climate that facilitates good strategy execution.

Business process reengineering is a tool for

addressing the suboptimal performance problems that can arise when pieces of strategy-critical activities are scattered across different work groups; typically it involves pulling the scattered pieces out of different departments and creating a single work group to take charge of the whole process and perform it in a better, cheaper, and more strategy-supportive fashion.

Which one of the following statements about the process of identifying and incorporating best practices is false?

Benchmarking involves identifying which company or organization is the best performer of an activity and then trying to imitate its approach.

Good strategy execution requires that

a company’s expenditures for operations and capital improvements be both strategy-driven (in order to amply fund competent performance of strategy-critical value chain activities) and lean (in order to operate as cost-efficiently as possible)

A "best practice"

is a method or technique employed by at least one enterprise that proved unusually effective in lowering costs, improving quality or performance, shortening time requirements, enhancing safety, or achieving one or more other highly positive operating outcomes.

Which of the following statements about Six Sigma programs is false?

There are two important types of Six Sigma programs: DSAMR and DMACB.

Good strategy execution requires that

a company’s expenditures for operations and capital improvements be both strategy-driven (in order to amply fund competent performance of strategy-critical value chain activities) and lean (in order to operate as cost-efficiently as possible)

Six Sigma programs and techniques

entail the use of advanced statistical methods to identify and remove the causes of defects (errors) and undesirable variations in performing an activity or business process.

The idea behind benchmarking is to

identify companies that are the best performers of an activity and then modify and adapt their practices to fit the company’s own specific circumstances and operating requirements.

Six Sigma’s DMADV process of define, measure, analyze, design and verify is a particularly good vehicle for

developing new processes or products at Six Sigma quality levels.

Which of the following statements about total quality management (TQM) is false?

TQM produces significant results very quickly–very little benefit emerges after the first six months.

Which of the following motivational practices is least likely to be effective in spurring stronger employee commitment to good strategy execution?

Equal pay increases and high levels of job security for all employees

Total quality management (TQM) emphasizes all but which one of the following?

Efficient, low-cost performance of all value chain activities

Reengineering how a firm performs a business process

is a tool for pulling the pieces of strategy-critical processes out of different departments and unifying their performance in a single work group that has charge over the whole process and is accountable for performing the activity in a cheaper, better, and more strategy-supportive fashion.

Which one of the following is not a tool that company managers can use to promote operating excellence in performing value chain activities?

Resource optimization programs

According to Figure 11.1, which one of the following is not a benefit of prescribing policies and operating procedures to aid management’s task of implementing and executing a company’s chosen strategy?

Helping build employee commitment to benchmarking and the adoption of best practices

From the standpoint of promoting successful strategy execution, it is important that the firm’s motivation and reward system

be based on accomplishing the right results, not on dutifully performing assigned tasks.

Which of the following is not a sound guideline for designing a reward and incentive system that helps promote good strategy execution?

Always include some kind of rewards and incentives for people who have tried hard, done their best, and yet fallen short of achieving their assigned performance targets.

Well conceived, state-of-the-art information and operating systems

not only enable better strategy execution but also strengthen organizational capabilities (perhaps enough to provide a competitive edge over rivals).

Which one of the following is not a typical characteristic of a weak company culture?

A complicated value chain and a very diverse set of core competencies–both of which act to create multiple subcultures

Which of the following are standout traits of an adaptive culture?

A willingness on the part of organizational members to accept change and take on the challenge of introducing and executing new strategies (provided core values and long-standing business principles are not compromised and the changes that management is trying to institute are perceived as "legitimate"), encouragement and support for internal entrepreneurship, and being proactive in identifying issues and moving forward with workable solutions

According to Figure 12.2, when trying to change a problem culture, top executives should undertake such steps as

specifying what new actions, behaviors, and work practices should be prominent in the "new" culture and taking visible, forceful actions to ingrain a new set of behaviors, practices, and cultural norms.

Which one of the following is unlikely to be effective in helping to perpetuate a company’s culture?

Assigning employees who fail to display cultural norms to dead-end jobs where the duties are tightly prescribed and strictly enforced

A culture that is grounded in actions, behaviors, and work practices conducive to good strategy execution

adds significantly to the power and effectiveness of a company’s strategy execution effort.

Which of the following is not an example of an unhealthy company culture that impedes good strategy execution?

Centralized, conservative cultures

Which one of the following is not a key aspect in defining and shaping the character of a company’s corporate culture?

The company’s strategic vision and mission and the approach to competing that underpins its strategy

Which of the following are standout traits of a change-resistant culture?

A lax approach to both product innovation and continuous improvement in performing value chain activities, following rather than leading market change, not making bold proposals to pursue emerging opportunities, and a "we have done it this way for years" syndrome

A company’s values statement and code of ethics

have a major culture-building influence because they communicate what actions and behavior are expected of all company personnel.

Leading the drive for good strategy execution and operating excellence calls upon managers to

practice MBWA, put constructive pressure on the organization to achieve good results and operating excellence, and push corrective actions to improve strategy execution and achieve the targeted results.

Which one of the following statements about a company’s culture is false?

A company’s culture, once established, tends to remain stable and entrenched over time.

Which of the following statements about company subcultures is inaccurate?

Companies that have instituted a values statement and a code of ethics very rarely have subcultures.

Which of the following is unlikely to be true in a strong culture company?

Top executives are reluctant to change established policies, procedures and work practices or back off strict enforcement of these policies, procedures and work practices (in order to avoid weakening the culture).

The hallmark of a strong-culture company is

the dominating presence of certain deeply-rooted values and operating approaches that "regulate" the conduct of a company’s business and the climate of its workplace.

Which one of the following is not part of the leadership task of putting constructive pressure on the organization to achieve good results and operating excellence?

Providing employees with a stream of suggestions for improving company operations and eliminating negative or punitive elements from the company’s reward system

1. The concept of social responsibility and good corporate citizenship concerns

a company’s duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.

2. The three categories of managers that stand out with regard to ethical and moral principles in business affairs are:

moral managers, amoral managers, and immoral managers.

3. Which one of the following is not among the major drivers of unethical managerial behavior?

Poor economic conditions that make it difficult for companies to earn a fair profit unless they engage in unethical behavior.

4. According to integrative social contracts theory,

universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals, groups, organizations, and businesses in all situations have a duty to observe; however, within the boundaries of this social contract, local cultures or groups have the "moral space" to specify what other actions may or may not be ethically permissible.

5. A multinational company operating in some countries where bribery and kickback payments are an entrenched local custom and not considered unethical is well-advised to

avoid the payment of bribes and kickbacks in all countries and in all circumstances if the payment of bribes and kickbacks is forbidden in its code of ethical conduct and if top management is serious about enforcing this prohibition.

6. A company’s strategy needs to be ethical because

a strategy that is unethical in whole or in part is morally incorrect and "the wrong thing to do"; pursuit of an unethical strategy reflects badly on the character of the company personnel involved.

7. Which one of the following is not an aspect of socially responsible behavior and good corporate citizenship?

Actions to establish and generously fund non-profit subsidiaries charged with furthering worthy social causes

8. According to ongoing research by Berlin-based Transparency International,

corruption both among business people and public officials is widespread across the world.

9. According to the school of ethical universalism,

there are ample grounds for rejecting the argument that the use of underage labor is ethically permissible in those countries, societies, and situations where child labor is normal and customary.

10. Business ethics concerns

the application of general ethical principles and standards to the actions and decisions of businesses and the conduct of their personnel.

11. An immoral manager is one who

has few scruples, little or no integrity, is driven by single-minded pursuit of what is in his/her own self-interest, and is willing to do most anything he/she believes they can get away with.

12. According to the school of ethical universalism,

the most important standards of what is right and what is wrong resonate with peoples of most societies regardless of local traditions and cultural norms–hence, common ethical standards can be used to judge the conduct of personnel at companies operating in all countries and cultural circumstances.

13. According to the ethical relativism school of thought,

if the payment of bribes/kickbacks is acceptable in a particular culture/society/country, then it is ethical for a company to pay bribes/kickbacks in conducting its business activities in that culture/society/country.

14. According to the school of ethical relativism,

differing religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong.

15. Which one of the following is not among the good business reasons why companies should be public-spirited devote time and resources to social responsibility initiatives, environmental sustainability, and being good corporate citizens?

A business is obligated to act as a responsible citizen and do its fair share to promote the general welfare; otherwise it is in violation of its implied contract with society and subject to both heavy fines and an excess profits tax.

1. The concept of social responsibility and good corporate citizenship concerns

a company’s duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.

2. According to the data in Table 9.1,

the Corruption Perception Index (CPI) scores in such countries as Finland, Denmark, New Zealand, Sweden, the Netherlands, and Switzerland is higher (indicating lower perceived levels of corruption) than in such countries as the United States, France, South Korea, China, India, Russia, and Brazil.

3. Which one of the following is not among the good business reasons why companies should be public-spirited and devote time and resources to social responsibility initiatives, environmental sustainability, and being good corporate citizens?

A business is obligated to act as a responsible citizen and do its fair share to promote the general welfare; otherwise it is in violation of its implied contract with society and subject to both heavy fines and an excess profits tax.

4. According to the school of ethical universalism,

the most important standards of what is right and what is wrong resonate with peoples of most societies regardless of local traditions and cultural norms–hence, common ethical standards can be used to judge the conduct of personnel at companies operating in all countries and cultural circumstances.

5. Which of the following is not a particularly sound or valid reason why deliberate pursuit of unethical strategies and tolerance of unethical conduct is a risky practice?

Most consumers are very ethically-aware and will quickly stop purchasing the products of any company that engages in shady behavior

6. According to the school of ethical universalism,

there are ample grounds for rejecting the argument that the use of underage labor is ethically permissible in those countries, societies, and situations where child labor is normal and customary.

7. According to the school of ethical relativism,

there is no single set of ethical standards because what is deemed ethical or unethical depends on the religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms that prevail in particular cultures and countries.

8. Which of the following are major drivers of unethical managerial behavior?

Overzealous pursuit of wealth and other selfish interests, heavy pressures on company managers to meet or beat performance targets, and a company culture that puts profitability and good business performance ahead of ethical behavior

9. Ethical principles in business

are not materially different from ethical principles in general because business actions must be judged in the context of society’s standards of what is ethically right and wrong, not by a special set of rules that apply just to business conduct.

10. According to integrative social contracts theory,

universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals, groups, organizations, and businesses in all situations have a duty to observe; however, within the boundaries of this social contract, local cultures or groups have the "moral space" to specify what other actions may or may not be ethically permissible.

11. A multinational company operating in some countries where bribery and kickback payments are an entrenched local custom and are not considered unethical is well-advised to

avoid the payment of bribes and kickbacks in all countries and in all circumstances if the payment of bribes and kickbacks is forbidden in its code of ethical conduct and if top management is serious about enforcing this prohibition.

12. An amoral manager is one who

believes that businesses ought to be able to do whatever the prevailing laws and regulations allow them to do without being shackled by any ethical considerations.

13. Which one of the following is not an aspect of socially responsible behavior and good corporate citizenship?

Actions to establish and generously fund non-profit subsidiaries charged with furthering worthy social causes

14. According to the school of ethical universalism,

there are ample grounds for rejecting the argument that the payment of bribes and kickbacks is permissible in those countries and situations where it is the local custom to engage in such payments.

15. The three categories of managers that stand out with regard to ethical and moral principles business affairs are:

moral managers, amoral managers, and immoral managers.

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