Which of these is a basic activity of strategy evaluation

Chapter 9: Strategy Review, Evaluation, and Control

Chapter 9: Strategy Review, Evaluation, and Control

CHAPTER 9
Strategy Review, Evaluation, and Control
True/False
The Nature of Strategy Evaluation
1. Most strategists believe that an organization’s well being depends on evaluation of the strategic-management process.

(t; easy; p. 298)

2. Adequate, timely feedback is important to effective strategy evaluation.

(t; easy; p. 298)

3. Too much emphasis on evaluating strategies may be expensive and counterproductive.

(t; medium; p. 298)

4. Strategy evaluation should have a long-run focus and avoid a short-run focus.

(f; medium; p. 299)

5. According to Richard Rumelt, consonance and consistency are based on a firm’s external assessment.

(f; medium; p. 299)

6. According to Rumelt, consistency and feasibility are largely based on a firm’s internal assessment.

(t; medium; p. 299)

7. Consistency, distinctiveness, advantage and feasibility are Richard Rumelt’s four criteria for evaluating a strategy.

(f; medium; p. 299)

8. Strategy evaluation is becoming increasingly easier with the passage of time, given the technological advances.

(f; difficult; p. 300; AACSB: Reflective thinking skills)

9. The decreasing time span for which planning can be done with any degree of certainty is a reason strategy evaluation is more difficult today.

(t; medium; p. 300; AACSB: Reflective thinking skills)

10. Strategies may be inconsistent if policy problems and issues continue to be brought to the top for resolution.

(t; easy; p. 300)

11. Competitive advantages normally are the result of superiority in one of three areas: feasibility, consistency, or consonance.

(f; medium; p. 300; AACSB: Reflective thinking skills)

12. Regardless of the size of the organization, a certain amount of management by wandering around at all levels is essential to effective strategy evaluation.

(t; medium; p. 301)

13. Because large companies have more at stake, it is more important for large organizations to conduct strategy evaluation than small companies.

(f; easy; p. 301)

14. The end of the fiscal year is the best time to do strategy evaluation.

(f; medium; p. 301; AACSB: Reflective thinking skills)

A Strategy-Evaluation Framework

15. Changes in the organization’s management, marketing, finance, R&D and CIS strengths and weaknesses should all be the focus of a revised EFE matrix in strategy evaluation.

(f; medium; p. 300; AACSB: Analytic skills)

16. In strategy evaluation, a revised IFE matrix should indicate how effective a firm’s strategies have been in response to key opportunities and threats.

(f; medium; p. 302; AACSB: Reflective thinking skills)

17. Strengths, weaknesses, opportunities and threats should continually be monitored for change because it is not really a question of whether these factors will change but rather when they will change and in what ways.

(t; medium; p. 302)

18. When taking corrective action, you need to compare expected results to actual results.

(f; easy; p. 302)

19. Criteria for evaluating strategies should be measurable and easily verifiable.

(t; easy; p. 302)

20. Specific financial ratios are rarely used criteria to evaluate strategies.

(f; medium; p. 302)

21. Measuring organizational performance includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance and examining progress being made toward meeting stated objectives.

(t; medium; p. 304; AACSB: Reflective thinking skills)

22. Intuitive judgments are almost always involved in deriving quantitative criteria.

(t; medium; p. 304)

23. Most quantitative evaluation criteria are geared to long-term objectives rather than annual objectives.

(f; medium; p. 304; AACSB: Analytic skills)

24. Measuring organizational performance requires making changes to reposition a firm competitively for the future.

(f; medium; p. 304)

25. Taking corrective actions does not necessarily mean that existing strategies will be abandoned, or even that new strategies must be formulated.

(t; medium; p. 305)

26. Corrective action in strategy evaluation is necessary to keep an organization on track toward achieving stated objectives.

(t; easy; p. 305)

27. Alvin Toffler argues that environments are becoming so dynamic and complex that they threaten people and organizations with future shock in his thought-provoking books entitled Future Shock and The Third Wave.

(t; medium; p. 305; AACSB: Reflective thinking skills)

28. Future shock occurs when the type and speed of changes overpower an individual or organization’s ability and capacity to adapt.

(t; medium; p. 305)

29. According to research, participation in strategy-evaluation activities is one of the best ways to overcome individuals’ resistance to change.

(t; medium; p. 305)

The Balanced Scorecard

30. The basic form of a Balanced Scorecard is the same for all organizations and industries.

(f; easy; p. 306)

31. The Balanced Scorecard Approach deals with the question, “How satisfied are the firm’s customers.”

(t; medium; p. 306)

Published Sources of Strategy-Evaluation Information

32. Each year, Fortune publishes strategy evaluation research on both the United States and other countries.

(t; medium; p. 306)

33. The most admired company in the world in 2007 was Apple.

(f; medium; p. 308)

Characteristics of an Effective Evaluation System

34. Strategy-evaluation activities must be meaningful, i.e., they should specifically relate to a firm’s objectives.

(t; medium; p. 308)

35. Timely approximate information is generally more desirable as a basis for strategy evaluation than accurate information that does not depict the present.

(t; easy; p. 308)

36. The test of an effective evaluation system is its usefulness and complexity.

(f; medium; p. 308)

37. Small organizations require a more elaborate and detailed strategy-evaluation system because they are still evolving.

(f; medium; p. 308; AACSB: Reflective thinking skills)

38. There is no one ideal strategy-evaluation system for all organizations.

(t; easy; p. 309)

Contingency Planning

39. Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected.

(t; medium; p. 309)

40. Organizations should prepare contingency plans just for unfavorable events.

(f; difficult; p. 309)

41. Strategies should try to cover all bases by planning for all possible contingencies.

(f; medium; p. 309)

42. Contingency plans should be as simple as possible.

(t; easy; p. 309)

43. Alternative strategies not selected for implementation should be discarded, as they have a tendency to contaminate the contingency plans.

(f; medium; p. 298; AACSB: Reflective thinking skills)

44. Identifying both beneficial and unfavorable events that could possibly derail the strategy or strategies is the first step of effective contingency planning.

(t; medium; p. 311)

Auditing

45. Independent auditors, government auditors and IRS auditors are the three groups of people who perform audits.
(f; medium; p. 311)

46. Independent auditors are basically CPAs who provide their services to organizations for a fee.

(t; easy; p. 311)

47. Public accounting firms usually avoid strategy evaluation services.

(f; medium; p. 312)

48. China is home to 16 of the world’s 20 most polluted cities.

(t; easy; p. 312; AACSB: Multicultural and diversity understanding)

49. Over 90 percent of China’s energy is derived from solar and nuclear power.

(t; medium; p. 313; AACSB: Multicultural and diversity understanding)

50. Two government agencies—IRS and GAO—employ government auditors responsible for making sure organizations comply with federal laws, statutes and policies.

(t; medium; p. 312)

51. Moving environmental affairs from the line side of the organization to the staff side is required when instituting an environmental audit.

(f; difficult; p. 312; AACSB: Ethical understanding and reasoning abilities)

52. The strategic management process should be completely open because participation and openness enhance understanding, commitment, and communication within the firm.

(t; easy; p. 314)

53. Increased education and diversity of the workforce at all levels are reasons why the top-down approach should be favored in organizations.

(f; medium; p. 315; AACSB: Multicultural and diversity understanding)

Multiple Choice
The Nature of Strategy Evaluation
54. Which of these is/are a basic activity of strategy evaluation?

a. Reviewing the underlying internal and external factors that represent the bases of current strategies

b. Measuring organizational performance

c. Taking corrective actions

d. all of the above

e. both B and C

(d; easy; p. 298)

55. The purpose of strategy evaluation is to

a. increase the budget annually.

b. alert management to problems or potential problems.

c. make budget changes.

d. evaluate employees’ performance.

e. improve R&D programs.

(b; medium; p. 298)

56. What is the cornerstone of effective strategy evaluation?

a. Adequate and timely feedback

b. Quality and quantity of managers

c. Smaller ratio of top- to lower-level management

d. Evaluation preceding implementation stage

e. Taking corrective actions

(a; difficult; p. 298)

57. All of these are Richard Rumelt’s criteria to evaluate a strategy except:

a. advantage.

b. consistency.

c. feasibility.

d. distinctiveness.

e. consonance.

(d; medium; p. 299)

58. What is happening to strategy evaluation with the passage of time?

a. increasingly difficult

b. much simpler

c. very convenient

d. an unnecessary activity

e. less important

(a; medium; p. 300)

59. All of the following are reasons strategy evaluation is more difficult today except:

a. a dramatic increase in the environment’s complexity.

b. the increasing number of variables.

c. the increase in the number of both domestic and world events affecting organizations.

d. the decreasing difficulty of predicting the future with accuracy.

e. the rapid rate of obsolescence of even the best plans.

(d; easy; p. 300)

60. Which of the following is not a reason for the increasing difficulty of evaluating strategies?

a. Product life cycles are longer today than ever.

b. Domestic and world economies are less stable than ever.

c. Product development cycles are longer than ever.

d. Technological advancement is more rapid.

e. Change is occurring more frequently than ever.

(a; medium; p. 300)

61. What is important because organizations face dynamic environments in which key external and internal factors often change quickly and dramatically?

a. Strategy formulation

b. Strategy evaluation

c. Strategy simplification

d. Strategy modification

e. Strategy implementation

(b; medium; p. 299; AACSB: Reflective thinking skills)

62. A final broad test of strategy is its

a. advantage.

b. feasibility.

c. consonance.

d. consistency.

e. distinctiveness.

(b; medium; p. 299)

63. Competitive advantage normally is the result of superiority in resources, skills and

a. employees.

b. position.

c. consistency.

d. feasibility.

e. governance.

(b; easy; p. 299)

64. What term refers to the need for strategists to examine sets of trends, as well as individual trends in evaluating strategies?

a. Consistency

b. Consonance

c. Synergy

d. Feasibility

e. Advantage

(b; medium; p. 299)

65. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies, refers to the need for strategists to examine sets of trends?

a. consistency

b. consonance

c. feasibility

d. advantage

e. empowerment

(b; medium; p. 299; AACSB: Reflective thinking skills)

66. If success for one organizational department means failure for another department, then strategies may be

a. synergistic.

b. advantageous.

c. inconsonant

d. failures.

e. inconsistent.

(e; easy; p. 301)

67. When empowered employees are held accountable for and pressured to achieve specific goals and are given wide latitude in their actions to achieve them, there can be

a. increased productivity.

b. dysfunctional behavior.

c. decreased number of complaints.

d. decreased turnover.

e. increased number of litigations.

(b; medium; p. 301)

68. Strategy-evaluation activities should be performed

a. on a periodic basis.

b. at the onset of a problem.

c. on a continuous basis.

d. upon completion of major projects.

e. every two years.

(c; easy; p. 301)

A Strategy-Evaluation Framework

69. Corrective actions are not needed when

a. changes have occurred in the firm’s internal strategic position.

b. external and internal factors have not significantly changed.

c. the firm is not progressing satisfactorily toward achieving stated objectives.

d. competitive factors are on the rise.

e. the industry is slowing down.

(b; medium; p. 302)

70. When you discover major changes have occurred in the firm’s internal strategic position while conducting strategy evaluation, you should

a. continue on the present strategic course.

b. immediately discontinue all aspects of the present strategic course.

c. take corrective actions.

d. add additional funds to the present strategic plan.

e. copy the actions of major competitors.

(c; difficult; p. 302; AACSB: Reflective thinking skills)

71. Changes in the organization’s management, marketing, finance/accounting, R&D and CIS strengths and weaknesses should be the focus of a revised

a. mission.

b. IFE matrix.

c. vision.

d. EFE matrix.

e. EPM matrix.

(b; medium; p. 302; AACSB: Reflective thinking skills)

72. A revised __________ should indicate how effective a firm’s strategies have been in response to key opportunities and threats.

a. IFE matrix

b. mission

c. EFE matrix

d. vision

e. CPM matrix

(c; medium; p. 302)

73. Which of the following is not included in measuring organizational performance?
a. Comparing results to competitors’ expectations.

b. Examining progress being made toward meeting stated objectives.

c. Investigating deviations from plans.

d. Evaluating individual performance.

e. Comparing expected results to actual results.

(a; medium; p. 304)

74. Ineffectiveness and/or inefficiencies indicate the need for
a. layoffs.

b. consultants.

c. some form of correction action.

d. reductions in pay.

e. more synergy.

(c; medium; p. 304)

75. What is the basis for quantitative financial evaluation?

a. Reduction in costs

b. The EPS/EBIT Analysis

c. Capital Asset Pricing Model

d. Financial ratios

e. Present value analysis

(d; medium; p. 304; AACSB: Analytic skills)

76. Which of these is not a key financial ratio?

a. Market share

b. Production quality

c. Earnings per share

d. Asset growth

e. Return on equity

(b; medium; p. 304; AACSB: Analytic skills)

77. Strategy evaluation is based on

a. empirical data.

b. qualitative criteria.

c. objective data.

d. qualitative and quantitative criteria.

e. intuition.

(d; medium; p. 304)

78. Financial ratios are used to compare a firm’s performance over different time periods, compare the firm’s performance to industry averages, and compare a firm’s performance with

a. overall business standards.

b. the performance of international firms.

c. the performance of suppliers.

d. non-financial ratios.

e. the performance of competitors.

(e; difficult; p. 304; AACSB: Analytic skills)

79. Most quantitative criteria are geared to objectives rather than objectives.

a. top-management; employee

b. short-term; annual

c. annual; long-term

d. environmental; community

e. profit; social

(c; medium; p. 304)

80. What corrective actions should a firm take during strategy evaluation?

a. Revising the business mission

b. Issuing stock

c. Revising objectives

d. Selling a division

e. all of the above

(e; medium; p. 305)

81. What occurs when the nature, types and speed of changes overpower an individual’s or organization’s ability and capacity to adapt?

a. Corporate downfall

b. Corrective actions

c. Future shock

d. Corporate agility

e. Measuring performance

(c; medium; p. 305; AACSB: Reflective thinking skills)

82. Corrective actions should

a. strengthen an organization’s competitive position in its industry.

b. streamline asset holdings.

c. reduce the staff size.

d. involve abandoning existing strategies.

e. all of the above

(a; medium; p. 305)

83. What is the best way to overcome individuals’ resistance to change in strategy evaluation?

a. Participation

b. Command-and-control

c. Laissez-faire system

d. Rational argument

e. Emotional reactions

(a; medium; p. 305)

84. An organization’s ability to adapt successfully to changing circumstances refers to its

a. corporate agility.

b. future shock.

c. dynamism.

d. revision power.

e. liquidity.

(a; easy; p. 305)

85. Corrective action should do all of the following except:

a. capitalize upon internal strengths.

b. avoid external opportunities.

c. avoid external threats.

d. improve internal weaknesses.

e. strengthen an organization’s competitive position.

(b; medium; p. 305)

The Balanced Scorecard

86. Which of the following is not a component of the Balanced Scorecard?

a. Social responsibility

b. Financial performance

c. Customer knowledge

d. Internal business processes

e. Learning and growth

(a; medium; p. 306)

87. What aims to balance long term with short term concerns, financial with non-financial concerns, and internal with external concerns.

a. Contingency planning

b. The Balanced Scorecard approach

c. Taking corrective action

d. Measuring performance

e. reviewing Bases of Strategy

(b; medium; p. 306)

Published Sources of Strategy-Evaluation Information

88. In the important publication used to evaluate a firm’s strategy, the Fortune 50 includes all of the following except:

a. the top retailers.

b. the top transportation companies.

c. the top utilities.

d. the top banks.

e. the top hospitals.

(e; medium; p. 306)

89. Which of these is not a key attribute in Fortune’s strategy evaluation research on “America’s Most Admired Companies”?

a. People management

b. Innovativeness

c. Financial soundness

d. Amount of physical resources

e. Use of corporate assets

(d; easy; p. 306)

Characteristics of an Effective Evaluation System

90. What is not a characteristic of an effective evaluation system?

a. Economical

b. Timely

c. Information-oriented

d. Meaningful

e. Provide a true picture of what is happening

(c; medium; p. 308)

91. Controls need to be _________ rather than__________.

a. action oriented; information oriented

b. cultural; political

c. qualitative; quantitative

d. measurable; timely

e. universal; diverse

(a; medium; p. 308)

92. The strategy-evaluation process should foster

a. mutual understanding.

b. implementation.

c. corporate culture.

d. profit centers.

e. contingency plans.

(a; medium; p. 308)

93. What factor determines the final design of a firm’s strategy-evaluation and control system?

a. Opportunities

b. Threats

c. External characteristics

d. The organization’s characteristics

e. The competition’s characteristics

(d; easy; p. 308)
94. Familiarity with local environments usually makes gathering and evaluating information much easier for organizations than for ones.

a. non-profit; for-profit

b. for-profit; non-profit

c. large; small

d. small; large

e. foreign; domestic

(d; medium; p. 308)

Contingency Planning
95. What activity is defined as having alternative plans that can be put into effect if certain key events do not occur as expected?

a. Corporate agility

b. Scenario planning

c. Strategy evaluation

d. Contingency planning

e. Forecasting

(d; easy; p. 309)

96. Which of the following statements about contingency plans is not true?

a. Contingency plans should be as simple as possible.

b. Only high-priority areas require the insurance of contingency plans.

c. Contingency plans should be developed for favorable and unfavorable events.

d. Develop contingency plans for all contingent events.

e. Contingency plans minimize the impact of potential threats.

(d; medium; p. 309)

97. What permits quick response to change, prevents panic in crisis situations, and makes managers more adaptable.

a. Auditing

b. Implementing a balanced scorecard

c. Contingency planning

d. Taking corrective actions

e. Measuring performance

(c; medium; p. 311; AACSB: Reflective thinking skills)

Auditing