Chapter 9

The Nature of Strategy Evaluation

51. Page: 336

52. Page: 336

53. 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
Ans: a Page: 337

54. All of these are Richard Rumelt’s criteria to evaluate a strategy except:
a. advantage.
b. consistency.
c. feasibility.
d. distinctiveness.
e. consonance.
Ans: d Page: 337

55. Page: 337

56. 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.
Ans: d Page: 337

57. 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.
Ans: a Page: 337

58. 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
Ans: b Page: 337

59. Page: 338

60. Page: 338

61. 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
Ans: b Page 338

62. 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
Ans: b Page: 338

63. Page: 338

64. 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.
Ans: b Page: 339

65. Page: 339

A Strategy-Evaluation Framework
66. 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.
Ans: b Page: 340

67. 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.
Ans: c Page: 340

68. 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.
Ans: b Page: 340

69. 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
Ans: c Page: 340

70. 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.
Ans: a Page: 342-343

71. Page: 343

72. 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
Ans: d Page: 343

73. 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
Ans: b Page: 343

74.
Page: 343

75. 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.
Ans: e Page: 343

76. 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
Ans: c Page: 343

77. 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
Ans: e Page: 344

78. 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
Ans: c Page: 344

79. 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.
Ans: a Page: 344

80. 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
Ans: a Page: 344

81. 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.
Ans: a Page: 344

82. 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.
Ans: b Page: 345

The Balanced Scorecard

83. 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
Ans: a Page: 346

84. 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
Ans: b Page: 346

Published Sources of Strategy-Evaluation Information

85. 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.
Ans: e Page: 346

86. Which of these is not a key attribute in Fortune’s strategy evaluation research on “
America’s Most Admired Companies”?
a. Quality of management
b. Innovation
c. Long-term investment value
d. Amount of physical resources
e. Use of corporate assets
Ans: d Page: 346-347
Characteristics of an Effective Evaluation System

87. 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
Ans: c Page: 349
88. Page: 349

89. The strategy-evaluation process should foster

a. mutual understanding.
b. implementation.
c. corporate culture.
d. profit centers.
e. contingency plans.
Ans: a Page: 349

90. 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
Ans: d Page: 349

91. 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
Ans: d Page: 349

Contingency Planning

92. 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
Ans: d Page: 350

93. 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.
Ans: d Page: 350

94. 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
Ans: c Page: 351

Auditing
95. What term refers to a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria, and communicating the
results to interested users?
a. Auditing
b. Innovation
c. R&D
d. Strategic Management
e. Accounting
Ans: a Page: 352

96. Page: 352

The Environmental Audit

97. Product design, manufacturing, transportation, customer use, packaging, product
disposal and corporate rewards should reflect considerations to develop constructive
relations with employees, consumers, suppliers and distributors.
a. profit
b. union
c. top-management
d. environmental
e. customer
Ans: d Page: 352

Twenty-First-Century Challenges in Strategic Management

98. Most strategy literature advocates that strategic management is

a. more of a science than an art.
b. more of an art than a science.
c. based on analysis rather than research.
d. based on intuition rather than analysis.
e. based on creativity rather than intuition.
Ans: a Page: 353

99. All of the following are reasons to be completely open with the strategy process except:
a. managers, employees and other stakeholders can readily contribute to the process.
b. investors, creditors and other stakeholders have greater basis for supporting a firm that is open.
c. visibility promotes democracy whereas secrecy promotes autocracy.
d. participation and openness enhances understanding, commitment and communication within
the firm.
e. openness limits rival firms from imitating or duplicating the firm’s strategies.
Ans: e Page: 354

100. Which of the following is not a reason why some firms prefer to conduct strategic-
planning in secret?
a. Dissemination of a firm’s strategies may translate into competitive intelligence for rival firms.
b. It enhances understanding, commitment and communication within the firm.
c. It limits criticism, second-guessing and hindsight.
d. Participants in a visible strategy process become more attractive to rival firms, who may lure
them away.
e. Secrecy limits rival firms from imitating or duplicating the firm’s strategies.
Ans: b Page: 354