Strategic Management-Chapter 9

Most strategists believe that an organization’s well-being depends on evaluation of the strategic-management process.

Adequate and timely feedback is important to effective strategy evaluation.

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

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

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

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

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

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

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

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

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

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

Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored.

It is most effective to conduct strategy evaluation annually, at the end of the fiscal year.

Changes in the organization’s management, marketing, finance and accounting, production and operations, research and development (R&D), and management information systems (MIS) strengths and weaknesses should all be the focus of a revised EFE matrix in strategy evaluation.

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

Strengths, weaknesses, opportunities, cost 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.

When measuring organizational performance, you need to compare expected results to actual results.

Criteria for evaluating strategies should be measurable and easily verifiable.

Financial ratios are rarely used as criteria to evaluate strategies.

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.

Intuitive judgments are almost always involved in deriving quantitative criteria.

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

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

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

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

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.

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

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

The form of a Balanced Scorecard does not vary for different organizations or industries.

The Balanced Scorecard approach deals with the question, “How satisfied are the firm’s customers?”

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

Yahoo was one of the firms most admired in its industry according to Fortune’s 2012 evaluation

Strategy-evaluation activities must be meaningful, that is, they should specifically relate to a firm’s objectives.

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

The test of an effective evaluation system is its complexity.

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

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

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

Organizations should prepare contingency plans just for unfavorable events.

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

Contingency plans should be as simple as possible.

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

Identifying both good and bad events that could jeopardize strategies is the first step of effective contingency planning.

A frequently used tool in strategy evaluation is the audit.

The U.S. Chamber of Commerce is against the accounting switch from GAAP to IFRS, saying it will cause cross-border commerce to decline.

Public accounting firms usually avoid strategy-evaluation services.

The accounting switch from GAAP to IFRS in the U.S. is going to cost businesses millions of dollars in fees and upgraded software systems and training.

Believing it will make it easier for investors to compare firms across countries and make it easier to raise capital globally, most large accounting firms and multinational firms favor the switch to IFRS.

The U.S. Chamber of Commerce supports the change from GAAP to IFRS, saying it will help the U.S. compete in the world economy.

IFRS standards comprise 25,000 pages, whereas GAAP standards comprise 5,000 pages.

Most executives believe that some strategic information should remain confidential to top managers.

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

Which of these is a basic activity of strategy evaluation?
A) Reviewing the underlying bases of current strategies
B) Comparing expected results with actual results
C) Taking corrective actions
D) Choices B and C only
E) All of the above

Too much emphasis on evaluating strategies
A) may be expensive and counterproductive.
B) is not possible – the more emphasis the better.
C) is good for morale, as employees like being closely evaluated.
D) is always advised if the firm can afford it.
E) is worse than too little or no evaluation.

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) Punitive corrective actions

All of these are Richard Rumelt’s criteria to evaluate a strategy EXCEPT
A) advantage.
B) consistency.
C) feasibility.
D) distinctiveness.
E) consonance.

With the passage of time strategy evaluation is becoming
A) increasingly difficult.
B) much simpler.
C) very convenient.
D) an unnecessary activity.
E) less important.

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 increasing time span for which planning can be done with any degree of certainty.
E) the rapid rate of obsolescence of even the best plans.

Which of the following is NOT a reason for the increasing difficulty of evaluating strategies?
A) Product life cycles are longer.
B) Domestic and world economies are less stable.
C) Product development cycles are shorter.
D) Technological advancement is more rapid.
E) Change is occurring more frequently.

Success today
A) guarantees success tomorrow.
B) is no guarantee of success tomorrow.
C) should lull a firm into complacency.
D) is all that really matters.
E) none of the above.

According to Rumelt, the final broad test of strategy is its
A) advantage.
B) feasibility.
C) consonance.
D) consistency.
E) distinctiveness.

Competitive advantage normally is the result of superiority in resources, skills, or
A) employees.
B) position.
C) consistency.
D) feasibility.
E) governance.

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

Rumelt’s criteria of consonance refers to the need for strategists to examine
A) inconsistent goals.
B) sets of trends.
C) impractical objectives.
D) competitive advantages.
E) the costs associated with particular strategies.

If success for one organizational department means failure for another department, then strategies may be
A) synergistic.
B) advantageous.
C) trendy.
D) feasible.
E) inconsistent.

Modern organizational realities demand that employees demonstrate greater
A) flexibility.
B) innovation.
C) creativity.
D) initiative.
E) all of the above

Strategy-evaluation activities should ideally be performed
A) just on a periodic basis.
B) only at the onset of a problem.
C) on a continuous basis.
D) solely upon completion of major projects.
E) annually only.

Corrective actions are almost always ________ except when external and internal factors have not significantly changed and the firm is progressing satisfactorily toward achieving stated objectives.
A) unnecessary
B) needed
C) undesirable
D) prohibitively expensive
E) futile

If you discover during the course of strategy evaluation that major changes have occurred in the firm’s internal strategic position, you should
A) continue on the present strategic course.
B) wait until the next quarter to see if things revert.
C) take corrective actions.
D) follow the original strategic plan.
E) none of the above

A revised ________ should focus on changes in the organization’s management, marketing, finance and accounting, production and operations, research and development (R&D), and management information systems (MIS) strengths and weaknesses.
A) mission
B) IFE matrix
C) vision
D) EFE matrix
E) EPM matrix

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

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

Which of the following is a corrective action a company might take to correct unfavorable variances?
A) Divesting a division
B) Revising objectives
C) Raising capital with stock or debt
D) Allocating resources differently
E) All of the above

Quantitative criteria commonly used to evaluate strategies are
A) cash budgets.
B) Balanced Scorecards.
C) Capital Asset Pricing Models.
D) financial ratios.
E) present value analyses.

Which of these is a potential problem associated with using only quantitative criteria for selecting strategies?
A) Most quantitative criteria are geared to long-term objectives rather than annual objectives.
B) Different accounting methods can provide different results on many quantitative criteria.
C) Intuitive judgments are never used in deriving quantitative criteria.
D) Quantitative criteria include human factors that may be underlying causes of declining performance.
E) Quantitative criteria are not able to compare the firm’s performance over different period of time.

Also important in evaluating strategies are ________ criteria, like high absenteeism and turnover rates, or low employee satisfaction.
A) numerical
B) qualitative
C) quantitative
D) accounting
E) financial

Financial ratios are used to compare a firm’s performance over different time periods, to compare the firm’s performance to industry averages, and to compare a firm’s performance with
A) overall business standards.
B) projected goals.
C) the performance of suppliers.
D) non-financial ratios.
E) the performance of competitors.

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) long-term; short-term

What corrective actions might a firm take during strategy evaluation?
A) Revise the business mission
B) Issue stock
C) Revise objectives
D) Sell a division
E) All of the above

According to author Alvin Toffler, what occurs when the nature, types, and speed of changes overpower an individual’s or organization’s ability and capacity to adapt?
A) Corporate insecurity
B) Corrective actions
C) Future shock
D) Corporate agility
E) Projected performance

Corrective actions should always
A) strengthen an organization’s competitive position in its industry.
B) streamline asset holdings.
C) have no risk.
D) involve abandoning existing strategies.
E) all of the above

Research suggests that which of the following is one of the best ways 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

According to researchers, all of the following encourage individuals to accept change EXCEPT
A) having a cognitive understanding of the changes.
B) having a sense of control over the situation.
C) having an awareness that necessary actions are going to be taken to implement change.
D) participating in strategy-evaluation activities.
E) being overpowered by the nature, types, and speed of changes.

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.

Which of the following is NOT one of the four perspectives from which the Balanced Scorecard allows firms to evaluate strategies?
A) Social responsibility
B) Financial performance
C) Customer knowledge
D) Internal business processes
E) Learning and growth

What aims to balance long-term with short-term concerns, financial with nonfinancial concerns, and internal with external concerns?
A) Contingency planning
B) The Balanced Scorecard approach
C) Taking corrective action
D) Benchmarking
E) Consonance

The Fortune 50 includes all of the following EXCEPT
A) the largest retailers.
B) the largest transportation companies.
C) the largest utilities.
D) the largest banks.
E) the largest hospitals.

Which of the following is NOT a key attribute that serves as one of the evaluative criteria for Fortune’s “America’s Most Admired Companies”?
A) People management
B) Innovativeness
C) Financial soundness
D) Amount of physical resources
E) Social responsibility

The strategy-evaluation process should
A) dominate decisions.
B) be complex.
C) be cumbersome.
D) foster mutual understanding and trust.
E) be restrictive.

Controls need to be ________ rather than ________.
A) action-oriented; information-oriented
B) cultural; political
C) qualitative; quantitative
D) measurable; timely
E) universal; diverse

The strategy-evaluation process should foster
A) mutual understanding.
B) doubt.
C) corporate culture.
D) complexity.
E) division.

Which of the following is true regarding the design of a firm’s strategy-evaluation system?
A) There is a one-size-fits-all system that works for all companies.
B) It does not need to take into account the organization’s size.
C) The management style of a firm has no bearing on the design.
D) It should be determined based on the unique characteristics of a company.
E) There is one ideal system.

________ organizations require more elaborate and detailed strategy-evaluation systems than ________ ones because it is more difficult to coordinate efforts among different divisions and functional areas.
A) Non-profit; for-profit
B) For-profit; non-profit
C) Large; small
D) Small; large
E) Foreign; domestic

________ plans can be defined as alternative plans that can be put into effect if certain key events do not occur as expected.
A) Agile
B) Scenario
C) Evaluation
D) Contingency
E) Forecast

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) Strategists should plan for all possible contingencies.
E) Contingency plans minimize the impact of potential threats.

What has been shown to permit quick response to change, prevent panic in crisis situations, and make managers more adaptable?
A) Auditing
B) Implementing a Balanced Scorecard
C) Contingency planning
D) Taking corrective actions
E) Measuring performance

What term is defined as “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) Financial ratios

International financial reporting standards (IFRS) comprise approximately ________ pages.
A) 1,000
B) 5,000
C) 10,000
D) 25,000
E) 100,000

Already the European Union and 113 nations including Australia, Mexico, and Canada have ________ IFRS rules.
A) adopted and then abandoned the use of
B) been prohibited from adopting
C) spoken out publicly against the adoption of
D) revised the standard version of the
E) adopted or soon plan to use

With regard to the visible or hidden issue, most executives agree that
A) the SEC should regulate whether or not companies make their strategic information visible.
B) some strategic information should remain confidential to top managers.
C) a company has gone too far when it takes steps to ensure that strategic information is not disseminated beyond “the inner circle.”
D) the potential benefit of improved employee and stakeholder motivation and input is not worth the risk of rival firms easily knowing and exploiting a firm’s strategies.
E) keeping strategies secret from employees and stakeholder will likely improve communication, understanding, and commitment.

A particularly important twenty-first-century challenge facing all strategists today is
A) deciding whether the process should be more an art or a science.
B) deciding whether strategies should be visible or hidden from stakeholders.
C) deciding whether the process should be more top-down or bottom-up in their firm.
D) all of the above
E) none of the above

Increased education and diversity of the workforce at all levels are reasons why
A) the top-down approach is preferred.
B) the bottom-up approach is untenable.
C) only top executives have the experience and acumen to make strategy decisions.
D) middle- and lower-level managers, and even nonmanagers, should be involved in the strategic planning process.
E) the horizontal approach is the most pragmatic choice.

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.

All of the following are reasons to be completely open as opposed to secretive with the strategy process EXCEPT
A) Managers, employees and other stakeholders can readily contribute to the process.
B) Stakeholders have greater basis for understanding and committing to a firm that is open.
C) All levels of today’s workforce exhibit increased education and diversity, making such contributions valuable.
D) Participation and openness enhance understanding, commitment and communication within the firm.
E) Openness limits rival firms from imitating or duplicating the firm’s strategies.

Mintzberg’s notion of “crafting” strategies
A) is consistent with the view that strategic management is more a science than an art.
B) contends that firms need to assess their environments, do research, evaluate alternatives, analyze, and then choose a course of action.
C) suggests that strategic decision making be based primarily on holistic thinking, intuition, creativity, and imagination.
D) reject strategies that result from subjective imagination in favor of objective analysis.
E) insists on formality.