Modern Management Concepts and Skills 12th Edition by Samuel C. Certo -Test Bank A+

$35.00
Modern Management Concepts and Skills 12th Edition by Samuel C. Certo -Test Bank A+

Modern Management Concepts and Skills 12th Edition by Samuel C. Certo -Test Bank A+

$35.00
Modern Management Concepts and Skills 12th Edition by Samuel C. Certo -Test Bank A+

) Entrepreneurship refers to the identification, evaluation and exploitation of opportunities.

Answer: TRUE

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

2) Opportunity evaluation is the first stage of the entrepreneurial process.

Answer: FALSE

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

3) Opportunities may sometimes arise from the discovery of new geographical markets in which new customers will value the new product or service.

Answer: TRUE

Page Ref: 142

Objective: 2

Difficulty: Easy

Classification: Conceptual

4) Entrepreneurial alertness refers to an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior in the environment.

Answer: TRUE

Page Ref: 143

Objective: 3

Difficulty: Easy

Classification: Conceptual

5) Information asymmetry refers to an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior.

Answer: FALSE

Page Ref: 143

Objective: 3

Difficulty: Easy

Classification: Conceptual

6) When analyzing entrepreneurial opportunities, the opportunity identification step is, “Where the rubber meets the road” and often presents a difficult challenge.

Answer: FALSE

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

7) Feasibility analysis helps entrepreneurs understand whether an idea is practical.

Answer: TRUE

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

8) Downside loss refers to the resources that an entrepreneur could lose if an opportunity does not succeed.

Answer: TRUE

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

9) Illusion of control refers to the activities and investments committed to gain returns from the new product or service arising from an opportunity.

Answer: FALSE

Page Ref: 145

Objective: 3

Difficulty: Easy

Classification: Conceptual

10) Exploitation exists when entrepreneurs overestimate the extent to which they can control the outcome of an opportunity.

Answer: FALSE

Page Ref: 145

Objective: 3

Difficulty: Easy

Classification: Conceptual

11) All entrepreneurs completely fund operations with their own money or credit cards.

Answer: FALSE

Page Ref: 146

Objective: 4

Difficulty: Easy

Classification: Conceptual

12) Venture capitalists generally make more investments than angel investors.

Answer: FALSE

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

13) Venture capitalists generally make larger investments than angel investors.

Answer: TRUE

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

14) Bank financing occurs when an entrepreneur obtains financing from a financial institution in the form of a loan.

Answer: TRUE

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

15) With respect to corporate entrepreneurship, sustained regeneration occurs when firms develop new culture, processes, or structures to support new product innovations.

Answer: TRUE

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

16) Arm & Hammer used sustained regeneration when it expanded the uses for baking soda by introducing it as a deodorizing ingredient in such products as toothpaste, laundry detergent, etc.

Answer: TRUE

Page Ref: 148

AACSB: Analytic Skills

Objective: 5

Difficulty: Moderate

Classification: Application

17) Organizational rejuvenation occurs when a firm attempts to alter its own competitive strategy.

Answer: FALSE

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

18) Strategic renewal occurs when a firm proactively seeks to create a new product market position that competitors have not recognized.

Answer: FALSE

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

19) Social value refers to the basic long-standing needs of society and has little to do with profits.

Answer: TRUE

Page Ref: 148

Objective: 6

Difficulty: Easy

Classification: Conceptual

20) One distinction between commercial and social entrepreneurship involves the availability of resources such as funding and employees.

Answer: TRUE

Page Ref: 149

Objective: 6

Difficulty: Easy

Classification: Conceptual

21) ________ refers to the identification, evaluation, and exploitation of opportunities.

  1. A) Entrepreneur
  2. B) Entrepreneurial opportunity
  3. C) Entrepreneurial alertness
  4. D) Entrepreneurship
  5. E) Entrepreneurial risk

Answer: D

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

22) Which of the following demonstrates the correct sequence in the stages of entrepreneurship?

  1. A) opportunity identification, opportunity evaluation, opportunity exploitation
  2. B) opportunity identification, opportunity exploitation, opportunity evaluation
  3. C) opportunity evaluation, opportunity identification, opportunity exploitation
  4. D) opportunity evaluation, opportunity exploitation, opportunity identification
  5. E) opportunity exploitation, opportunity evaluation, opportunity identification

Answer: A

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

23) Entrepreneurial opportunity is ________.

  1. A) the activities and investments committed to gain returns from the new product or service arising from the opportunity
  2. B) resources (i.e., money, relationships, etc.) the entrepreneur could lose if the opportunity does not succeed
  3. C) an occasion to bring into existence new products and services that allow outputs to be sold at a price greater than their cost of production
  4. D) an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior in the environment
  5. E) the process in which an individual or group of individuals in an existing corporation create a new organization or instigate renewal or innovation within that corporation

Answer: C

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

24) A(n) ________ is an individual who identifies, evaluates, and exploits opportunities.

  1. A) leader
  2. B) entrepreneur
  3. C) supplier
  4. D) distributor
  5. E) opportunist

Answer: B

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

25) When Nintendo develops and markets the Wii gaming system, it is an opportunity that has arisen from a ________.

  1. A) new product or service
  2. B) new geographical market
  3. C) new method of production
  4. D) new raw material
  5. E) new method of organizing

Answer: A

Page Ref: 142

Objective: 2

Difficulty: Moderate

Classification: Conceptual

26) Which type of opportunity is Citibank pursuing when it provides services in China?

  1. A) new products or services
  2. B) new geographical markets
  3. C) new raw materials
  4. D) new methods of production
  5. E) new methods of organizing

Answer: B

Page Ref: 142

Objective: 2

Difficulty: Moderate

Classification: Conceptual

27) Which of the following is an example of an opportunity that has arisen from new uses for raw materials?

  1. A) the invention of the heart stent
  2. B) an American bank providing services in China
  3. C) raising chicken without antibiotics
  4. D) using the Internet to sell a product
  5. E) using corn to produce ethanol

Answer: E

Page Ref: 142

Objective: 2

Difficulty: Moderate

Classification: Conceptual

28) When Tyson Chicken raises chicken for commercial use without using antibiotics, which type of opportunity is this?

  1. A) new products or services
  2. B) new geographical markets
  3. C) new raw materials
  4. D) new methods of production
  5. E) new methods of organizing

Answer: D

Page Ref: 142

Objective: 2

Difficulty: Moderate

Classification: Conceptual

29) Which of the following is an example of an opportunity that arose from the use of a new method of organizing?

  1. A) using corn to produce ethanol
  2. B) using the Internet to sell a product
  3. C) raising chicken without antibiotics
  4. D) an American bank providing services in China
  5. E) the invention of the heart stent

Answer: B

Page Ref: 142

Objective: 2

Difficulty: Moderate

Classification: Conceptual

30) ________ is the first step of the entrepreneurial process.

  1. A) Opportunity identification
  2. B) Opportunity evaluation
  3. C) Opportunity exploitation
  4. D) Opportunity feedback
  5. E) Risk evaluation

Answer: A

Page Ref: 143

Objective: 3

Difficulty: Easy

Classification: Conceptual

31) ________ refers to an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior in the environment.

  1. A) Social networking
  2. B) Entrepreneurial opportunity
  3. C) Entrepreneurial alertness
  4. D) Feasibility analysis
  5. E) Entrepreneurial risk

Answer: C

Page Ref: 143

Objective: 3

Difficulty: Easy

Classification: Conceptual

32) Rick and Jose gain new market information regarding a potential entrepreneurial opportunity. Despite the fact that both of them have gained access to this new information, only one of these individuals has access to additional information suggesting that other competitors are already moving to exploit this opportunity. What is this an example of?

  1. A) information asset
  2. B) information assurance
  3. C) social networking
  4. D) information asymmetry
  5. E) information reliability

Answer: D

Page Ref: 143

Objective: 3

Difficulty: Moderate

Classification: Conceptual

33) Martha has recently created a Facebook account. She also understands that she can utilize this to advertise her growing recycling business. This is an example of ________.

  1. A) information symmetry
  2. B) market research
  3. C) information asset
  4. D) entrepreneurial alertness
  5. E) entrepreneurial risk

Answer: D

Page Ref: 143

AACSB: Analytic Skills

Objective: 3

Difficulty: Moderate

Classification: Application

34) ________ is the second step of the entrepreneurial process.

  1. A) Opportunity identification
  2. B) Opportunity selection
  3. C) Opportunity evaluation
  4. D) Opportunity feedback
  5. E) Opportunity success

Answer: C

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

35) ________ is a type of evaluation that helps entrepreneurs understand whether an idea is practical.

  1. A) Illusion of control
  2. B) Entrepreneurial risk management
  3. C) Strategic planning
  4. D) Feasibility analysis
  5. E) Entrepreneurial alertness

Answer: D

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

36) Mike wants to start his own laundry service. However, he intends to first study the market and consider factors like who his competitors are, how they function, their market shares, how he can attract prospective customers, etc., before he decides whether his plan is viable. Mike is engaging in ________.

  1. A) benchmarking
  2. B) entrepreneurial risk management
  3. C) feasibility analysis
  4. D) exploitation
  5. E) angel investing

Answer: C

Page Ref: 144

AACSB: Analytic Skills

Objective: 3

Difficulty: Moderate

Classification: Application

37) ________ is the likelihood and magnitude of the opportunity’s downside loss.

  1. A) Illusion of control
  2. B) Entrepreneurial risk
  3. C) Entrepreneurial alertness
  4. D) Exploitation
  5. E) Entrepreneurial opportunity

Answer: B

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

38) ________ refers to the resources that the entrepreneur could lose if the opportunity does not succeed.

  1. A) Downside loss
  2. B) Entrepreneurial risk
  3. C) Feasibility analysis
  4. D) Information asymmetry
  5. E) Illusion of control

Answer: A

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

39) Betty and David decide to do a survey to get people’s reaction to their innovative idea for a new product. With the help of an organization that conducts primary research, the couple are able to get the response of people from their town. The results are very encouraging and they decide to start their company. What error have they committed?

  1. A) hypercorrection
  2. B) cognitive distortion
  3. C) law of small numbers
  4. D) defence mechanism
  5. E) overregularization

Answer: C

Page Ref: 144

AACSB: Analytic Skills

Objective: 3

Difficulty: Moderate

Classification: Application

Cicada Inc. is a small firm involved in the design and manufacture of residential and commercial furniture. The company has recently identified an attractive opportunity that would serve their growth and revenue plans well, but Jack Walters, one of the company’s founding members, vehemently opposes the idea.

40) Which of the following, if true, would most strengthen Jack’s argument?

  1. A) The cost of borrowing funds to finance this endeavor is lower than the rate of return on the investment.
  2. B) The company has underestimated the extent to which they can control the outcome of the opportunity.
  3. C) The company has historically used small, but relevant, samples of information to arrive at their decisions.
  4. D) Jack generally has a tendency to avoid risks and has vetoed several viable business opportunities in the past.
  5. E) Though the probability of failure is minimal, the downside loss could threaten existing operations.

Answer: E

Page Ref: 144

AACSB: Reflective Thinking Skills

Objective: 3

Difficulty: Moderate

Classification: Critical thinking

41) Which of the following, if true, would most weaken Jack’s argument?

  1. A) Other companies that have ventured into this area have met with mixed results.
  2. B) Increased working capital can lead to a liquidity crunch for the firm.
  3. C) The firm has not made any significant investments in the recent past.
  4. D) The investment required is minimal and complements the company’s existing lines of business.
  5. E) The firm will have to overcome several entry barriers to take advantage of this opportunity.

Answer: D

Page Ref: 144

AACSB: Reflective Thinking Skills

Objective: 3

Difficulty: Moderate

Classification: Critical thinking

42) Which of the following is true about factors that adversely influence the accuracy of an entrepreneur’s risk perceptions?

  1. A) An entrepreneur’s belief in the law of small numbers increases the risk he or she perceives with an opportunity.
  2. B) Because individuals are more likely to obtain good information and less likely to obtain bad information, small samples of information are likely biased negatively.
  3. C) Most entrepreneurs have access to large databases.
  4. D) The control that an entrepreneur feels with respect to the opportunity’s outcome may influence perceptions of the idea’s risk.
  5. E) Law of small numbers and the illusion of control positively influence the accuracy of risk perceptions when evaluating opportunities.

Answer: D

Page Ref: 144-145

Objective: 3

Difficulty: Easy

Classification: Conceptual

43) Jerry starts his own business even when he is advised by family and friends that it is not a suitable opportunity. His friends feel that the market is uncertain and new entry at this juncture is inadvisable. Jerry soon realizes that his friends were right and he should have taken their advice. In spite of himself, he is forced to admit that the market situation is such that it would take more than a good entrepreneur to survive. This is an example of ________.

  1. A) exploitation
  2. B) anchoring
  3. C) information bias
  4. D) illusion of control
  5. E) reactance

Answer: D

Page Ref: 145

AACSB: Analytic Skills

Objective: 3

Difficulty: Moderate

Classification: Application

44) ________ is the third step of the entrepreneurial process.

  1. A) Opportunity identification
  2. B) Opportunity evaluation
  3. C) Opportunity exploitation
  4. D) Opportunity selection
  5. E) Opportunity improvement

Answer: C

Page Ref: 145

Objective: 3

Difficulty: Easy

Classification: Conceptual

45) ________ refers to the activities and investments committed to gain returns from the new product or service arising from the opportunity.

  1. A) Exploitation
  2. B) Information asymmetry
  3. C) Entrepreneurial risk
  4. D) Illusion of control
  5. E) Social value

Answer: A

Page Ref: 145

Objective: 3

Difficulty: Easy

Classification: Conceptual

46) Entrepreneurs are most likely to exploit an opportunity when ________.

  1. A) customers are likely to continue using the same product
  2. B) there is no market demand, but an opportunity to create market demand
  3. C) they perceive that they have the support of important stakeholders
  4. D) they want to enhance the prospects of the opportunity by training an incapable management team
  5. E) they feel they do not have access to the resources needed to ensure high levels of organizational performance

Answer: C

Page Ref: 146

Objective: 3

Difficulty: Easy

Classification: Conceptual

47) Jose has successfully initiated a business of repairing cars. However, without immediate income to sustain the business, he may have to shut shop. His friend, Adam, invests in the company and gives the company a much-required boost. Adam is an example of a(n) ________.

  1. A) bank financier
  2. B) venture capitalist
  3. C) angel investor
  4. D) crowd funder
  5. E) private equity investor

Answer: C

Page Ref: 146

Objective: 4

Difficulty: Moderate

Classification: Application

48) ________ are firms that raise money from investors and then use this money to make investments in new firms.

  1. A) Angel investors
  2. B) Venture capitalists
  3. C) Banking institutions
  4. D) Entrepreneurs
  5. E) Insurance companies

Answer: B

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

49) Which of the following best describes an angel investor?

  1. A) Families and friends of an entrepreneur are not angel investors.
  2. B) Angel investors raise money and then use this money to make investments in new firms.
  3. C) Angel investors make fewer investments than venture capitalists.
  4. D) Angel investors focus on a small number of industries.
  5. E) Angel investors provide the initial financing to start-up ventures.

Answer: E

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

50) Which of the following is true about the differences between angel investors and venture capitalists?

  1. A) Venture capitalists are wealthy individuals who provide capital to new companies.
  2. B) Angel investors raise money and then use this money to make investments in new firms.
  3. C) Venture capitalists make more investments than angel investors.
  4. D) Angel investors tend not to focus on particular industries.
  5. E) Venture capitalists typically provide the initial financing to start-up ventures.

Answer: D

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

51) Which of the following is true about banking finance?

  1. A) Like angel investors and venture capitalists, banks invest in a business.
  2. B) Banks are more interested in ensuring that the entrepreneur’s opportunity will survive long enough to ensure repayment.
  3. C) Banks typically focus on investing in a small number of industries.
  4. D) Banks are concerned with the long-term potential for returns.
  5. E) Banks typically provide more capital as the new venture becomes more established.

Answer: B

Page Ref: 147

Objective: 4

Difficulty: Easy

Classification: Conceptual

52) ________ is the process in which an individual or group of individuals in an existing corporation create a new organization or instigate renewal or innovation within that corporation.

  1. A) Corporate social entrepreneurship
  2. B) Intrapreneurship
  3. C) Intrepreneurship
  4. D) Corporate entrepreneurship
  5. E) Social entrepreneurship

Answer: D

Page Ref: 147

Objective: 5

Difficulty: Easy

Classification: Conceptual

53) Beth heads the team of designers at La Belle, Inc., a well-known brand for designer bags. She is an extraordinary designer herself and is also an excellent manager to her team. In the past, La Belle has successfully implemented many of her innovative ideas to their benefit. The company has now decided that Beth should be given the responsibility of managing their new business unit that specializes in clothes, shoes, and other accessories. What type of entrepreneurship is displayed in this scenario?

  1. A) intrapreneurship
  2. B) creative destruction
  3. C) corporate social entrepreneurship
  4. D) social entrepreneurship
  5. E) corporate entrepreneurship

Answer: E

Page Ref: 147

AACSB: Analytic Skills

Objective: 5

Difficulty: Moderate

Classification: Application

54) Which of the following is true about corporate entrepreneurship?

  1. A) Corporate entrepreneurs focus on less quantitative performance measures that are not related to money.
  2. B) The purpose of corporate entrepreneurship is to create value for the public.
  3. C) Corporate entrepreneurs face more difficulties attracting capital from angel investors, venture capitalists, or banks.
  4. D) Corporate entrepreneurship results in new companies that often continue to work closely with the parent company.
  5. E) Corporate entrepreneurs often face difficulties in the form of hiring and compensating employees.

Answer: D

Page Ref: 147

Objective: 5

Difficulty: Easy

Classification: Conceptual

55) ________ occurs when firms develop new culture, processes, or structures to support new product innovations in current markets as well as with existing products in new markets.

  1. A) Domain definition
  2. B) Organized rejuvenation
  3. C) Strategic renewal
  4. D) Sustained regeneration
  5. E) Project hosting

Answer: D

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

56) Which of the following is the most frequently used type of corporate entrepreneurship?

  1. A) sustained regeneration
  2. B) organized rejuvenation
  3. C) domain definition
  4. D) strategic renewal
  5. E) project hosting

Answer: A

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

57) ________ involves improving the firm’s ability to execute strategies and focuses on new processes instead of new products.

  1. A) Sustained regeneration
  2. B) Project hosting
  3. C) Organizational rejuvenation
  4. D) Strategic renewal
  5. E) Domain definition

Answer: C

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

58) ________ occurs when a firm attempts to alter its own competitive strategy.

  1. A) Public hosting
  2. B) Sustained regeneration
  3. C) Organized rejuvenation
  4. D) Strategic renewal
  5. E) Domain definition

Answer: D

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

59) ________ occurs when a firm proactively seeks to create a new product market position that competitors have not recognized.

  1. A) Sustained regeneration
  2. B) Organized rejuvenation
  3. C) Public hosting
  4. D) Strategic renewal
  5. E) Domain definition

Answer: E

Page Ref: 148

Objective: 5

Difficulty: Easy

Classification: Conceptual

60) Coral Inc. is a company specializing in the manufacture of crystal ware. It is based out of Charleston, South Carolina, and has a profitable market share in the southern states of Florida and Georgia as well. The managers at Coral Inc. are aware of entrepreneurial opportunities outside these states. After a decade of successful business in these three states, the company has decided to reach out to a larger market. This will mean hiring more resources and greater financial investments. Which of the following, if true, would MOST strengthen the argument for expanding the business to other states?

  1. A) The company is struggling to maintain its products’ quality because of the increasing bargaining power of suppliers.
  2. B) Customers in these states are showing interest in buying more products of the same product category.
  3. C) Recent financial results show that their competitors are incurring losses.
  4. D) Market research indicates that very limited changes in existing products will be required to attract prospective customers in neighboring states.
  5. E) Melamine kitchenware items are doing better business than glass and crystal.

Answer: D

Page Ref: 148

AACSB: Reflective Thinking Skills

Objective: 5

Difficulty: Difficult

Classification: Critical thinking

61) ________ involves the recognition, evaluation, and exploitation of opportunities that create social value as opposed to personal or shareholder wealth.

  1. A) Corporate social entrepreneurship
  2. B) Intrapreneurship
  3. C) Intrepreneurship
  4. D) Corporate entrepreneurship
  5. E) Social entrepreneurship

Answer: E

Page Ref: 148

Objective: 6

Difficulty: Easy

Classification: Conceptual

62) Bryan has started a nonprofit organization that places the visually impaired in suitable jobs. What type of entrepreneurship is Bryan displaying?

  1. A) corporate social entrepreneurship
  2. B) intrapreneurship
  3. C) commercial entrepreneurship
  4. D) corporate entrepreneurship
  5. E) social entrepreneurship

Answer: E

Page Ref: 148

AACSB: Analytic Skills

Objective: 6

Difficulty: Easy

Classification: Application

63) ________ refers to the basic long-standing needs of society and has little to do with profits.

  1. A) Commercial value
  2. B) Social value
  3. C) Economic value
  4. D) Psychological value
  5. E) International value

Answer: B

Page Ref: 148

Objective: 6

Difficulty: Easy

Classification: Conceptual

64) Which of the following is true about the differences between commercial and social entrepreneurship?

  1. A) The purpose of commercial entrepreneurship is to create value for the public.
  2. B) Social entrepreneurs are not required to consider issues surrounding sales and costs since they have enough funding from angel investors.
  3. C) Most commercial entrepreneurs rely on donations as sources of funding.
  4. D) Commercial entrepreneurs focus on less quantitative performance measures that are not related to money.
  5. E) Although profits remain somewhat important, social value dominates the goal structure of social entrepreneurship.

Answer: E

Page Ref: 149

Objective: 6

Difficulty: Easy

Classification: Conceptual

65) Explain the fundamentals of entrepreneurship.

Answer: Entrepreneurship refers to the identification, evaluation, and exploitation of opportunities. Opportunities, in a general sense, are appropriate or favorable occasions. In the entrepreneurship context, though, the definition of opportunity is slightly different from this general definition. Specifically, an entrepreneurial opportunity is an occasion to bring into existence new products and services that allow outputs to be sold at a price greater than their cost of production. In other words, entrepreneurial opportunities exist when individuals are able to sell new products and services at a price that produces a profit.

Although entrepreneurship has a broad definition, the term still involves starting new businesses.

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

66) Who is an entrepreneur?

Answer: An entrepreneur is an individual who identifies, evaluates, and exploits opportunities. Many associate the term entrepreneur with one individual starting a new business, but it is not always the case. Many entrepreneurs work with others when identifying, evaluating, and exploiting entrepreneurial opportunities. Research suggests that organizations started by entrepreneurial teams tend to perform better than those started by individual entrepreneurs working by themselves. Many attribute this “team advantage” to the combination of diverse skills, experiences, and relationships of the entrepreneurial team members. In addition, as new organizations grow, they require leaders with new skills. Consequently, assembling a team makes it easier for entrepreneurs to add team members with these new skills as the venture expands.

Page Ref: 140

Objective: 1

Difficulty: Easy

Classification: Conceptual

67) What is entrepreneurial opportunity? Which are the types of opportunities as described by Schumpeter?

Answer: Entrepreneurship refers to the identification, evaluation, and exploitation of opportunities. Specifically, an entrepreneurial opportunity is an occasion to bring into existence new products and services that allow outputs to be sold at a price greater than their cost of production.

In his classic formulation of opportunities, Schumpeter described five different types of opportunities.

  1. Opportunities arise from the creation of new products or services. When a new type of medical device is created, for example, an opportunity exists in the form of convincing doctors to use the new device in their practices.
  2. Opportunities arise from the discovery of new geographical markets in which new customers will value the new product or service. As an example, suppose an individual has exclusive rights to produce and distribute action figures based on a popular movie within the United States. After saturating the domestic market, the individual might begin to distribute the action figures in China. This scenario would represent an opportunity arising from the discovery of a new geographical market.
  3. Opportunities may arise from the creation or discovery of new raw materials or after discovering alternative uses for existing raw materials. For example, ethanol, which can be produced from corn, represents a new use for corn.
  4. Opportunities may emerge from the discovery of new methods of production. According to Schumpeter, new methods of production allow entrepreneurs to produce goods or services at lower costs, which allows the entrepreneurs to satisfy the needs of customers more effectively.
  5. Opportunities may arise from new methods of organizing. The emergence of the Internet provides an example of opportunities that arose from new methods of organizing.

Page Ref: 141-142

Objective: 2

Difficulty: Easy

Classification: Conceptual

68) Describe the four factors that influence the ability of individuals to identify opportunities.

Answer: The four factors that influence the ability of individuals to identify opportunities: entrepreneurial alertness, information asymmetry, social networks, and the ability to establish means-ends relationships.

  1. Individuals vary in terms of entrepreneurial alertness, which refers to an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior in the environment. When individuals have high levels of entrepreneurial alertness, they are more likely to identify potential entrepreneurial opportunities. In contrast, when individuals have low levels of entrepreneurial alertness, they are more likely to dismiss or ignore new information and overlook potential opportunities.
  2. Individuals vary in terms of the information to which they have access, which is known as information asymmetry. This variation in information involves both new information and old information, and no two people share all of this information at the same time.
  3. Individuals vary in terms of their social networks, which represent individuals’ patterns of social relationships. Some individuals have extended social networks (i.e., many social relationships), while other individuals have narrow social networks (i.e., few social relationships). Research suggests that individuals with extended networks are more likely to identify potential entrepreneurial opportunities than those with more narrow social networks. Moreover, the type of social network may influence opportunity identification. An individual with entrepreneurial family members, for example, may be better able to identify opportunities than an individual with family members who are not entrepreneurial.
  4. Individuals will vary in terms of their ability to assess means-ends relationships. In this context, the ability to assess means–end relationships refers to the ability of entrepreneurs to understand how to turn a new technology into a product or service that will be valued by consumers.

Page Ref: 143

Objective: 3

Difficulty: Easy

Classification: Conceptual

69) Explain feasibility analysis.

Answer: When evaluating opportunities, entrepreneurs must be honest with themselves. If not, the entrepreneurs may purposely ignore or accidentally overlook important factors that will limit the potential success of the opportunity.

To evaluate ideas, entrepreneurs will often engage in feasibility analysis, which is analysis that helps entrepreneurs understand whether an idea is practical. In such a study, entrepreneurs will study customer demands, the structure of the industry, and the entrepreneur’s ability to provide the new product or service. Although entrepreneurs have many ideas, not all of them are feasible; this analysis helps them to better understand the likelihood that their opportunity will provide the resources required.

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

70) What is entrepreneurial risk? In this context, explain downside loss.

Answer: When evaluating opportunities, entrepreneurs must be honest with themselves. If not, the entrepreneurs may purposely ignore or accidentally overlook important factors that will limit the potential success of the opportunity.

To evaluate ideas, entrepreneurs will often engage in feasibility analysis. Even if an idea is feasible, opportunities are associated with some risk. One of the central factors that entrepreneurs will examine in the evaluation stage is the opportunity’s entrepreneurial risk, which is the likelihood and magnitude of the opportunity’s downside loss. In this context, downside loss refers to the resources (i.e., money, relationships, etc.) the entrepreneur could lose if the opportunity does not succeed. All else being equal, entrepreneurs are more likely to pursue opportunities with lower levels of entrepreneurial risk and less likely to pursue opportunities with higher levels of entrepreneurial risk.

Page Ref: 144

Objective: 3

Difficulty: Easy

Classification: Conceptual

71) Describe opportunity exploitation.

Answer: The third step in the entrepreneurship process involves exploiting an opportunity. Exploitation refers to the activities and investments committed to gain returns from the new product or service arising from the opportunity. Simply stated, exploitation occurs when an entrepreneur (or group of entrepreneurs) decides that an opportunity is worth pursuing. When an entrepreneur, for example, decides that customers would highly value a new product, exploitation entails all of those activities (i.e., marketing, production, etc.) needed to sell the new product to consumers.

Page Ref: 145

Objective: 3

Difficulty: Easy

Classification: Conceptual

72) When do entrepreneurs require external capital? Describe the three primary sources of external capital.

Answer: When entrepreneurs decide that an opportunity is worth exploiting, they often lack the capital (i.e., money) needed to exploit the opportunity. Although some entrepreneurs fund their operations with their own money or with credit cards, most entrepreneurs require at least some external money to fund operations. The three primary sources of external capital for entrepreneurs: angel investors, venture capitalists, and bank financing.

  1. Angel investors are wealthy individuals who provide capital to new companies. Angel investors may include an entrepreneur’s family and friends, but angel investors are also private individuals who did not know the entrepreneur prior to funding the opportunity. Angel investors have existed for centuries.
  2. Venture capitalists are firms that raise money from investors and then use this money to make investments in new firms. Many prominent companies such as Intel and Microsoft received investments from venture capitalists in their early days. The companies then used these funds to help acquire the resources (i.e., employees, equipment, etc.) that eventually made them the companies they are today.
  3. Bank financing occurs when an entrepreneur obtains financing from a financial institution in the form of a loan. It is important to note that unlike angel investors or venture capitalists, banks are not investors. Instead, banks make loans to entrepreneurs and in return expect repayment of the loans with interest. As such, banks are not concerned with the long-term potential for returns. Instead, these banks are more interested in ensuring that the entrepreneur’s opportunity will survive long enough to ensure repayment. In other words, investors typically seek risk, but banks are more likely to minimize risk.

Page Ref: 146-147

Objective: 4

Difficulty: Easy

Classification: Conceptual

73) What is corporate entrepreneurship?

Answer: Corporate entrepreneurship is the process in which an individual or group of individuals in an existing corporation create a new organization or instigate renewal or innovation within that corporation. Although corporate entrepreneurship often involves establishing new organizations, these new organizations leverage the parent corporation’s assets, market position, or other resources. In other words, when corporate entrepreneurship results in new companies, these new companies often continue to work closely with the parent company. It is important to recognize that corporate entrepreneurship does not necessarily require creating a new organization. Corporate entrepreneurship, for example, also involves creating new products, services, or technologies.

Page Ref: 147

Objective: 5

Difficulty: Easy

Classification: Conceptual

74) Define social entrepreneurship.

Answer: Social entrepreneurship involves the recognition, evaluation, and exploitation of opportunities that create social value as opposed to personal or shareholder wealth. In this context, social value refers to the basic long-standing needs of society and has little to do with profits. Basic long-standing needs might include providing water, food, and shelter to those individuals in need. Social value might also refer to more specific needs such as providing playground equipment to needy school districts or seeing-eye dogs for those who are blind.

Page Ref: 148

Objective: 6

Difficulty: Easy

Classification: Conceptual

Modern Management, 12e (Certo)

Chapter 7 Principles of Planning

1) Planning is the process of determining how the organization will achieve its objectives.

Answer: TRUE

Page Ref: 160

Objective: 1

Difficulty: Easy

Classification: Conceptual

2) The affirmative purpose of planning is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management activities.

Answer: FALSE

Page Ref: 160

Objective: 1

Difficulty: Easy

Classification: Conceptual

3) A potential disadvantage of planning is that it can take up too much managerial time.

Answer: TRUE

Page Ref: 161

Objective: 1

Difficulty: Easy

Classification: Conceptual

4) Of the four primary management functions, organizing usually precedes planning.

Answer: FALSE

Page Ref: 161

Objective: 1

Difficulty: Easy

Classification: Conceptual

5) Premises are the assumptions upon which alternatives to reaching organizational objectives are based.

Answer: TRUE

Page Ref: 163

Objective: 2

Difficulty: Moderate

Classification: Conceptual

6) The last step in the planning process focuses on developing plans to pursue the chosen alternative for reaching organizational objectives.

Answer: FALSE

Page Ref: 163

Objective: 2

Difficulty: Easy

Classification: Conceptual

7) Organizational objectives are the targets toward which the management system is directed.

Answer: TRUE

Page Ref: 165

Objective: 3

Difficulty: Easy

Classification: Conceptual

8) An organization’s vision outlines what the organization exists to do, given a particular group of customers and customer needs.

Answer: FALSE

Page Ref: 165

Objective: 3

Difficulty: Moderate

Classification: Conceptual

9) Organizations exist for various purposes but have the same types of objectives.

Answer: FALSE

Page Ref: 165

Objective: 3

Difficulty: Easy

Classification: Conceptual

10) Managers should establish performance objectives that are within easy reach for employees.

Answer: FALSE

Page Ref: 167

Objective: 3

Difficulty: Easy

Classification: Conceptual

11) According to Drucker, management should set objectives that indicate the company’s responsibilities to its customers and society but should not specify the extent to which the company intends to live up to these responsibilities.

Answer: FALSE

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Conceptual

12) Short-term objectives are targets to be achieved within five to seven years.

Answer: FALSE

Page Ref: 167

Objective: 4

Difficulty: Easy

Classification: Conceptual

13) Suboptimization is the process of assigning subobjectives to the various people or units in the organization based on the organizational objectives.

Answer: FALSE

Page Ref: 168

Objective: 4

Difficulty: Moderate

Classification: Conceptual

14) One of the primary guidelines for establishing quality objectives is that management should set objectives only in relation to other organizational objectives.

Answer: TRUE

Page Ref: 169

Objective: 4

Difficulty: Easy

Classification: Conceptual

15) The management by objectives (MBO) approach has been found to be ineffective for nonprofit organizations.

Answer: FALSE

Page Ref: 169

Objective: 5

Difficulty: Easy

Classification: Conceptual

16) A key element of any management by objectives (MBO) program is top management support and commitment.

Answer: TRUE

Page Ref: 170

Objective: 5

Difficulty: Easy

Classification: Conceptual

17) A disadvantage of a management by objectives (MBO) program is that it can be time consuming.

Answer: TRUE

Page Ref: 171

Objective: 5

Difficulty: Easy

Classification: Conceptual

18) The final responsibility for organizational planning rests with the firm’s chief executives.

Answer: TRUE

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

19) Organizational planners must know how all parts of the organization function and interrelate.

Answer: TRUE

Page Ref: 172

Objective: 7

Difficulty: Easy

Classification: Conceptual

20) Management’s evaluation of organizational planners should be completely objective.

Answer: FALSE

Page Ref: 172

Objective: 7

Difficulty: Moderate

Classification: Conceptual

21) The process of determining how an organization can get where it wants to go and what it will do to accomplish its objectives is ________.

  1. A) organizing
  2. B) influencing
  3. C) planning
  4. D) controlling
  5. E) analyzing

Answer: C

Page Ref: 160

Objective: 1

Difficulty: Easy

Classification: Conceptual

22) The protective purpose of planning is to ________.

  1. A) decrease paper work and red tape
  2. B) increase the degree of organizational success
  3. C) optimize the use of organizational resources
  4. D) minimize risk by reducing the uncertainties surrounding business conditions
  5. E) maximize the organization’s ability to leverage environmental opportunities

Answer: D

Page Ref: 160

Objective: 1

Difficulty: Moderate

Classification: Conceptual

23) The affirmative purpose of planning is to ________.

  1. A) increase the degree of organizational success
  2. B) increase the level of workplace diversity
  3. C) optimize the use organizational resources
  4. D) refine work methods and reduce production costs
  5. E) improve organizational compliance with industry standards

Answer: A

Page Ref: 160

Objective: 1

Difficulty: Moderate

Classification: Conceptual

24) Which of the following is the fundamental purpose of planning?

  1. A) eliminating risk
  2. B) helping the organization reach its objectives
  3. C) optimizing the use of resources
  4. D) identifying organizational objectives
  5. E) organizing work processes

Answer: B

Page Ref: 161

Objective: 1

Difficulty: Easy

Classification: Conceptual

25) A disadvantage of planning is that it ________.

  1. A) causes managers to focus on the future
  2. B) reduces organizational flexibility once plans are set
  3. C) requires organizational resources
  4. D) can take up too much managerial time
  5. E) involves planning for situations that may not occur

Answer: D

Page Ref: 161

Objective: 1

Difficulty: Moderate

Classification: Conceptual

26) Which of the following is an advantage of planning?

  1. A) eliminates all risks
  2. B) enhances decision coordination
  3. C) emphasizes immediate goals
  4. D) suboptimizes the use of resources
  5. E) promotes individual performance

Answer: B

Page Ref: 161

Objective: 1

Difficulty: Moderate

Classification: Conceptual

27) Planning is advantageous to an organization, particularly in the creation of new ventures. According to an often-cited survey, as many as 65 percent of all newly started businesses are not around to celebrate a fifth anniversary. This high failure rate seems primarily a consequence of inadequate planning. Successful businesses have an established plan, a formal statement that outlines the objectives the organization is attempting to achieve. Planning does not eliminate risk, of course, but it does help managers identify and deal with organizational problems before they cause havoc in a business. Which of the following best expresses the main point of this paragraph?

  1. A) Adequate planning eliminates business risk.
  2. B) All ventures have a 65 percent chance of failure.
  3. C) Existing businesses do not derive as much value from planning compared to new ventures.
  4. D) Effective planning helps managers identify and plan for all organizational problems.
  5. E) Companies that plan well appear to have a better chance at success.

Answer: E

Page Ref: 161

Objective: 1

Difficulty: Moderate

Classification: Critical thinking

28) The primary management function is ________.

  1. A) organizing
  2. B) influencing
  3. C) controlling
  4. D) planning
  5. E) staffing

Answer: D

Page Ref: 161

Objective: 1

Difficulty: Easy

Classification: Conceptual

One of ValuTech’s objectives for the year is to bring down the firm’s production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:

(1) Use alternate suppliers who can provide raw materials at a lower cost.

(2) Adopt cutting-edge technology that makes the production process more efficient.

29) The first step in the planning process is to ________.

  1. A) list alternative ways of reaching objectives
  2. B) state organizational objectives
  3. C) develop the premises upon which each alternative is based
  4. D) develop plans to pursue the chosen alternative
  5. E) put plans into action

Answer: B

Page Ref: 162

Objective: 2

Difficulty: Moderate

Classification: Conceptual

30) What is the underlying assumption in the first alternative?

  1. A) Customers associate high prices with high quality and vice versa.
  2. B) Customers are more quality conscious than price sensitive.
  3. C) Low-cost raw materials will not affect the overall quality of the final product.
  4. D) The company’s relationship with its current suppliers is strong.

Answer: C

Page Ref: 162-163

Objective: 2

Difficulty: Moderate

Classification: Critical thinking

31) What is the underlying assumption in the second alternative?

  1. A) Competitors are also likely to adopt high-end technology.
  2. B) Consumers’ purchase decisions are directly influenced by the manufacturing process.
  3. C) The availability of better technology translates into higher worker productivity.
  4. D) The costs associated with upgrading will outweigh the benefits.
  5. E) Alternate suppliers can provide raw materials at a lower cost.

Answer: C

Page Ref: 162-163

Objective: 2

Difficulty: Moderate

Classification: Critical thinking

32) Which of the following steps in the planning process should precede all the others?

  1. A) develop premises upon which each alternative is based
  2. B) develop plans to pursue the chosen alternative
  3. C) list alternative ways of reaching objectives
  4. D) choose the best alternative for reaching objectives
  5. E) A reduction in production costs leads to lower prices.
  6. F) put plans into action

Answer: C

Page Ref: 163

Objective: 2

Difficulty: Moderate

Classification: Conceptual

33) After identifying the alternative ways in which the organization can reach its objectives, a manager should ________.

  1. A) develop plans for each alternative
  2. B) choose the best alternative for reaching objectives
  3. C) rank each alternative according to complexity
  4. D) develop premises on which to base each alternative
  5. E) choose the alternative which is most cost effective

Answer: D

Page Ref: 163

Objective: 2

Difficulty: Moderate

Classification: Conceptual

34) Alternatives to reach an organizational objective are based on assumptions which are called ________.

  1. A) objectives
  2. B) missions
  3. C) goals
  4. D) premises
  5. E) priorities

Answer: D

Page Ref: 163

Objective: 2

Difficulty: Easy

Classification: Conceptual

35) The last step in the planning process is to ________.

  1. A) put the plans into action
  2. B) evaluate the organizational goals
  3. C) choose the best alternative for reaching objectives
  4. D) develop the premises upon which each alternative is based
  5. E) state the organizational objectives

Answer: A

Page Ref: 163

Objective: 2

Difficulty: Moderate

Classification: Conceptual

36) ________ is the key to a successful planning process.

  1. A) Classification
  2. B) Repetition
  3. C) Implementation
  4. D) Evaluation
  5. E) Standardization

Answer: C

Page Ref: 164

Objective: 2

Difficulty: Easy

Classification: Conceptual

37) A system created as part of the overall management system is a(n) ________.

  1. A) offshoot
  2. B) microsystem
  3. C) spinoff
  4. D) subsystem
  5. E) outgrowth

Answer: D

Page Ref: 164

Objective: 2

Difficulty: Easy

Classification: Conceptual

38) Which of the following statements is true about the planning subsystem?

  1. A) It utilizes all of an organization’s resources.
  2. B) It reduces the need for strict control over the planning process.
  3. C) It helps managers organize the overall management system and enhance its success.
  4. D) It allows different organizational departments to develop their own strategic plans.
  5. E) It places the responsibility of identifying organizational objectives on different departments.

Answer: C

Page Ref: 164

Objective: 2

Difficulty: Moderate

Classification: Conceptual

39) The targets toward which an open management system is directed are ________.

  1. A) organizational purposes
  2. B) operational plans
  3. C) organizational objectives
  4. D) business processes
  5. E) objective indicators

Answer: C

Page Ref: 165

Objective: 3

Difficulty: Easy

Classification: Conceptual

40) A firm’s ________ refer(s) to what it exists to do, given a particular group of customers and customer needs.

  1. A) operational plan
  2. B) unique selling proposition
  3. C) organizational purpose
  4. D) long-term goal
  5. E) vision statement

Answer: C

Page Ref: 165

Objective: 2

Difficulty: Easy

Classification: Conceptual

41) Which of the following is an example of a statement of organizational purpose?

  1. A) To increase the company’s market share by 20 percent by 2011.
  2. B) To execute all projects in a timely and professional manner.
  3. C) To be the leading provider of professional health care services.
  4. D) To provide our employees with a challenging and rewarding work environment.
  5. E) To build long-lasting customer relationships based on trust.

Answer: C

Page Ref: 165

Objective: 3

Difficulty: Moderate

Classification: Application

42) John F. Mee suggested that organizational objectives for businesses can be summarized in three points. Identify the correct statement.

  1. A) Service to society is the motivating force for managers.
  2. B) The people responsible for attaining objectives should have a voice in setting them.
  3. C) Managers are not bound by the ethical codes of the society in which the business operates.
  4. D) Managers should establish performance objectives that they know are within reach for employees.
  5. E) Service to customers by the provision of desired economic values justifies the existence of the business.

Answer: E

Page Ref: 166

Objective: 3

Difficulty: Moderate

Classification: Conceptual

43) It is important for organizations to ensure that the objectives they set for their employees are ________.

  1. A) unrealistically high
  2. B) within easy reach
  3. C) low
  4. D) within reach, but not easy reach
  5. E) out of reach

Answer: D

Page Ref: 167

Objective: 3

Difficulty: Easy

Classification: Conceptual

44) Which of the following is NOT one of the key areas in which Drucker advised managers to set management system objectives?

  1. A) market standing
  2. B) profitability
  3. C) government regulation
  4. D) innovation
  5. E) public responsibility

Answer: C

Page Ref: 167

Objective: 3

Difficulty: Easy

Classification: Conceptual

45) One of the organizational objectives of Valpo Industries, a pharmaceutical firm, is “to develop a new line of drugs for the treatment of life-threatening diseases such as cancer and AIDS, through the use of patented technology and processes.” According to Drucker, this objective relates to ________.

  1. A) market standing
  2. B) innovation
  3. C) productivity
  4. D) profitability
  5. E) public responsibility

Answer: B

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

46) One of the short-term objectives of Alport Corporation, a manufacturer of construction equipment, is “to achieve a 15 percent return on investment (ROI) by September 2011.”According to Drucker, this objective relates to ________.

  1. A) innovation
  2. B) productivity
  3. C) market standing
  4. D) managerial performance
  5. E) profitability

Answer: E

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

47) According to Drucker, which of the following is an example of an organizational objective related to productivity?

  1. A) to reduce overall inventory management costs by 15 percent
  2. B) to increase the use of environmentally-friendly workplace practices
  3. C) to lower the rate of attrition in the organization within the next 6 months
  4. D) to increase the unit’s monthly output by 10 percent within the next 12 months
  5. E) to reduce total overhead costs by 5 percent by the end of the year

Answer: D

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

48) One of the corporate objectives of Supra Inc. is “to enrich the quality of life in the community by providing education, training, and employment opportunities.”According to Drucker, this organizational objective relates to ________.

  1. A) managerial performance and development
  2. B) innovation
  3. C) public responsibility
  4. D) worker performance and attitude
  5. E) market standing

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

49) According to Drucker, which of the following key areas for organizational objectives is more personal and subjective in nature, and hence likely to arouse managerial opposition?

  1. A) productivity
  2. B) innovation
  3. C) worker performance and attitude
  4. D) physical and financial resources
  5. E) market standing

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Easy

Classification: Conceptual

50) According to Drucker, which of the following goal areas relates to a tangible, impersonal characteristic of organizational operations?

  1. A) number of employees
  2. B) innovation
  3. C) managerial performance and development
  4. D) worker performance and attitude
  5. E) public responsibility

Answer: B

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Conceptual

51) Intermediate-term objectives are targets to be achieved in _______.

  1. A) one year or less
  2. B) one to five years
  3. C) three to seven years
  4. D) five to seven years
  5. E) five to ten years

Answer: B

Page Ref: 167

Objective: 4

Difficulty: Easy

Classification: Conceptual

52) Tandem Industries is a cycle manufacturer. As part of its planning activities, it sets an objective to increase its market share by 5 percent within 3 years. This is an example of a(n) ________ objective.

  1. A) short-term
  2. B) intermediate-term
  3. C) long-term
  4. D) suboptimal
  5. E) principled

Answer: B

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

53) Targets to be achieved in one year or less are ________.

  1. A) time-bound actions
  2. B) departmentalized goals
  3. C) short-term objectives
  4. D) long-term objectives
  5. E) intermediate-term plans

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Easy

Classification: Conceptual

54) HomeTurf is a retailer of wooden furniture. The firm currently has three stores and has plans to set up two more within the next eight months. This is an example of a(n) ________ objective.

  1. A) intermediate-term
  2. B) short-sighted
  3. C) long-term
  4. D) short-term
  5. E) suboptimal

Answer: D

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

55) Which of the following refers to targets to be achieved within a timeframe of five to seven years?

  1. A) short-term objectives
  2. B) intermediate-term plans
  3. C) long-term objectives
  4. D) operational goals
  5. E) medium-term objectives

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Easy

Classification: Conceptual

56) Plaxo Industries is a large-scale manufacturer of commercial kitchen equipment whose products are currently sold in Europe and the Middle East. Plaxo wants to foray into the Asian market and the company’s management has set a target of entering the Chinese market by 2018. This is an example of a(n) ________ objective.

  1. A) short-term
  2. B) intermediate-term
  3. C) long-term
  4. D) medium-term
  5. E) operational

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Application

57) A management guideline which recommends that managers clearly determine, understand, and state organizational objectives before they initiate any action is the ________.

  1. A) management-by-objectives approach
  2. B) hierarchy of needs
  3. C) principle of the objective
  4. D) hierarchy of objectives
  5. E) concept of suboptimization

Answer: C

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Conceptual

58) A(n) ________ involves breaking an organizational objective down into subobjectives so individuals at different levels of the organization know what they must do to reach the overall organizational objective.

  1. A) suboptimization process
  2. B) intermediate-term plan
  3. C) organizational hierarchy
  4. D) hierarchy of objectives
  5. E) organizational purpose

Answer: D

Page Ref: 168

Objective: 4

Difficulty: Easy

Classification: Conceptual

59) The condition that exists when organizational subobjectives conflict or are not directly aimed at accomplishing the overall organizational objectives is ________.

  1. A) diminution
  2. B) deduction
  3. C) aggregation
  4. D) suboptimization
  5. E) minimization

Answer: D

Page Ref: 168

Objective: 4

Difficulty: Easy

Classification: Conceptual

60) When established subobjectives are aimed in different directions, a manager should ________.

  1. A) determine the initial purpose of planning and then revise the objectives accordingly
  2. B) choose the subobjective that better contributes to the overall organizational objectives
  3. C) revise the organization’s entire strategic plan
  4. D) identify alternative ways of reaching organizational objectives
  5. E) consider eliminating the objectives all together

Answer: B

Page Ref: 168

Objective: 4

Difficulty: Easy

Classification: Conceptual

61) In line with the organization’s objectives, the sales managers at MagnaCorp must ensure that all products are sufficiently stocked so that customer orders are fulfilled and stockout situations do not arise. The operations managers, on the other hand, have been instructed to lower inventory costs and hence, prefer to keep stock levels to a minimum. This situation is an example of ________.

  1. A) management by objectives
  2. B) secondary objectives
  3. C) intermediate-term plans
  4. D) planning subsystems
  5. E) suboptimization

Answer: E

Page Ref: 168

Objective: 4

Difficulty: Moderate

Classification: Application

ABC Corp. is an information technology company. The IT department wants to upgrade the firm’s technological infrastructure but the cost of upgrading is likely to take up at least 60 percent of the firm’s cash reserves. The finance manager is reluctant to release funds for this purpose. According to him, “The economy is still in a state of uncertainty. The company is better off preserving its cash reserves rather than investing it.”

62) Which of the following, if true, would most support the IT department’s plan to upgrade the firm’s technology?

  1. A) Efficiency gains from the new technology would offset the payments in 10 years.
  2. B) ABC Corp. has always been ahead of the technology-curve.
  3. C) The proposed technology is going to be the industry standard in the next year.
  4. D) The firm has not made any significant investments in the recent past.
  5. E) Investment in technology is always a gamble-it may or may not pay off.

Answer: C

Page Ref: 168

Objective: 4

Difficulty: Moderate

Classification: Critical thinking

63) Which of the following, if true, would most support the finance manager’s point of view?

  1. A) There is a correlation between a firm’s level of technological investment and its long-term growth.
  2. B) Gains from technology are hard to predict on account of uncertain demand.
  3. C) The returns from other investment opportunities are much more attractive.
  4. D) Recent reports suggest that the economy is yet to fully recover from the recession.
  5. E) Banks are hesitant to lend to the company on account of uncertain economic conditions.

Answer: E

Page Ref: 168

Objective: 4

Difficulty: Moderate

Classification: Critical thinking

64) In order to increase the quality of their objectives, managers should ________.

  1. A) set employees’ goals as high as possible
  2. B) ensure that they set objectives entirely by themselves
  3. C) establish goals which are within easy reach
  4. D) let the people responsible for attaining the objectives have a voice in setting them
  5. E) avoid relating objectives to specific actions

Answer: D

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

65) What is the rationale behind letting the people responsible for attaining certain objectives have a voice in setting them?

  1. A) Employees are more capable than managers and are better at establishing objectives.
  2. B) Managers are motivated when their employees are allowed to have a say in goal setting.
  3. C) Employees can showcase their managerial potential when they are allowed to set their own goals.
  4. D) Managers tend to set objectives that are often easily achievable and do not challenge employees.
  5. E) The people responsible for attaining the objectives know their job better than the managers do.

Answer: E

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

66) When setting objectives, managers should state objectives as specifically as possible because ________.

  1. A) it ensures that employees have explicit directions for what they should do
  2. B) it ensures that employee productivity will vary according to the needs of the situation
  3. C) it allows employees to make inferences about what they should do to accomplish their goals
  4. D) it allows them to set the pace for employees’ work
  5. E) it reduces the risk of suboptimization

Answer: A

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

67) Which of the following guidelines for establishing quality objectives helps keep the risk of suboptimization to a minimum?

  1. A) relating objectives to specific actions whenever necessary
  2. B) stating objectives as specifically as possible
  3. C) setting objectives only in relation to other organizational objectives
  4. D) specifying when goals are expected to be achieved
  5. E) stating objectives clearly and simply

Answer: C

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

68) Why is it important to provide employees with a timeframe for accomplishing their objectives?

  1. A) to instill a sense of urgency in employees
  2. B) to allow employees to pace themselves
  3. C) to make the goals more meaningful
  4. D) to reduce the risk of suboptimization
  5. E) to motivate employees to improve their performance

Answer: B

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

69) A sales manager sets the following performance objective for members of his sales team: To increase customer sales by 10 percent within the next 6 months. Which of the following is a valid criticism of this objective?

  1. A) It does not pinpoint expected results.
  2. B) It is not stated in simple fashion.
  3. C) It is not achievable.
  4. D) It is does not relate to specific actions.
  5. E) It is not related to other organizational objectives.

Answer: D

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Application

70) “To lower the rate of employee attrition within the organization by 5 percent through the use of effective employee retention and motivation techniques.” Which of the following is a valid criticism of this objective?

  1. A) It is not stated in a simple fashion.
  2. B) It does not provide a timeframe for achieving objectives.
  3. C) It is not related to specific actions.
  4. D) It is not achievable.
  5. E) It does not pinpoint expected results.

Answer: B

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Application

71) Which management writer popularized management by objectives (MBO)?

  1. A) Tom Peters
  2. B) Frederick Taylor
  3. C) Peter Drucker
  4. D) Abraham Maslow
  5. E) Henry Fayol

Answer: C

Page Ref: 169

Objective: 5

Difficulty: Easy

Classification: Conceptual

72) Which of the following is the first step in the management by objectives (MBO) process?

  1. A) set worker objectives
  2. B) review organizational objectives
  3. C) develop performance evaluation criteria
  4. D) evaluate past performance
  5. E) establish rewards

Answer: B

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

73) After setting worker objectives, the next step in a management by objectives (MBO) program is to ________.

  1. A) develop performance evaluation criteria
  2. B) review organizational objectives
  3. C) establish rewards
  4. D) monitor progress
  5. E) evaluate past performance

Answer: D

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

74) Which of the following is an accurate statement in reference to management by objectives (MBO)?

  1. A) Rewards are given to workers independent from their objective attainment.
  2. B) Managers and workers meet to agree on worker objectives.
  3. C) Managers and workers do not meet to monitor progress.
  4. D) Managers set objectives for workers without their input.
  5. E) Rewards are given on the basis of the manager’s effort .

Answer: B

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

75) Which of the following is the last step in the management by objectives (MBO) process?

  1. A) review performance objectives
  2. B) evaluate performance
  3. C) give rewards
  4. D) monitor progress
  5. E) set performance goals

Answer: C

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

76) Which of the following is NOT a necessary factor for a successful management by objectives (MBO) program?

  1. A) Management must follow through on employee performance evaluations by rewarding employees accordingly.
  2. B) Top management must be committed to the MBO process and set appropriate objectives for the organization.
  3. C) Managers and subordinates together must develop and agree on each individual’s goals.
  4. D) Employee performance should be conscientiously evaluated against established objectives.
  5. E) Managers must conclude automatically that employees have produced at an acceptable level because they have reached their objectives.

Answer: E

Page Ref: 170

Objective: 5

Difficulty: Easy

Classification: Conceptual

77) One of the primary advantages of management by objectives (MBO) is that ________.

  1. A) it saves time
  2. B) it is an easy process
  3. C) it gains employee commitment
  4. D) it reduces the volume of paper work in the organization
  5. E) it places the responsibility for goal attainment solely on managers

Answer: C

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

78) In a management by objectives program (MBO), why must managers be careful not to conclude automatically that employees have produced at an acceptable level simply because they have reached their objectives?

  1. A) The objectives may have been set too low in the first place, and managers may have failed to recognize it at the time.
  2. B) The MBO framework is naturally flawed and requires managers to use subjective criteria to evaluate performance.
  3. C) The employees may have reached their objectives by means that the organization had not considered.
  4. D) The MBO approach measures perfomance based merely on goal attainment and not on the level of effort expended.
  5. E) The objectives set for employees may not be aligned with the overall organizational objectives.

Answer: A

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

79) The final responsibility for organizational planning rests with ________.

  1. A) the planning department
  2. B) the designated organizational planner
  3. C) the shareholders
  4. D) the chief executives
  5. E) the first-level managers

Answer: D

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

80) Mintzberg pointed out that the top managers of organizations have many different roles to perform. As ________, they must represent their organizations in a variety of social, legal, and ceremonial situations.

  1. A) organizational figureheads
  2. B) disturbance handlers
  3. C) liaisons
  4. D) resource allocators
  5. E) monitors

Answer: A

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

81) One of the disadvantages of management by objectives (MBO) is that ________.

  1. A) the process is very quick and informal
  2. B) the process has no effect on worker commitment
  3. C) the program only emphasizes what should be done in an organization
  4. D) the process is time consuming and requires additional paper work
  5. E) the process is a mere duplication of other management practices

Answer: D

Page Ref: 171

Objective: 5

Difficulty: Moderate

Classification: Conceptual

82) The CEO of an organization inaugurated the company’s state-of-the-art research and development facility. According to Mintzberg, the CEO performed the role of a(n) ________ in this situation.

  1. A) monitor
  2. B) liaison
  3. C) organizational figurehead
  4. D) resource allocator
  5. E) disturbance handler

Answer: C

Page Ref: 171

Objective: 6

Difficulty: Moderate

Classification: Application

83) According to Mintzberg, when managers establish themselves as links between their organizations and factors outside their organizations, they are performing the role of a ________.

  1. A) resource allocator
  2. B) disturbance handler
  3. C) monitor
  4. D) negotiator
  5. E) liaison

Answer: E

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

84) The workers of a factory go on an unauthorized strike. The factory supervisor attempts to brings the situation under control by initiating negotiations with the labor union. According to Mintzberg, this manager has taken on the role of a(n) ________.

  1. A) liaison
  2. B) monitor
  3. C) disturbance handler
  4. D) organizational figurehead
  5. E) resource allocator

Answer: C

Page Ref: 171

Objective: 6

Difficulty: Moderate

Classification: Application

85) According to Mintzberg, which of the following tasks is associated with the role of a resource allocator?

  1. A) developing organizational policies and procedures
  2. B) interacting with labor unions
  3. C) motivating employees
  4. D) approving department budgets
  5. E) networking with managers in competing organizations

Answer: D

Page Ref: 171

Objective: 6

Difficulty: Moderate

Classification: Application

86) According to Mintzberg, when managers take on the role of a disturbance handler they must ________.

  1. A) assess organizational progress
  2. B) settle disputes between organization members
  3. C) establish themselves as links between their organizations and factors outside their organizations
  4. D) represent their organizations in a variety of social, legal, and ceremonial situations
  5. E) determine where resources should be placed to benefit their organizations best

Answer: B

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

87) According to Mintzberg, as ________, managers must assess organizational progress.

  1. A) liaisons
  2. B) organizational figureheads
  3. C) monitors
  4. D) resource allocators
  5. E) disturbance handlers

Answer: C

Page Ref: 171

Objective: 6

Difficulty: Easy

Classification: Conceptual

88) Which of the following statements is true regarding the primary qualifications of organizational planners?

  1. A) They can be good communicators, though such a qualification is not mandatory.
  2. B) They should be able to work independently, as planning is mostly a solitary task.
  3. C) They should have a theoretical understanding of planning rather than practical experience.
  4. D) They should be aware of the social, political, technical, and economic trends that can affect the firm.
  5. E) They should have a narrower, more focused understanding of the organization.

Answer: D

Page Ref: 172

Objective: 7

Difficulty: Moderate

Classification: Conceptual

89) According to Malik, a planner is doing a reputable job if plans ________.

  1. A) focus mostly on long-term recommendations
  2. B) avoid describing the attainment of objectives in operational terms
  3. C) emphasize the internal environment, as opposed to the external environment
  4. D) are the result of all elements of the management team working together
  5. E) focus on present opportunities rather than potential opportunities that may not materialize

Answer: D

Page Ref: 172

Objective: 7

Difficulty: Moderate

Classification: Conceptual

90) Management’s evaluation of planners should ________.

  1. A) never be completely objective
  2. B) depend mostly on subjective factors
  3. C) be completely subjective in nature
  4. D) rely entirely on objective criteria
  5. E) completely avoid the use of subjective indicators

Answer: A

Page Ref: 173

Objective: 7

Difficulty: Easy

Classification: Conceptual

91) What is planning? What are the advantages and potential disadvantages of planning?

Answer: Planning is the process of determining how the organization can get where it wants to go, and what it will do to accomplish its objectives.

A vigorous planning program produces many benefits. First, it helps managers to be future-oriented. They are forced to look beyond their everyday problems to project what situations may confront them in the future. Second, a sound planning program enhances decision coordination. Third, planning emphasizes organizational objectives. Because organizational objectives are the starting points for planning, managers are continually reminded of exactly what their organization is trying to accomplish. Planning does not eliminate risk, but it does help managers identify and deal with organizational problems before they cause havoc in a business.

If the planning function is not well executed, planning can have several disadvantages for the organization. For example, an overemphasized planning program can take up too much managerial time. Managers must strike an appropriate balance between time spent on planning and time spent on organizing, influencing, and controlling. If they don’t, some activities that are extremely important to the success of the organization may be neglected. Overall, the advantages of planning definitely outweigh the disadvantages. Usually, the disadvantages of planning result from using the planning function incorrectly.

Page Ref: 160-161

Objective: 1

Difficulty: Moderate

Classification: Conceptual

92) Describe the steps in the planning process.

Answer: The planning process consists of the following six step:

  1. State organizational objectives – Because planning focuses on how the management system will reach organizational objectives, a clear statement of those objectives is necessary before planning can begin. Objectives stipulate those areas in which organizational planning must occur.
  2. List alternative ways of reaching objectives – A manager should list as many available alternatives as possible for reaching objectives.
  3. Develop premises on which to base each alternative – The feasibility of using any one alternative to reach organizational objectives is determined by the premises, or assumptions, on which the alternative is based. A manager should list all of the premises for each alternative.
  4. Choose the best alternative for reaching objectives – An evaluation of alternatives must include an evaluation of the premises on which the alternatives are based. A manager usually finds that some premises are unreasonable and can therefore be excluded from further consideration. This elimination process helps the manager determine which alternative would best accomplish organizational objectives.
  5. Develop plans to pursue the chosen alternative – After an alternative has been chosen, a manager begins to develop strategic (long-range) and tactical (short-range) plans.
  6. Put the plans into action—Once plans that furnish the organization with both long-range and short-range direction have been developed, they must be implemented.

Page Ref: 162-163

Objective: 2

Difficulty: Moderate

Classification: Conceptual

93) What is the difference between an organizational objective and a statement of organizational purpose?

Answer: An organizational objective is a target toward which the open management system is directed. The organizational purpose, or mission, is what the organization exists to do, given a particular group of customers and customer needs. Properly developed organizational objectives reflect the purpose of the organization—that is, they flow naturally from the organization’s mission.

Page Ref: 165

Objective: 3

Difficulty: Moderate

Classification: Conceptual

94) Describe the eight key areas in which Drucker advised managers to set management system objectives.

Answer: Managers should strive to develop and attain a variety of objectives in all areas where activity is critical to the operation and success of the management system. According to Drucker, management should set management system objectives indicating where it would like to be in relation to its competitors (market standing), outlining its commitment to the development of new methods of operation (innovation), outlining target levels of production (productivity), regarding the use, acquisition, and maintenance of capital and monetary resources (physical and financial resources), specifying the profit the company would like to generate (profitability), specifying rates and levels of managerial productivity and growth (managerial performance and development), specifying rates of worker productivity as well as desirable attitudes for workers to possess (worker performance and attitude), and indicating the company’s responsibilities to its customers and society and the extent to which the company intends to live up to those responsibilities (public responsibility).

Page Ref: 167

Objective: 4

Difficulty: Moderate

Classification: Conceptual

95) What is “suboptimization”? What should managers do about it?

Answer: Suboptimization is the condition wherein subobjectives are conflicting or not directly aimed at accomplishing the overall organizational objective. When it occurs, a manager has to choose which subobjective would better contribute to obtaining overall objectives and should take precedence. Managers should minimize suboptimization by developing a thorough understanding of how the various parts of the organization relate to each other and by ensuring that the subobjectives properly reflect these relationships.

Page Ref: 168-169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

96) How can managers increase the quality of their objectives?

Answer: In order to increase the quality of their objectives, managers should let the people responsible for attaining the objectives have a voice in setting them as, often, they know their job situation better than managers do. Managers should state objectives as specifically as possible so that employees have explicit directions for what they should do. They should also relate objectives to specific actions whenever necessary so that employees do not have to infer what they should do to accomplish their goals. By pinpointing expected results, employees can know exactly how managers will determine whether an objective has been reached. In addition, managers should set goals high enough so that employees will have to strive to meet them, but not so high that employees give up trying to meet them. Employees should have a timeframe for accomplishing their objectives so that they may pace themselves accordingly. Managers should set objectives only in relation to other organizational objectives to keep the possibility of suboptimization to a minimum. Lastly, objectives should be stated clearly and simply.

Page Ref: 169

Objective: 4

Difficulty: Moderate

Classification: Conceptual

97) Explain the management by objectives approach (MBO) and explain the three basic parts included in most MBO programs.

Answer: Management by objectives is a management approach that uses organizational objectives as the primary means of managing organizations. To effectively organize an MBO program, all individuals within an organization are assigned a specialized set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers. Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives. Finally, rewards are given to individuals on the basis of how close they come to reaching their goals.

Page Ref: 169

Objective: 5

Difficulty: Moderate

Classification: Conceptual

98) What are the factors that are essential to the success of a management by objectives (MBO) program?

Answer: Certain key factors are essential to the success of an MBO program. First, top management must be committed to the MBO process and set appropriate objectives for the organization. Because all individual MBO goals will be based on these overall objectives, if the overall objectives are inappropriate, individual MBO objectives will also be inappropriate and related individual work activity will be nonproductive. Second, managers and subordinates together must develop and agree on each individual’s goals. Both managers and subordinates must feel that the individual objectives are just and appropriate if each party is to seriously regard them as a guide for action. Third, employee performance should be conscientiously evaluated against established objectives. This evaluation helps determine whether the objectives are fair and if appropriate means are being used to attain them. Fourth, management must follow through on employee performance evaluations by rewarding employees accordingly and such rewards must be given out fairly and honestly. Managers must be careful, though, not to conclude automatically that employees have produced at an acceptable level simply because they have reached their objectives. The objectives may have been set too low in the first place, and managers may have failed to recognize it at the time.

Page Ref: 170

Objective: 5

Difficulty: Moderate

Classification: Conceptual

99) What are the main qualifications organizations look for in organization planners?

Answer: Planners should have four primary qualifications. First, they should have considerable practical experience within their organization. Preferably, they should have been executives in one or more of the organization’s major departments. This experience will help them develop plans that are both practical and tailor-made for the organization. Second, planners should be capable of replacing any narrow view of the organization they may have acquired while holding other organizational positions with an understanding of the organization as a whole. They must know how all parts of the organization function and interrelate. Third, planners should have some knowledge of and interest in the social, political, technical, and economic trends that could affect the future of the organization. They must be skillful in defining those trends and possess the expertise to determine how the organization should react to the trends to maximize its success.

Lastly, planners should be able to work well with others. Their position will inevitably require them to work closely with several key members of the organization, so it is essential that they possess the personal characteristics necessary to collaborate and advise effectively. The ability to communicate clearly, both orally and in writing, is one of the most important of these characteristics.

Page Ref: 172

Objective: 7

Difficulty: Moderate

Classification: Conceptual

100) How should organization planners be evaluated?

Answer: Planners, like all other organization members, should be evaluated according to the contribution they make toward helping the organization achieve its objectives. The quality and appropriateness of the planning system and the plans that the planner develops for the organization are the primary considerations in this evaluation.

Although the assessment of planners is necessarily somewhat subjective, several objective indicators can be used, such as the use of appropriate techniques and the degree of objectivity displayed by the planner. However, management’s evaluation of planners should never be completely objective. Important subjective considerations include how well planners get along with key members of the organization, the amount of organizational loyalty they display, and their perceived potential.

Page Ref: 172-173

Objective: 7

Difficulty: Easy

Classification: Conceptual

+
-
Only 0 units of this product remain

You might also be interested in