Professional Documents
Culture Documents
CHAPTER 4
The Internal Assessment
True/False
The Nature of an Internal Audit
1.
2.
The process of performing an internal audit, compared to the external audit, provides
more opportunity for participants to understand how their jobs, departments and
divisions fit into the whole organization.
Ans: T
3.
Page: 123
Page: 123
Page: 124
Proponents of the resource-based view argue that external factors are more
important than internal factors for a firm in achieving and sustaining competitive
advantage
Ans: F
5.
Page: 125
The basic premise of the research-based view is that the mix, type, amount and
nature of a firms internal resources should be considered first and foremost in
devising strategies that can lead to sustainable competitive advantage.
Ans: T
Page: 125
The subtle, elusive and largely unconscious forces that shape the workplace are
captured by the organizational culture.
Ans: T
Page: 126
68
7.
8.
9.
Page 129
In the U.S., personal achievement and accomplishments are more important than
time spent with the family and the quality of relationships espoused by some
cultures.
Ans: T
16.
Page 129
The smile is one form of communication that works the same worldwide.
Ans: T
15.
Page: 129
In China, to show that you enjoyed your meal, you should completely finish your
food.
Ans: F
14.
Page: 128
The U.S. understanding of Far Eastern cultures is a strength its firms have in
competing with Pacific Rim firms.
Ans: F
13.
Page: 128
12.
Page 127
11.
Page 127
10.
Page: 126
Page: 130
Page: 130
69
17.
Page: 131
Management
18.
19.
The only certain thing about the future of any organization is change.
Ans: T
20.
Page: 134
26.
Page: 133
Motivation is one explanation why some people work hard and others do not.
Ans: T
25.
Page 132
24.
Page: 132
Controlling is the management function that is most important for the evaluation
stage of the strategic management process.
Ans: T
23.
Page: 132
22.
Page: 131
21.
Page: 131
Page: 135
Page: 127
70
Marketing
27.
There are seven basic functions of marketing: customer analysis, selling, product
and service planning, pricing, distribution, marketing research and opportunity
analysis.
Ans: T
28.
29.
Page: 137
Five major stakeholders that affect pricing decisions are consumers, governments,
suppliers, distributors and competitors.
Ans: T
35.
Page 137
34.
Page 137
Pfizer, which has the worlds largest drug sales force, was planning on increasing
their sales force by 15% in 2005.
Ans: F
33.
Page: 137
The Internet was the fastest-growing segment of U.S. advertising spending in 2004
compared to 2003.
Ans: T
32.
Page: 137
A new trend is to base advertising rates solely on sales rates with regard to
advertising products or services on the Internet.
Ans: T
31.
Page: 136
30.
Page: 136
Page: 138
Page: 138
71
36.
37.
38.
Page: 138
Page: 139
Page: 139
Finance/Accounting
39.
Three areas, according to James Van Horne, comprise the functions or basic decision
areas of finance: the investment decision, the financing decision and the earnings
decision.
Ans: F
40.
41.
Page: 141
44.
Page: 141
The idea that paying dividends results in a higher stock price is a myth.
Ans: T
43.
Page: 141
42.
Page: 141
Page: 143
Page: 143
72
45.
46.
Financial ratio analysis rarely has to go beyond the actual calculation and
interpretation of ratios.
Ans: F
47.
Page 144
Page 145
A limitation of financial ratios is the fact that they are based on accounting data.
Ans: T
Page: 145
Production/Operations
48.
49.
In most industries, only minor costs of producing a product or service are incurred
within operations, so production/operations does not have great value as a
competitive weapon in a companys overall strategy.
Ans: F
50.
Page: 147
Page: 148
Increased efficiency, quality, productivity and job satisfaction can come from crosstraining workers.
Ans: T
Page: 149
52.
Page: 151
Internal R&D and contract R&D are the two basic forms of R&D in organizations.
Ans: T
Page: 151
73
53.
Page: 152
Page: 153
Value Chain Analysis can enable a firm to better identify its own strengths and
weaknesses especially as compared to competitors Value Chain Analyses.
Ans: T
56.
Although a useful step in the strategic management process, value chain analysis
can rarely help a firm monitor whether its prices and costs are competitive.
Ans: F
57.
Page: 154
Page 155
Page 157
59.
Page: 157
The Internal Factor Evaluation Matrix should include from 10 to 20 key factors
Ans: T
Page: 158
74
Multiple Choice
The Nature of an Internal Audit
60.
61.
62.
Page: 115
Page: 116
Page: 116
The internal resource categories used in the resource-based approach are physical
resources, human resources and
a.
financial resources.
b.
shareholder resources.
c.
organizational resources.
d.
natural resources.
e.
technological resources.
Ans: c
Page: 117
75
64.
65.
Page: 117
Empirical indicators are resources that are either rare, hard to imitate, or
a.
expensive.
b.
inexpensive.
c.
easily substitutable.
d.
not easily substitutable.
e.
inefficient.
Ans: d
Page: 117
67.
Page: 118
Page: 118
76
68.
69.
70.
71.
Page: 119
Page: 119
In Europe, it is generally true that the farther __________ on the continent, the
more participatory the management style.
a.
south
b.
east
c.
west
d.
north
e.
southeast
Ans: d
Page: 120
77
72.
Page: 122
Management
73.
What is the essential bridge between the present and the future that increases the
likelihood of achieving desired results?
a.
Motivating
b.
Planning
c.
Controlling
d.
Staffing
e.
Organizing
Ans: b
74.
75.
Page: 123
Page: 123
Page: 123
78
76.
Which function of management includes areas such as job design, job specification,
job analysis and unity of command?
a.
planning
b.
organizing
c.
motivating
d.
staffing
e.
controlling
Ans: b
77.
78.
Page: 124
Synergy is
a.
synthetic energy.
b.
when a team effort is used to achieve desired results.
c.
when individuals work separately to achieve desired results.
d.
when financial expectations of the firm are decided upon.
e.
employee energy.
Ans: b
79.
Page: 124
Page: 125
Which management function includes breaking tasks into jobs, combining jobs to
form departments and delegating authority?
a.
motivating
b.
staffing
c.
organizing
d.
controlling
e.
planning
Ans: c
Page: 125
79
80.
81.
82.
Page: 126
83.
Page: 125
Page: 126
Page: 127
80
84.
85.
86.
Page: 127
Page: 127
All of the following are key questions that can reveal internal strengths and
weaknesses in the management department except:
a.
Is the organizations structure appropriate?
b.
Are reward and control mechanisms effective?
c.
Are the organizations products positioned well among competing products?
d.
Does the firm use strategic management concepts?
e.
Do managers delegate authority well?
Ans: c
Page: 128
Marketing
87.
Page: 128
81
88.
89.
90.
Page: 129
92.
Page: 128
91.
Page: 128
Page: 129
Page: 129
82
93.
Distribution includes
a.
customer analysis.
b.
pricing.
c.
warehousing.
d.
advertising.
e.
test marketing.
Ans: c
Page: 130
Opportunity Analysis
94.
Which of the following is not a key question that can reveal internal strengths and
weaknesses of the marketing department?
a.
Does the firm have an effective sales organization?
b.
Is our product quality good?
c.
Are markets segmented effectively?
d.
Are the firms products and services priced appropriately?
e.
Does the firm have good liquidity?
Ans: e
Page: 132
Finance/Accounting
95.
Which of these is the allocation and reallocation of capital and resources to projects,
products, assets and divisions of an organization?
a.
Investment decision
b.
Dividend decisions
c.
Financing decisions
d.
Restructuring decisions
e.
Strategic decision
Ans: a
96.
Page: 133
Which decision concerns determining the best capital structure for the firm and
includes examining various methods by which the firm can raise capital.
a.
investment
b.
dividends
c.
financing
d.
capital budgeting
e.
implementation
Ans: c
Page: 133
83
97.
98.
What category of ratios includes return on total assets and return on stockholders
equity?
a.
leverage
b.
activity
c.
profitability
d.
growth
e.
liquidity
Ans: c
99.
Page: 135
Page: 135
What category of ratios measures how effectively a firm can maintain its economic
position in the growth of the economy and industry?
a.
profitability
b.
liquidity
c.
leverage
d.
activity
e.
growth
Ans: e
Page: 135
Production/Operations
100.
Page: 139
84
101.
_______ management deals with inputs, transformations and outputs that vary
across industries and markets.
a.
Marketing
b.
Financial
c.
Research and Development
d.
Production/operations
e.
Distribution
Ans: d
Page: 139
Page: 143
Which of the following ties all business functions together and provides the basis for
all managerial decisions?
a.
Management
b.
Marketing
c.
Information
d.
Technology
e.
Workforce
Ans: c
104.
Page: 144
A management __________ receives raw material from both the external and
internal evaluation of an organization.
a.
advisor
b.
information system
c.
consultant
d.
strategic system
e.
accountant
Ans: b
Page: 144
85
105.
Page: 144-145
The process whereby a firm determines the costs associated with organizational
activities from purchasing raw materials to manufacturing products to marketing
those products is called
a.
the resource-based approach.
b.
value chain analysis.
c.
strategic cost analysis.
d.
the internal factor evaluation matrix.
e.
cost-benefit analysis.
Ans: b
107.
Page: 146
Page: 146-147
Page: 147
86
109.
Page: 148
Essay Questions
110.
111.
112.
Identify any five differences when comparing American versus foreign cultures.
The chapter gives 11 differences between U.S. and foreign managers. Please refer to
page 130-131.
Page: 130-131
87
113.
Identify the five basic functions of management, and describe each function.
The five basic functions of management are planning, organizing, motivating,
staffing and controlling. Please refer to Table 4-3 on page 132 in the text for the
descriptions of each function.
Page: 131-136
114.
115.
There are seven basic functions of marketing. List and define these functions.
The seven basic functions of marketing are (1) customer analysis, (2) selling
products/services, (3) product and service planning, (4) pricing, (5) distribution, (6)
marketing research and (7) opportunity analysis. Students should define each of
these functions.
Page: 136
116.
According to James Van Horne, what are the three decisions that comprise the
functions of finance? Describe each function.
The three basic functions of finance, according to James Van Horne, are the
investment decision, the financing decision and the dividend decision. The
investment decision is the allocation and reallocation of capital and resources to
project, products, assets and divisions of an organization. The financing decision
determines the best capital structure for the firms and includes examining various
methods by which the firm can raise capital. Dividend decisions concern issues such
as the percentage of earning paid to stockholders, the stability of dividends paid over
time and the repurchase or issuance of stock.
Page: 141
88
117.
Identify the reasons dividends are sometimes paid out even when funds could be
better reinvested in the business or when the firm has to tap outside sources to pay
the dividends.
Dividends are sometimes paid out even when funds could be better reinvested in the
business or when the firm has to obtain outside sources of capital. The reasons for
these situations are as follows. (1) Paying cash dividends is customary. Failure to do
so could be thought of as a stigma. A dividend change is considered a signal about
the future. (2) Dividends represent a sales point for investment bankers. Some
institutional investors can buy only dividend-paying stocks. (3) Shareholders often
demand dividends, even in companies with great opportunities for reinvesting all
available funds. (4) A myth exists that paying dividends will result in a higher stock
price.
Page: 141
118.
89
119.
120.
According to Roger Schroeder, there are five basic functions or decision areas in
production. Describe these five functions.
The five basic functions or decision areas in production are process, capacity,
inventory, workforce and quality. Please refer to Table 4-5 on page 147 in the text for
descriptions of each function or decision area.
Page: 147
121.
Four basic approaches exist to determine R&D budget allocations. What are these
approaches? Which one would you recommend for a pharmaceutical company?
Why?
The four approaches to determining commonly used R&D budget allocations are:
(1) financing as many project proposals as possible; (2) using a percentage-of-sales
method; (3) budgeting about the same amount competitors spend for R&D; and (4)
deciding how many successful new products are needed and working backward to
estimate the required R&D investment.
Students should recommend the fourth approach for a pharmaceutical company,
deciding how many successful new products are needed, and work backward to
estimate the required R&D investment, because most firms have no choice but to
continually develop new and improved products because of changing consumer
needs and tastes, new technologies, shortened product life cycles and increased
domestic and foreign competition. Students should also mention that different
strategies require different R&D capabilities, so no one approach will be appropriate
for all companies at all times.
Page: 151
90
122.