Business In Action 6Th Ed By Courtland L. Bovee – Test Bank

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Business In Action 6Th Ed By Courtland L. Bovee – Test Bank

Business in Action, 6e (Bovee/Thill)

Chapter 6   Entrepreneurship and Small Business Ownership

 

1) Among all firms that apply for U.S. patents on new inventions, small businesses receive 13 times more patents per employee than larger firms.

Answer:  TRUE

Explanation:  Among all firms that apply for U.S. patents on new inventions, small businesses receive 13 times more patents per employee than larger firms.

Page Ref: 117

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

2) A 12-empoyee executive recruiting firm making $750,000 per year would be a small business.

Answer:  TRUE

Explanation:  Small business refers to a company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry).

Page Ref: 117

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

3) Lifestyle businesses are small only because they are new and have ambitious plans to grow.

Answer:  FALSE

Explanation:  Small businesses such as a self-employed consultant, a corner florist, or a small e-commerce venture are sometimes called lifestyle businesses because they are built around the personal and financial needs of an individual or a family. In contrast, other firms are small simply because they are young, but they have ambitious plans to grow.

Page Ref: 118

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

4) Business start-ups decline when the economy sours.

Answer:  FALSE

Explanation:  Business start-ups often soar when the economy sours. During hard times, many companies downsize or lay off talented employees, who then have little to lose by pursuing self-employment.

Page Ref: 120

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

5) Outsourcing reduces opportunities for small businesses and entrepreneurs.

Answer:  FALSE

Explanation:  Outsourcing, the practice of engaging outside firms to handle either individual projects or entire business functions, creates numerous opportunities for small businesses and entrepreneurs.

Page Ref: 120

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

6) The practice of engaging outside firms to handle either individual projects or entire business functions is called downsizing.

Answer:  FALSE

Explanation:  Outsourcing is the practice of engaging outside firms to handle either individual projects or entire business functions.

Page Ref: 120

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

7) Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Answer:  TRUE

Explanation:  Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Page Ref: 121

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

8) In large organizations, mechanisms put in place to prevent mistakes can also hamper innovative thinking by restricting people to tried-and-true methods.

Answer:  TRUE

Explanation:  In large organizations, mechanisms put in place to prevent mistakes can also hamper innovative thinking by restricting people to tried-and-true methods.

Page Ref: 122

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

9) Compared to starting a new business, buying an existing business can involve more work and more risk.

Answer:  FALSE

Explanation:  Compared to starting a new business, buying an existing business can involve less work and less risk–provided, of course, that you check out the company carefully.

Page Ref: 123

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

10) Financing a business you are starting from scratch is often easier than financing an existing business

Answer:  FALSE

Explanation:  Financing an existing business is often much easier because lenders are reassured by the company’s history and existing assets and customer base.

Page Ref: 123

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

11) A business plan summarizes the proposed business venture, goals, and plans for achieving those goals.

Answer:  TRUE

Explanation:  A business plan summarizes the proposed business venture, goals, and plans for achieving those goals.

Page Ref: 124

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

12) The start-up schedule section in a business plan would forecast its income, expenses, and cash flow for the first 3 years of business.

Answer:  FALSE

Explanation:  The start-up schedule forecast development of the company in terms of completion dates for major aspects of the business plan.

Page Ref: 124

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

13) In the business plan, the exit strategy explains how and when the owner will close her business.

Answer:  FALSE

Explanation:  An exit strategy explains how investors will be able to cash out or sell their investment, such as through a public stock offering, sale of the company, or a buyback of the investors’ interest.

Page Ref: 125

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

14) Motivational collapse occurs when the would-be entrepreneur encounters one too many setbacks and simply doesn’t have the drive to keep going.

Answer:  TRUE

Explanation:  Motivational collapse occurs when the would-be entrepreneur encounters one too many setbacks and simply doesn’t have the drive to keep going.

Page Ref: 126

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

15) SCORE is an acronym for the Service Corps of Retired Entrepreneurs.

Answer:  FALSE

Explanation:  Service Corps of Retired Executives (SCORE) is a resource partner of the Small Business Administration.

Page Ref: 127

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

16) An advisory board is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

Answer:  TRUE

Explanation:  An advisory board is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

Page Ref: 128

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

17) Unlike a corporate board of directors, an advisory board has legal responsibilities.

Answer:  FALSE

Explanation:  Unlike a corporate board of directors, an advisory board does not have legal responsibilities, and you don’t have to incorporate to establish an advisory board.

Page Ref: 128

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

18) Facilities that house small businesses and provide support services during the company’s early growth phases are called angel investors.

Answer:  FALSE

Explanation:  Facilities that house small businesses and provide support services during the company’s early growth phases are known as business incubators.

Page Ref: 129

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

19) The first infusion of capital that a business receives is called seed money.

Answer:  TRUE

Explanation:  Seed money refers to the first infusion of capital used to get a business started.

Page Ref: 130

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

20) Angel investors provide money to finance new businesses in exchange for a large rate of interest.

Answer:  FALSE

Explanation:  Angel investors are private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest or banks are willing to lend.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

21) Funding a business with credit cards or a personal line of credit is extremely risky.

Answer:  TRUE

Explanation:  Funding a business with credit cards or a personal line of credit might be the only option many people have, but it is extremely risky.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

22) When companies go public, they put out an IPO, or independent public offering.

Answer:  TRUE

Explanation:  The shares offered for sale at this point are the company’s initial public offering (IPO). Going public is an effective method of raising needed capital.

Page Ref: 132

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

23) Baskin-Robbins gives its franchisees the right to resell its trademarked goods that must be purchased from Baskin-Robbins. This is an example of a product franchise.

Answer:  TRUE

Explanation:  Franchise is a business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of a business system of another company (the franchisor).

Page Ref: 133

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  6

Course LO:  Explain the benefits and challenges of engaging in international business

Classification:  Application

24) If you invest in a successful franchise, you know you are getting a viable business model, one that has worked many times before.

Answer:  TRUE

Explanation:  If you invest in a successful franchise, you know you are getting a viable business model, one that has worked many times before.

Page Ref: 133

Difficulty:  Easy

Chapter LO:  6

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

25) If customer demand for the goods or services sold by your franchise changes, you have the ability to quickly adapt your business in response.

Answer:  FALSE

Explanation:  If the customer-demand for the goods and services you sell declines, a franchisor doesn’t have the option of independently changing your business in response.

Page Ref: 133

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

26) A small business is defined as a company that ________.

  1. A) is newly launched and has fewer than 100 shareholders
  2. B) is dominant in its field and employs fewer than 1,500 employees
  3. C) has revenue of less than $750,000
  4. D) is independently owned and operated and not dominant in its field
  5. E) is funded through personal lines of credit and has fewer than 1,000 employees

Answer:  D

Explanation:  D) A small business is an independently owned and operated company that employees fewer than 500 people and is not dominant in its field of operation.

Page Ref: 117

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

27) Which of the following is true about a small business?

  1. A) A small business is one which employs between 500 to 1000 employees.
  2. B) A small business is usually funded by personal lines of credit, and not through bank loans and microlenders.
  3. C) A small business is one that is not dominant in its field.
  4. D) A small firm usually curtails the freedom to innovate.
  5. E) A small firm avoids risks that larger firms are willing to take.

Answer:  C

Explanation:  C) A small business is an independently owned and operated company that employees fewer than 500 people and is not dominant in its field of operation.

Page Ref: 117

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

28) Which of the following is an example of a lifestyle business?

  1. A) A paper recycling unit that employs about 800 employees.
  2. B) A self-employed landscape designer.
  3. C) Nature’s Delights, an international gourmet food chain that is considered to be the world’s leading retailer of natural and organic foods.
  4. D) Museum of Fine Arts, a government-funded museum that houses a collection of 19th and 20th century American, German, and French paintings.
  5. E) Freedom Books, a firm that is the leader in the English-language book publishing sector.

Answer:  B

Explanation:  B) Lifestyle businesses are built around the personal and financial needs of an individual or a family.

Page Ref: 118

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Application

 

29) Barbara owns a small florist shop that employs a couple of part-time floral designers. She doesn’t expect her business to grow much, but it provides her with a comfortable income and she enjoys what she does. Barbara’s business would be described as a ________.

  1. A) mid-size enterprise
  2. B) retail business
  3. C) lifestyle business
  4. D) high-growth venture
  5. E) service business

Answer:  C

Explanation:  C) Lifestyle businesses are built around the personal and financial needs of an individual or a family.

Page Ref: 118

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Application

 

 

30) One of the general characteristics of a small business is that it typically sells fewer products ________.

  1. A) to a larger customer base
  2. B) to fewer market segments
  3. C) to foreign companies
  4. D) at lower costs to government agencies
  5. E) at higher costs

Answer:  B

Explanation:  B) Most small firms have a narrow focus, offering fewer goods and services to fewer market segments.

Page Ref: 119

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

31) Which of the following is true regarding high-growth ventures?

  1. A) They are usually run by one individual rather than a team.
  2. B) They refer to businesses such as a self-employed consultant, a corner florist, or a small e-commerce venture.
  3. C) They are mostly family businesses.
  4. D) They are are built around the personal and financial needs of an individual.
  5. E) They expand rapidly by obtaining a sizable supply of investment capital.

Answer:  E

Explanation:  E) High-growth ventures are usually run by a team rather than by one individual, and they expand rapidly by obtaining a sizable supply of investment capital and by introducing new products or services to a large market.

Page Ref: 118

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

32) Small companies tend to differ from large ones because ________.

  1. A) they have a wider focus compared to larger companies
  2. B) they are mostly launched with more financial backing than larger companies
  3. C) they have less freedom to innovate and move quickly compared to larger companies
  4. D) they can react to market changes and make decisions more quickly than larger companies
  5. E) they are more bureaucratic compared to larger companies

Answer:  D

Explanation:  D) Small, entrepreneurial firms usually find it easier to operate “on the fly,” making decisions quickly and reacting to changes in the marketplace.

Page Ref: 119

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

33) Three factors contributing to the increased number of small businesses are technologies such as e-commerce, growing diversity in entrepreneurship, and ________.

  1. A) downsizing and outsourcing
  2. B) increased ease in going public
  3. C) nationalization
  4. D) market regulation
  5. E) monopolistic business practices

Answer:  A

Explanation:  A) Three factors are contributing to the increase in the number of small businesses today: e-commerce, social media, and other technological advances; the growing diversity in entrepreneurship; and corporate downsizing and outsourcing.

Page Ref: 119; 120

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

34) TechPoint, a technical writing and business documentation firm, finds it difficult to handle its training requirements. The company forms a one-year contract with Impact Inc., a language training firm, to conduct training and refresher courses for their employees. This is an example of ________.

  1. A) downsizing
  2. B) outsourcing
  3. C) vertical integration
  4. D) market penetration
  5. E) diversification

Answer:  B

Explanation:  B) Outsourcing refers to the practice of engaging outside firms to handle either individual projects or entire business functions.

Page Ref: 120

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Application

 

 

35) Technical Solutions Inc., a leading software solutions firm in Dallas with 1000 employees, is facing a financial crunch because of the economic downfall. Several of its key investors have backed out, and it has lost some projects to its competitors. The SEO of the company considers cost-cutting measures to turn around the organization. An analysis of the situation reveals that many of its employees have become redundant as their work roles have reduced considerably. The firm also employs a large number of people who are almost at the retirement age. Which of the following measures will be most appropriate for the company, from a business perspective?

  1. A) downsizing
  2. B) vertical integration
  3. C) outsourcing
  4. D) diversification
  5. E) market penetration

Answer:  A

Explanation:  A) During hard times, many companies downsize or lay off talented employees.

Page Ref: 120

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  1

Classification:  Application

36) The positive, forward-thinking desire to create a profitable, sustainable business is called ________.

  1. A) optimism
  2. B) entrepreneurial spirit
  3. C) fiscal discipline
  4. D) marketing strategy
  5. E) business implementation

Answer:  B

Explanation:  B) Entrepreneurial spirit refers to the positive, forward-thinking desire to create profitable, sustainable business enterprises.

Page Ref: 120

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

37) Which of the following is a quality that a successful entrepreneur is most likely to have?

  1. A) unwillingness to take risks
  2. B) unwilling to make any sacrifices in other areas of life
  3. C) high need to be motivated by an external agent
  4. D) always measures success in strictly financial terms
  5. E) views failure as a chance to grow

Answer:  E

Explanation:  E) While there is no single personality profile that fits all successful entrepreneurs, most entrepreneurs tend to learn from mistakes and view failure as a chance to grow.

Page Ref: 121

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

38) Todd D. Morrison is the manager of an advanced research team at LCM Inc., a pharmaceutical company. Todd is keen to introduce process improvements aimed at making the business unit more profitable. He also uses innovative leadership methods, such as giving team members greater flexibility and freedom. Todd takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation. Todd Morrison’s efforts are an example of ________.

  1. A) intrapreneurship
  2. B) outsourcing
  3. C) downsizing
  4. D) vertical integration
  5. E) horizontal integration

Answer:  A

Explanation:  A) Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Page Ref: 121

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Compare and contrast different economic systems

Classification:  Application

 

39) Intrapreneurship refers to ________.

  1. A) entrepreneurial efforts within a larger organization
  2. B) starting a business by buying into a franchise system
  3. C) starting a business by buying an existing independent business
  4. D) individuals who are responsible for strategic corporate social responsibility activities within an organization
  5. E) the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled

Answer:  A

Explanation:  A) Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Page Ref: 121

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

40) Which of the following is most likely to encourage entrepreneurship?

  1. A) inability to find attractive employment anywhere else
  2. B) increased market regulations
  3. C) inadequate protection of property rights
  4. D) excessive market regulation
  5. E) monopolistic business practices

Answer:  A

Explanation:  A) A reason why people start a business, one that becomes more common during tough job markets, is the inability to find attractive employment anywhere else.

Page Ref: 121

Difficulty:  Easy

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

41) Which of the following statements is true about intrapreneurship?

  1. A) It increases bureaucracy and hinders innovation.
  2. B) It refers to individuals who start new, independent businesses.
  3. C) It refers to individuals who start a business by buying into a franchise system.
  4. D) It involves working with tried-and-true methods.
  5. E) It can be risky behavior that may or may not be rewarded.

Answer:  E

Explanation:  E) Innovating within a larger organization is often much easier said than done. Intrapreneurship can be risky behavior that may or may not be rewarded.

Page Ref: 122

Difficulty:  Moderate

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Concept

42) Barbara decided to open an independent bookstore. However, after careful consideration, she decided to purchase an existing book shop called BookStop from an owner who was retiring. Which of the following statements, if true, is most likely to make Barbara’s business successful.

  1. A) Barbara decides to change the layout of the bookstore and repaint the walls.
  2. B) The government increases the taxes on small businesses.
  3. C) Barabara decides to reduce the freedom given to the existing employees by the previous owner of BookStop.
  4. D) Barabara does not like the existing business processes and systems, so she decides to build them from scratch.
  5. E) BookStop was a profitable business with many loyal customers.

Answer:  E

Explanation:  E) When you buy a healthy business, you generally purchase an established customer base, functioning business systems, proven products or services, and a known location.

Page Ref: 123

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

43) Which of the following is true about creating a new, independent business?

  1. A) The possibility for borrowing start-up capital or getting investors is more, compared to buying an existing business.
  2. B) The owner’s freedom is less, compared to buying an existing business.
  3. C) The business processes and systems are usually already in place.
  4. D) The workforce is usually already in place.
  5. E) The customer base must be built from the ground up.

Answer:  E

Explanation:  E) Starting a new business involves building the customer base, brand recognition, and sales from the ground up, which can put serious strain on company finances until sales volume builds.

Page Ref: 123

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Compare and contrast different economic systems

Classification:  Concept

 

44) Matthew decides to open a cafe in his neighborhood, called Coffee Beans. While analyzing the start-up options, he decides against buying an existing independent business, or even buying into a franchise system. Because of a recent reduction in the availability of loans to entrepreneurs, he is unable to get a bank loan. He is likely to have which of the following benefits?

  1. A) He will have an established brand recognition.
  2. B) Since business processes and systems are usually in place, he need not create them.
  3. C) Support networks are already in place, so he need not update them.
  4. D) He need not hire and train the workforce at his own expense.
  5. E) He will experience very high freedom and flexibility.

Answer:  E

Explanation:  E) Starting a new business provides very high freedom and flexibility to the owner, particularly during early phases, although low capital can severely restrict the owner’s ability to maneuver.

Page Ref: 123

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

45) Which of the following is an advantage of buying into a franchise system?

  1. A) It comes with an established business system.
  2. B) It comes with a workforce.
  3. C) It already has a customer base with ongoing sales.
  4. D) It allows the owner to have a very high level of freedom.
  5. E) It requires the owner to establish brand recognition from scratch.

Answer:  A

Explanation:  A) Buying a franchise combines many of the benefits of independent business ownership with the support that comes with being part of a larger organization. One of the key advantages of buying a franchise is that it comes with an established business system.

Page Ref: 123

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

46) A business plan is a written document that summarizes the ________.

  1. A) business’ cost benefit analysis
  2. B) business’ sources of finances for the business
  3. C) proposed business venture, goals, and plans for achieving those goals
  4. D) personal financial statements of the business owners
  5. E) organization’s exposure to internal and external threats

Answer:  C

Explanation:  C) A business plan summarizes a proposed business venture, communicates the company’s goals, highlights how management intends to achieve those goals, and shows how customers will benefit from the company’s goods or services.

Page Ref: 124

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

47) Preparing a business plan serves which of the following functions?

  1. A) It assists the owners in preparing publicity releases for the business.
  2. B) It helps persuade lenders and investors to finance the business.
  3. C) It identifies sources of potential employees for the business.
  4. D) It fulfills the requirements set forth by the Small Business Administration.
  5. E) It meets licensing regulations established by the local government.

Answer:  B

Explanation:  B) Preparing a business plan serves important functions. It helps persuade lenders and investors to finance your business if outside money is required.

Page Ref: 124

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

48) A business plan outlines that investors will be able to sell their investment through a public stock offering, or a buyback of the investors’ interest. This is an example of which of the following elements of a business plan?

  1. A) start-up schedule
  2. B) operations plan
  3. C) exit strategy
  4. D) marketing strategy
  5. E) target market

Answer:  C

Explanation:  C) An exit strategy explains how investors will be able to cash out or sell their investment, such as through a public stock offering, sale of the company, or a buyback of the investors’ interest.

Page Ref: 125

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

49) Which of the following statements is true regarding the failure rates of new businesses?

  1. A) It is possible to calculate a precise figure that represents all types of businesses across all industries.
  2. B) The definition of “failure” remains the same across businesses and business owners.
  3. C) Establishing a time frame is not essential for a failure rate to have any meaning.
  4. D) Structural changes in the economy are unrelated to the failure rates of new businesses.
  5. E) The failure rate of new businesses is usually high during the first year.

Answer:  E

Explanation:  E) Establishing a time frame is essential for a failure rate to have any meaning. For example, ill-conceived or undercapitalized businesses often don’t survive the first year, so the early failure rate is quite high.

Page Ref: 126

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

50) At the federal level, small businesses can apply for loans backed by the ________.

  1. A) Center for Emerging Technologies
  2. B) U.S. Chamber of Commerce
  3. C) Service Corps of Retired Executives
  4. D) Venture Capitalists Association (VCA)
  5. E) Small Business Administration

Answer:  E

Explanation:  E) At the federal level, small businesses can apply for SBA-backed loans.

Page Ref: 126

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

51) Which of the following statements is true about the Service Corps of Retired Executives (SCORE)?

  1. A) It is a resource partner of the SBA.
  2. B) It works on a contractual basis with large businesses.
  3. C) It offers advice and one-to-one counseling to entrepreneurs, in return for company shares.
  4. D) It offers resources and programs to minority-owned businesses.
  5. E) It hires retired executives to work as consultants for a nominal fee.

Answer:  A

Explanation:  A) The Service Corps of Retired Executives (SCORE) is a resource partner of the SBA. These experienced business professionals offer free advice and one-to-one counseling to entrepreneurs.

Page Ref: 127

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

52) SCORE is a resource partner of the ________.

  1. A) Small Business Online Community
  2. B) Minority Business Development Agency
  3. C) Small Business Administration
  4. D) United States Chamber of Commerce
  5. E) Center for Emerging Technologies

Answer:  C

Explanation:  C) Some of the best advice available to small businesses is delivered by thousands of volunteers from the Service Corps of Retired Executives (SCORE), a resource partner of the SBA.

Page Ref: 127

Difficulty:  Easy

Chapter LO:  4

Course LO:  Compare and contrast different economic systems

Classification:  Concept

53) A(n) ________ is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

  1. A) advisory board
  2. B) business incubator
  3. C) venture capitalist
  4. D) angel investor
  5. E) micro lender

Answer:  A

Explanation:  A) An advisory board is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

Page Ref: 128

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

54) An advisory board differs from a corporate board of directors, because ________.

  1. A) an advisory board has legal responsibilities
  2. B) you don’t have to incorporate to establish an advisory board
  3. C) you usually require high amounts of financial compensation to consult an advisory board
  4. D) members of an advisory board lack subject-area expertise
  5. E) advisors are required to obtain certification from SBA

Answer:  B

Explanation:  B) Unlike a corporate board of directors, an advisory board does not have legal responsibilities, and you don’t have to incorporate to establish an advisory board.

Page Ref: 128

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

55) ________ are centers that provide a small business with a wide array of support resources and services during its early growth phase.

  1. A) Seed centers
  2. B) Business incubators
  3. C) Microlenders
  4. D) Angel investors
  5. E) Intrapreneurs

Answer:  B

Explanation:  B) Business incubators are centers that provide “newborn” businesses with various combinations of advice, financial support, access to industry insiders and connections, facilities, and other services a company needs to get started.

Page Ref: 129

Difficulty:  Easy

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Concept

56) In exchange for a small share of ownership, KMC Group makes a small investment in TechPro, a new, independent software firm. KMC Group provides support to TechPro during its early stages by helping the founders refine their ideas, hire suitable employees and train them, establish connections with industry insiders, and deal with legal issues. KMC Group is most likely to be a(n) ________.

  1. A) advisory board
  2. B) mentor
  3. C) business incubator
  4. D) seed center
  5. E) microlender

Answer:  C

Explanation:  C) Business incubators are centers that provide “newborn” businesses with various combinations of advice, financial support, access to industry insiders and connections, facilities, and other services a company needs to get started.

Page Ref: 129

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

57) Money used or needed to set up a new business is ________.

  1. A) an incubator fund
  2. B) seed money
  3. C) an initial public offering
  4. D) public financing
  5. E) an advisory board loan

Answer:  B

Explanation:  B) The first infusion of capital used to get a business started is called seed money.

Page Ref: 130

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

58) ________ is a combination of private and public financing, in which an entrepreneur invites people to fund a share of a new business venture or a new product.

  1. A) Crowdfunding
  2. B) Microlending
  3. C) Angel investment
  4. D) Business incubator
  5. E) Threshold pledge system

Answer:  A

Explanation:  A) A combination of private and public financing is crowdfunding, in which an entrepreneur invites people to fund a share of a new business venture or a new product.

Page Ref: 130

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

59) Keri Sears uses the funding platform Kickstarter to solicit money to start a not-for-profit organization that promotes folk musicians and revives interest in the folk and traditional forms of music in America. She invites people to fund the business project and she states that donors will be honored on the organization’s website. She sets a six month goal to raise the money. Keri is using which of the following forms of financing?

  1. A) angel investors
  2. B) business incubator
  3. C) threshold pledge system
  4. D) fund and release system
  5. E) crowdfunding

Answer:  E

Explanation:  E) A combination of private and public financing is crowdfunding, in which an entrepreneur invites people to fund a share of a new business venture or a new product.

Page Ref: 130

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

 

60) ________ are organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans.

  1. A) Angel groups
  2. B) Venture capitalists
  3. C) Angel investors
  4. D) Microlenders
  5. E) Franchises

Answer:  D

Explanation:  D) Microlenders are organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

61) Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit are called ________.

  1. A) angel investors
  2. B) microlenders
  3. C) venture capitalists
  4. D) advisory boards
  5. E) business incubators

Answer:  C

Explanation:  C) Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit are called venture capitalists.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

62) Private individuals who put their own money into start-ups, with the goal of eventually selling their interest for a profit, are called ________.

  1. A) angel investors
  2. B) microlenders
  3. C) venture capitalists
  4. D) advisory boards
  5. E) business incubators

Answer:  A

Explanation:  A) Angel investors are private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

63) Funding a new business with credit cards or a personal line of credit ________.

  1. A) is the least expensive form of financing
  2. B) is subject to a lot of bureaucratic procedures
  3. C) involves minimum amount of risk
  4. D) is used by very few entrepreneurs
  5. E) is a widely available form of financing

Answer:  E

Explanation:  E) Although they tend to be one of the most expensive forms of financing, credit cards are also widely available and sometimes the only source of funding an entrepreneur has.

Page Ref: 131

Difficulty:  Moderate

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

64) Which of the following statements is true about venture capitalists?

  1. A) They are private individuals without specialized investment skills.
  2. B) They make investments in large, established businesses.
  3. C) They usually make investments in low-risk, low-potential areas.
  4. D) They simply provide money to new ventures, and do not provide managerial advice.
  5. E) They are extremely focused and selective while investing in companies.

Answer:  E

Explanation:  E) Because one-third of venture capitalist-funded start-ups don’t succeed, those that do succeed need to really pay off to compensate. VCs are therefore extremely focused and selective.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

65) Which of the following is a major difference between banks and venture capitalists as categories of private financing?

  1. A) Unlike banks, which recruit investment specialists, venture capitalists are private investors without any specialized investment skills.
  2. B) Unlike banks, which provide investment for high-risk businesses, venture capitalists won’t lend money to a start-up that hasn’t established a successful track record.
  3. C) Unlike banks, which dont require collateral, venture capitalists provide investments only when an entrepreneur puts up marketable collateral.
  4. D) Unlike banks, which only provide money, venture capitalists also provide management expertise.
  5. E) Unlike banks, which are extremely focused and selective in giving loans, venture capitalists are less focused and provide loans to a large number of start-ups.

Answer:  D

Explanation:  D) Unlike banks or most other financing sources, venture capitalists do more than simply provide money. They also provide management expertise in return for a sizable ownership interest in the business.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

66) Unlike venture capitalists, angel investors tend to ________.

  1. A) invest larger amounts of money in start-ups
  2. B) remain involved with the company for a very short time
  3. C) have a more local focus
  4. D) be investment specialists with an extremely focused and selective approach
  5. E) invest mostly in high-potential areas

Answer:  C

Explanation:  C) Angel investing tends to have a more local focus than venture capitalism, so you can search for angels through local business contacts and organizations.

Page Ref: 131

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the benefits and challenges of engaging in international business

Classification:  Concept

 

67) The institution that actually provides the money for an SBA-backed loan is the ________.

  1. A) venture capitalist
  2. B) bank
  3. C) SBIC
  4. D) business incubator
  5. E) IPO

Answer:  B

Explanation:  B) To get an SBA-backed loan, you apply to a regular bank or credit union, which actually provides the money.

Page Ref: 132

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

68) A corporation’s first offering of shares to the public is called ________.

  1. A) private placement
  2. B) secondary market offering
  3. C) secondary equity offering
  4. D) IPO
  5. E) crowdfunding

Answer:  D

Explanation:  D) A corporation’s first offering of shares to the public is called initial public offering (IPO).

Page Ref: 132

Difficulty:  Easy

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

69) Celera Inc., a soap manufacturing firm based in Colorado, needs to raise capital to fund its product development plans. The firm decides to offer its shares of ownership to the public for the first time, and lists its securities on a public exchange. This is termed as ________.

  1. A) private placement
  2. B) secondary market offering
  3. C) secondary equity offering
  4. D) IPO
  5. E) crowdfunding

Answer:  D

Explanation:  D) A corporation’s first offering of shares to the public is called initial public offering (IPO).

Page Ref: 132

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Application

70) A company that licenses elements of its business system to other companies is called a ________.

  1. A) franchisor
  2. B) venture capitalist
  3. C) angel investor
  4. D) intrapreneur
  5. E) business mentor

Answer:  A

Explanation:  A) A company that licenses elements of its business system to other companies is called a franchisor.

Page Ref: 132

Difficulty:  Easy

Chapter LO:  6

Course LO:  Compare and contrast different economic systems

Classification:  Concept

 

71) A(n) ________ enables the buyer to use a larger company’s trade name and sell its goods or services in a specific territory.

  1. A) trademark
  2. B) franchise
  3. C) initial public offering
  4. D) open source contract
  5. E) network effect

Answer:  B

Explanation:  B) An alternative to creating or buying an independent company is to buy a franchise, which enables the buyer to use a larger company’s trade name and sell its goods or services in a specific territory.

Page Ref: 132

Difficulty:  Easy

Chapter LO:  6

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

 

72) You have decided to open a pet store and signed an agreement with Dogz-N-Catz Centers Inc. You and the company have drawn up an agreement that allows you to use the Dogz-N-Catz name and its business format, to receive training, and to use its advertising materials. Under this agreement, Dogz-N-Catz Inc. is the ________.

  1. A) franchisor
  2. B) microinvestor
  3. C) angel investor
  4. D) venture capitalist
  5. E) business mentor

Answer:  A

Explanation:  A) A company that licenses elements of its business system to other companies is called a franchisor.

Page Ref: 132

Difficulty:  Moderate

AACSB:  Analytic Skills

Chapter LO:  6

Course LO:  Compare and contrast different economic systems

Classification:  Application

73) A car dealer in Ohio has the rights to sell trademarked automobiles manufactured by Armadillo Motors Inc., which does not have a distribution network in Ohio. The car dealer purchases the automobiles from Armadillo Motors Inc. and then resells them in Ohio. Which of the following models does the dealer use?

  1. A) product franchise
  2. B) joint venture
  3. C) shakeout
  4. D) vertical integration
  5. E) intrapreneurship

Answer:  A

Explanation:  A) A product franchise gives you the right to sell trademarked goods, which are purchased from the franchisor and resold.

Page Ref: 133

Difficulty:  Easy

AACSB:  Analytic Skills

Chapter LO:  6

Course LO:  Explain the entrepreneurship process

Classification:  Application

 

 

74) R&M Group, a consumer products company based in Libya, conducted a market research. The research indicated that there was a lack of branded soft drinks in the market, even though there were several local soft-drink manufacturers. The company purchased the right to produce and distribute soft drinks of Fizzpop Inc.(a leading U.S. based soft-drinks firm) R&M Group also sources the supplies from Fizzpop Inc. to ensure that the taste of the product remains the same. In this scenario, which of the following business methods does R&M Group use?

  1. A) joint venture
  2. B) shakeout
  3. C) vertical integration
  4. D) manufacturing franchise
  5. E) delayering

Answer:  D

Explanation:  D) A manufacturing franchise, such as a soft -drink bottling plant, gives you the right to produce and distribute the manufacturer’s products, using supplies purchased from the franchisor.

Page Ref: 133

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  6

Course LO:  Compare and contrast different economic systems

Classification:  Application

75) Andy, an entrepreneur, plans to open a bakery in his neighborhood. He realizes that there are no branded bakeries in the locality, even though there are a number of independent bakeries. He approaches Soft Bakes, an international bakery chain, and signs an agreement with them that gives him the right to open a bakery shop that uses Soft Bakes’ name and management methods. In this scenario, which of the following business methods does Andy use?

  1. A) business-format franchise
  2. B) joint venture
  3. C) shakeout
  4. D) vertical integration
  5. E) delayering

Answer:  A

Explanation:  A) A business-format franchise gives you the right to open a business using a franchisor’s name and format for doing business.

Page Ref: 133

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  6

Course LO:  Compare and contrast different economic systems

Classification:  Application

 

 

76) Define a small business? What is the economic role of small businesses?

Answer:  A small business is a company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry).

Some of the major contributions small firms make are:

∙ They provide jobs.

∙ They introduce new products.

∙ They supply the needs of larger organizations. Many small businesses act as distributors, servicing agents, and suppliers to larger corporations and to numerous government agencies.

∙ They inject a considerable amount of money into the economy. Small businesses pay nearly half the private-sector payroll in the United States and produce half the country’s gross domestic product.

∙ They take risks that larger companies sometimes avoid. Entrepreneurs play a significant role in the economy as risk takers – people willing to try new and unproven ideas.

∙ They provide specialized goods and services.

Page Ref: 117; 118

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

77) Compare and contrast lifestyle businesses with high-growth ventures.

Answer:  The majority of small businesses are modest operations with little growth potential, although some have attractive income potential for the solo business person. Small businesses such as a self-employed consultant, a corner florist, or a small e-commerce venture are sometimes called lifestyle businesses because they are built around the personal and financial needs of an individual or a family. In contrast, other firms are small simply

because they are young, but they have ambitious plans to grow. These high-growth ventures are usually run by a team rather than by one individual, and they expand rapidly by obtaining a sizable supply of investment capital and by introducing new products or services to a large market.

Page Ref: 118

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  1

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

 

78) Compare and contrast small companies with large ones?

Answer:  Small companies tend to differ from large ones in a variety of important ways. First, most small firms have a narrow focus, offering fewer goods and services to fewer market segments. Second, unless they are launched with generous financial backing, which is rare, small businesses have to get by with limited resources. Third, smaller businesses often have more freedom to innovate and move quickly. As they grow larger, companies tend to get slower and more bureaucratic. In contrast, entrepreneurial firms usually find it easier to operate “on the fly,” making decisions quickly and reacting to changes in the marketplace.

Page Ref: 119

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Synthesis

 

79) How do downsizing and outsourcing influence the number of small businesses?

Answer:  Business start-ups often soar when the economy sours. During hard times, many companies downsize or lay off talented employees, who then have little to lose by pursuing self-employment.  Outsourcing, the practice of engaging outside firms to handle either individual projects or entire business functions, also creates numerous opportunities for small businesses

and entrepreneurs. Some companies subcontract special projects and secondary business functions to experts outside the organization, while others turn to outsourcing as a way to permanently eliminate entire departments, and some laid-off employees even become entrepreneurs and sell services to their former employers.

Page Ref: 120

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the role of small businesses in the economy

Classification:  Concept

 

80) Describe the qualities of a successful entrepreneur. How is an intrapreneur different from an entrepreneur? What are the unique challenges faced by an intrapreneur?

Answer:  Successful entrepreneurs tend to love what they do and are driven by a passion to succeed at it, they are disciplined and willing to work hard, they are confident and optimistic, and they like to control their own destiny. Moreover, they relate well to others and have the ability to inspire others, they are curious, they learn from their mistakes without letting failure drag them down, they are adaptable and tuned into their environments, and they are moderate but careful risk takers.

The entrepreneur’s innovative spirit is so compelling that many large companies and individuals within companies now try to express it through intrapreneurship, a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Page Ref: 121

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  2

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

81) Compare and contrast creating a new, independent business with buying an existing independent business.

Answer:  Creating a new, independent business usually has very limited possibilities for borrowing start-up capital or getting investors. It gives a lot of freedom and flexibility to the owner and must be designed and created from scratch, which can be time consuming and expensive. Support networks, workforce, customer base, brand recognition, and sales must be built from scratch.

Compared to starting a new business, buying an existing business can involve less work and less risk – provided, of course, that you check out the company carefully. When you buy a healthy business, you generally purchase an established customer base, functioning business systems, proven products or services, and a known location. In addition, financing an existing business is often much easier because lenders are reassured by the company’s history and existing assets and customer base.

Buying an existing business is not without disadvantages and risks. You may need a considerable amount of financing to buy a fully-functioning company, and you will inherit any problems the company has, from unhappy employees to obsolete equipment to customers with overdue accounts.

Page Ref: 123

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

82) Compare and contrast creating a new, independent business with buying into a franchise system.

Answer:  Creating a new, independent business usually has very limited possibilities for borrowing start-up capital or getting investors. It gives a lot of freedom and flexibility to the owner; and must be designed and created from scratch, which can be time consuming and expensive. Support networks, workforce, customer base, brand recognition, and sales must be built from scratch.

Buying a franchise, combines many of the benefits of independent business ownership with the support that comes with being part of a larger organization. Many franchisors do not allow franchisees to buy a franchise with borrowed funds, so they must have their own capital. Most franchisors require rigid adherence to company policies and processes, and the franchisee’s freedom and independence is low. A franchise comes with an established business system; workforce must be hired and trained, but a franchisor usually provides training or training support; and customer base and repeat sales must be built up, but one of the major advantages of a franchise is established brand recognition.

Page Ref: 123

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

83) What is a business plan? How is it different from an executive summary?

Answer:  A business plan summarizes a proposed business venture, communicates the company’s goals, highlights how management intends to achieve those goals, and shows how customers will benefit from the company’s goods or services. An effective business plan should include your mission and objectives, company overview, management, target market, marketing strategy, design and development plans, operations plan, start-up schedule, major risk factors, and financial projections and requirements.

An executive summary is a concise version of the business plan. Investor Guy Kawasaki advises entrepreneurs to create an executive summary of their business plan to use when presenting their ideas to investors for the first time. Entrepreneurs often have as little as 20 minutes to make these pitches, so a compelling presentation backed up by an executive summary, no longer than 20 pages, is ideal. The most important part of the entire package is “the grab,” a compelling one-or two-sentence statement that gets an investor’s

attention. If an investor is intrigued, he or she can then read the executive summary to get a better sense of the opportunity and then review the full business plan before making a decision to provide funds.

Page Ref: 124; 125

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

84) Briefly describe what a business plan is and discuss its importance in starting a business.

Answer:  A business plan summarizes the proposed business venture, its goals, and its plans for achieving those goals. It serves three important functions: 1) it guides company operations and outlines the business’ strategy; 2) it helps persuade lenders and investors to finance the business; 3) it provides a “reality check” in the event that the business idea is not feasible.

Page Ref: 124

Difficulty:  Easy

Chapter LO:  3

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

85) Compare and contrast business partners with mentors and advisory boards as sources of advice and support for entrepreneurs?

Answer:  Banks, credit card companies, software companies, and other firms you do business with can also be a source of advice and support. For example, the Open Forum ( www.openforum.com ), hosted by American Express, offers a variety of videos, articles, and online network tools to help small business owners, as well as online tutorials and forums where business owners can post questions. The free resources from these companies are part of their marketing strategies and so include a certain amount of self promotion.

Many entrepreneurs and business owners take advantage of individual mentors and advisory boards. Mentoring can happen through both formal programs such as SCORE and informal relationships developed in person or online. In either case, the advice of a mentor who has been down the road before can be priceless. An advisory board is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

Page Ref: 127; 128

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

86) Compare and contrast business incubators with networks and support groups as sources of advice and support for entrepreneurs?

Answer:  Many cities across the country have local networks of entrepreneurs. Some entrepreneurs meet regularly in small groups to analyze each other’s progress month by month. Being forced to articulate your plans and decisions to peers – and to be held accountable for results – can be an invaluable reality check. Some groups focus on helping entrepreneurs hone their presentations to potential investors. In addition to local in-person groups, social networking technology gives entrepreneurs an endless array of opportunities to connect online.

Business incubators are centers that provide “newborn” businesses with various combinations of advice, financial support, access to industry insiders and connections, facilities, and other services a company needs to get started. Some incubators are not-for-profit organizations affiliated with the economic development agencies of local or state governments or universities, some are for-profit enterprises, some companies have internal incubators to encourage new ventures, and some are run by venture capitalists.

Page Ref: 129

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  4

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

87) Identify and briefly describe at least 3 sources of financial aid that are available to small businesses.

Answer:  1) Private financing – family loans or private savings; 2) banks and microlenders ; 3) venture capitalists – investment specialists who provide money in exchange for an ownership share of the company; 4) angel investors – private individuals who invest their own money into start-ups; 5) credit cards and personal lines of credit; 6) going public – selling shares of stock to the public for the first time; 7) loan programs from the small business administration (SBA).

Page Ref: 130

Difficulty:  Moderate

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

88) Discuss banks and microlenders as sources of private financing. How does it differ from seeking funds by going public?

Answer:  Bank loans are one of the most important sources of financing for small business – but there’s an important catch: In most cases, banks won’t lend money to a start-up that has not established a successful track record. In response to the needs of entrepreneurs who don’t qualify for standard bank loans or who don’t need the amount of a regular loan, hundreds of organizations now serve as microlenders, offering loans up to $35,000 or so.

Companies with solid growth potential may also seek funding from the public at large.

Whenever a corporation offers its shares of ownership to the public for the first time, the company is said to be going public. Going public is an effective method of raising needed capital, but it can be an expensive and time-consuming process with no guarantee of raising the amount of money needed.

Page Ref: 131; 132

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

89) Compare and contrast venture capitalists with angel investors.

Answer:  Venture capitalists (VCs) are investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit. VC funding provides a crucial stimulus to the economy by making risky, early-stage investments in firms that are likely to become major employers if their products succeed in the marketplace. Given the amounts of money involved and the expectations of sizable returns, VCs usually invest in high-potential areas such as information technology, energy, biotechnology, and digital media.

Start-up companies that can’t attract VC investment (perhaps because they are too early in their product development) often look for angel investors, private individuals who put their own money into start-ups, with the goal of eventually selling their interest for a profit. These individuals are willing to invest smaller amounts than VCs and often stay involved with the company for a longer period of time. Many of these investors join angel networks or angel groups that invest together in chosen companies. Angel investing tends to have a more local focus than venture capitalism.

Page Ref: 131

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  5

Course LO:  Explain the entrepreneurship process

Classification:  Synthesis

 

90) From the perspective of the franchisee, list 3 advantages and 3 disadvantages of buying a franchise.

Answer:  From the perspective of the franchisee, advantages of buying a franchise are:

1) freedom of being a business owner while having the support of a larger, established organization; 2) a viable business model that has worked many times before; 3) instant name recognition; 4) standardized quality of goods and services; 5) national advertising; 6) services such as site-location studies, market research, training and technical assistance; 7) assistance in financing the initial investment.

From the perspective of the franchisee, disadvantages of buying a franchise are:

Disadvantages: 1) you must follow a prescribed business format that covers every aspect of doing business; 2) little ability to change business models if the demand for goods or services declines; 3) potentially high initial costs and royalties; 4) little control over decisions the franchisor makes that affect the entire system

Page Ref: 133

Difficulty:  Difficult

Chapter LO:  6

Course LO:  Explain the entrepreneurship process

Classification:  Concept

 

Business in Action, 6e (Bovee/Thill)

Chapter 7   Management Roles, Functions, and Skills

 

1) Management is the process of planning, organizing, leading, and controlling to meet organizational goals.

Answer:  TRUE

Explanation:  Management is the process of planning, organizing, leading, and controlling to meet organizational goals. These tasks are interrelated.

Page Ref: 141

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

2) High-level managers rely heavily on subordinates to collect, analyze, and summarize information.

Answer:  TRUE

Explanation:  High-level managers rely heavily on subordinates to collect, analyze, and summarize information.

Page Ref: 142

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

3) The executive dashboard is a tool that provides quick-read summaries of vital performance variables.

Answer:  TRUE

Explanation:  The executive dashboard, just like the dashboard in a car, provides quick-read summaries of vital performance variables.

Page Ref: 142

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

4) Setting the prices of new products is a fairly routine decision that managers make.

Answer:  TRUE

Explanation:  Setting the prices of new products is a fairly routine decision that managers make.

Page Ref: 143

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

5) Selecting an individual for employment from a pool of job applicants is an example of an interpersonal role of management.

Answer:  FALSE

Explanation:  Managers make many decisions as part of their work. Choosing which of several job candidates to hire is an example of a decisional role of managers.

Page Ref: 143

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

6) A mission statement is a statement of the operational goals of the organization.

Answer:  FALSE

Explanation:  A mission statement is a brief statement of why an organization exists.  It describes what the organization aims to accomplish for customers, investors, and other stakeholders.

Page Ref: 144

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

7) A vision statement is a brief description of a company’s present status in the market.

Answer:  FALSE

Explanation:  A vision statement is a brief and inspirational expression of what a company aspires to be.

Page Ref: 145

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

8) A value statement does not establish expectations for an organization’s employees.

Answer:  FALSE

Explanation:  A value statement establishes the expectations for an organization’s employees.

Page Ref: 145

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

9) Strengths and weaknesses are internal factors that contribute to a company’s success or failure.

Answer:  TRUE

Explanation:  Strengths are positive internal factors that contribute to a company’s success. Weaknesses are negative internal factors that inhibit the company’s success.

Page Ref: 146

Difficulty:  Moderate

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

10) An economic slowdown is viewed as a weakness in the SWOT analysis of a firm.

Answer:  FALSE

Explanation:  Weaknesses are negative internal factors that inhibit the company’s success, such as obsolete facilities, inadequate financial resources to fund growth, or lack of managerial depth and talent. Economic slowdown is an external factor.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

11) Qualitative managerial forecasts are based on historical data and involve complex statistical computations.

Answer:  FALSE

Explanation:  Managerial forecasts fall under two broad categories: quantitative forecasts, which are typically based on historical data or tests and often involve complex statistical computations, and qualitative forecasts, which are based more on intuitive judgments.

Page Ref: 146

Difficulty:  Moderate

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

12) A goal is a broad, long-term accomplishment that an organization wants to achieve.

Answer:  TRUE

Explanation:  A goal is a broad, long-range accomplishment that organizations want to attain and an objective is a specific, short-range target designed to help them reach that goal.

Page Ref: 147

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

13) Organizing is the process of arranging resources to carry out an organization’s plans.

Answer:  TRUE

Explanation:  Organizing is the process of arranging resources to carry out an organization’s plans. It is a major function of managers.

Page Ref: 148

Difficulty:  Easy

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

14) A management pyramid is used to exhibit managerial roles without defining a corporate hierarchy.

Answer:  FALSE

Explanation:  A management pyramid is used to defines a corporate hierarchy.

Page Ref: 148

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

15) Middle managers establish the structure for an organization as a whole.

Answer:  FALSE

Explanation:  Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions.

Page Ref: 149

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

16) First-line managers are those at the lowest level of the management hierarchy.

Answer:  TRUE

Explanation:  First-line managers are those at the lowest level of the management hierarchy. They supervise the operating employees and implement the plans set at the higher management levels.

Page Ref: 149

Difficulty:  Easy

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

17) Leading is the process of influencing and motivating people to work willingly and effectively toward common goals.

Answer:  TRUE

Explanation:  Leading is the process of influencing and motivating people to work willingly and effectively toward common goals.

Page Ref: 150

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

18) Cognitive intelligence is a measure of a person’s awareness of and ability to manage his or her own emotions.

Answer:  FALSE

Explanation:  Emotional intelligence is a measure of a person’s awareness of and ability to manage his or her own emotions. People with high emotional intelligence recognize their own emotional states and the effect those emotions have on others.

Page Ref: 150

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

19) Socially adept managers have a knack for finding and building common ground with people of all kinds.

Answer:  TRUE

Explanation:  Social intelligence involves looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own. Socially adept managers have a knack for finding and building common ground with people of all kinds.

Page Ref: 151

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

20) Autocratic leaders allow subordinates to make all the decisions concerning their performance.

Answer:  FALSE

Explanation:  Autocratic leaders control the decision-making process in their organizations, often restricting the decision-making freedom of subordinates.

Page Ref: 151

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

21) A manager completely hands over operational decision making to her subordinates. This manager is a democratic leader.

Answer:  FALSE

Explanation:  This leader is a laissez-faire leader. Leaders who leave most decisions up to employees are called laissez-faire leaders. Democratic leaders involve employees in decision making, but do not hand over decision making to them.

Page Ref: 152

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

22) Mentoring is the process of establishing a short-term relationship between a senior member and a junior member.

Answer:  FALSE

Explanation:  Mentoring is similar to coaching but is based on long-term relationships between senior and junior members of an organization.

Page Ref: 152

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

23) A mentor is usually an experienced manager or employee who can help guide other managers and employees.

Answer:  TRUE

Explanation:  Mentoring is based on long-term relationships between senior and junior members of an organization. The mentor is usually an experienced manager or employee who can help guide other managers and employees through the corporate maze.

Page Ref: 152

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

24) Organizational culture refers to a set of shared values and norms that support the management system and that guide management and employee behavior.

Answer:  TRUE

Explanation:  Organizational culture refers to a set of shared values and norms that support the management system and that guide management and employee behavior.

Page Ref: 153

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

25) Controlling is the process of motivating employees to be committed toward the organization’s values.

Answer:  FALSE

Explanation:  Controlling is the management function of keeping a company’s activities on track toward previously established goals.

Page Ref: 154

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

26) Standards refer to the criteria against which performance is measured.

Answer:  TRUE

Explanation:  Standards refer to the criteria against which performance is measured. Setting standards is the first step of the control cycle.

Page Ref: 155

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

27) Quality is a measure of how productive an organization’s employees are.

Answer:  FALSE

Explanation:  Quality is a measure of how closely a product conforms to predetermined standards and customer expectations.

Page Ref: 155

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

28) Conceptual skills refer to the ability and knowledge to perform the mechanics of a particular job.

Answer:  FALSE

Explanation:  Technical skills refer to the ability and knowledge to perform the mechanics of a particular job. In contrast, conceptual skills refer to the ability to understand the relationship of parts to the whole.

Page Ref: 158

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

29) Managerial roles are grouped into three main categories: interpersonal, decisional, and ________.

  1. A) directive
  2. B) instructional
  3. C) operational
  4. D) informational
  5. E) differential

Answer:  D

Explanation:  D) All the managerial roles that leaders must play can be grouped into three main categories: interpersonal, informational, and decisional.

Page Ref: 141

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

30) Providing leadership to employees is an example of a(n) ________ role of management.

  1. A) interpersonal
  2. B) communicative
  3. C) instructional
  4. D) decisional
  5. E) informational

Answer:  A

Explanation:  A) The interpersonal roles that a manager must play include the following: Providing leadership to employees, building relationships, and acting as a liaison between groups and individuals both inside and outside the company.

Page Ref: 141

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

31) A top executive reads summaries of vital performance variables in the organization using the executive dashboard. The executive is performing the ________ role in this case.

  1. A) interpersonal
  2. B) instructional
  3. C) directional
  4. D) decisional
  5. E) informational

Answer:  E

Explanation:  E) An executive dashboard is a tool used to summarize information. The executive is performing an informational role in this case.

Page Ref: 142

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

32) A(n) ________ is a tool that provides quick-read summaries of vital performance variables.

  1. A) executive dashboard
  2. B) business plan
  3. C) benchmark
  4. D) budget plan
  5. E) managerial pyramid

Answer:  A

Explanation:  A) An executive dashboard is a tool that provides quick-read summaries of vital performance variables.

Page Ref: 142

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

33) Choosing a candidate from several job applicants is an example of the ________ role of managers.

  1. A) interpersonal
  2. B) instructional
  3. C) collaborative
  4. D) decisional
  5. E) informational

Answer:  D

Explanation:  D) Managers have many decisional roles. Such roles include choosing which of several job candidates to hire or setting the prices of new products.

Page Ref: 143

Difficulty:  Easy

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

34) Robert is the manager of a departmental store. Which of the following is an example of a decisional role that he has to undertake?

  1. A) communicating with the top management
  2. B) training the new employees in the store
  3. C) performing operational tasks in the store
  4. D) motivating employees to serve customers better
  5. E) setting the prices of the products in the store

Answer:  E

Explanation:  E) Managers have many decisional roles. Such roles include choosing which of several job candidates to hire or setting the prices of new products.

Page Ref: 143

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Application

 

 

35) Charles is the CFO of a manufacturing organization. When determining how much money should be allocated to each departmental budget, he is performing the ________ role of management.

  1. A) informational
  2. B) decisional
  3. C) instructional
  4. D) communicative
  5. E) interpersonal

Answer:  B

Explanation:  B) Charles is making a decision when allocating departmental budget. Hence he is performing the decisional role.

Page Ref: 143

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Application

 

36) Developing strategies, establishing goals and objectives for the organization, and translating those strategies and goals into action plans is part of the ________ function of management.

  1. A) leading
  2. B) organizing
  3. C) intermediating
  4. D) motivating
  5. E) planning

Answer:  E

Explanation:  E) Managers engage in planning when they develop strategies, establish goals and objectives for the organization, and translate those strategies and goals into action plans.

Page Ref: 143

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

37) ________ plans outline the firm’s long-range (often two to five years) organizational goals and set a course of action the firm will pursue to reach its goals.

  1. A) Tactical
  2. B) Operational
  3. C) Strategic
  4. D) Short-term
  5. E) Contingency

Answer:  C

Explanation:  C) Strategic plans outline the firm’s long-range (often two to five years) organizational goals and set a course of action the firm will pursue to reach its goals. The strategic planning process consists of six interrelated steps.

Page Ref: 143

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

38) A ________ is a brief declaration of what the organization aims to accomplish for customers, investors, and other stakeholders.

  1. A) operational plan
  2. B) mission statement
  3. C) SWOT statement
  4. D) tactical plan
  5. E) values statement

Answer:  B

Explanation:  B) A mission statement is a brief statement of why an organization exists. In other words, it describes what the organization aims to accomplish for customers, investors, and other stakeholders.

Page Ref: 144

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

39) A(n) ________ is a brief and inspirational expression of what a company aspires to be.

  1. A) tactical plan
  2. B) values statement
  3. C) operational plan
  4. D) vision statement
  5. E) summary of objectives

Answer:  D

Explanation:  D) A vision statement is a brief and inspirational expression of what a company aspires to be.

Page Ref: 145

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

40) “Do what’s right, respect others, care for customers, and perform with excellence.” This is likely to be an organization’s ________ statement.

  1. A) vision
  2. B) operational
  3. C) tactical
  4. D) values
  5. E) mission

Answer:  D

Explanation:  D) A values statement identifies the principles that guide the company’s decisions and behaviors and establish expectations for everyone in the organization. The given statement describes a company’s principles.

Page Ref: 145

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

 

41) Which of the following is an example of a strength that companies possess?

  1. A) prospective merger candidates
  2. B) lack of regulations
  3. C) respected brand
  4. D) narrow customer base
  5. E) increasing demand for products

Answer:  C

Explanation:  C) Strengths are positive internal factors that contribute to a company’s success. Having a respected brand is such a strength.

Page Ref: 145; 146

Difficulty:  Moderate

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

Alfa Knowledge is a knowledge management firm. The company helps organizations document and manage internal knowledge. The company has operations in seventeen countries.

 

42) Which of the following refers to a strength that Alfa Knowledge possesses?

  1. A) The company has an early mover advantage in the market that it is operating.
  2. B) The company is functioning in a low-growth industry.
  3. C) The company has a patented technology for knowledge management.
  4. D) The company is functioning in a high-growth industry.
  5. E) The countries in which the company is operating were not affected by the economic slowdown of 2009.

Answer:  C

Explanation:  C) Strengths are positive internal factors that contribute to a company’s success. Having a patent is an internal factor and will contribute to the company’s success.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

43) Which of the following describes a weakness that Alfa Knowledge has?

  1. A) The company’s sales were affected by the nuclear disaster that took place in Japan.
  2. B) The company functions in countries that lack skilled labor.
  3. C) The company spends huge money to pay for tariffs and duties.
  4. D) The company often incurs loses due to fluctuating exchange rates.
  5. E) The company’s employees are not committed to be with the company for long.

Answer:  E

Explanation:  E) Weaknesses are negative internal factors that inhibit the company’s success. The only negative internal factor described here is the lack of commitment from the employees.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

44) Which of the following is an opportunity available to Alfa Knowledge?

  1. A) having strong financial resources
  2. B) having a respected brand
  3. C) having committed employees
  4. D) presence of potential partners
  5. E) presence of strong management professionals in the company

Answer:  D

Explanation:  D) Opportunities are positive situations that represent the possibility of generating new revenue. Presence of potential partners is one such opportunity.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

 

45) The demand for Alfa’s products has been shrinking in recent times. This is considered a(n) ________ for the company.

  1. A) weakness
  2. B) limitation
  3. C) internal flaw
  4. D) opportunity
  5. E) threat

Answer:  E

Explanation:  E) Threats are negative forces that could inhibit a firm’s ability to achieve its objectives. Shrinking demand is one such threat.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

46) RSX Plastic is an Asian company that manufactures commercial plastic products. The company plans to open a production facility in the United States. In order to enter the U.S. market, the company is required to set up a plastic recycling plant that attracts huge fixed costs. This requirement is an example of a(n) ________ for the company.

  1. A) opportunity
  2. B) weakness
  3. C) strength
  4. D) threat
  5. E) internal limitation

Answer:  D

Explanation:  D) Threats are negative forces that could inhibit a firm’s ability to achieve its objectives, including such external factors as new competitors, new government regulations, economic contraction, and changes in interest rates. The given requirement is an example of a threat.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Application

 

 

47) A(n) ________ is a specific, short-range target or aim.

  1. A) mission
  2. B) tactic
  3. C) strategy
  4. D) objective
  5. E) vision

Answer:  D

Explanation:  D) An objective is a specific, short-range target designed to help organizations reach their goals.

Page Ref: 147

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

48) In order to be effective, a business goal should be ________.

  1. A) broadly defined
  2. B) measurable
  3. C) time unlimited
  4. D) remotely defined
  5. E) substantially high

Answer:  B

Explanation:  B) Business people should make their goals and objectives “SMART,” as in specific, measurable, attainable, relevant, and time limited.

Page Ref: 147

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

49) The overall plan might be supported at the next level down by such plans as research and development plan, manufacturing plan, and marketing plan. Such functional plans are called ________ plans.

  1. A) appraisal
  2. B) strategic
  3. C) contingency
  4. D) tactical
  5. E) corporate

Answer:  D

Explanation:  D) The overall strategic plan of an organization might be supported at the next level down by a research and development plan, a manufacturing plan, and a marketing plan, describing how each functional area will help the company reach its strategic goals and objectives. Such plans are called tactical plans.

Page Ref: 147

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

50) Which of the following statements is true of tactical plans?

  1. A) Tactical plans vary by company and business function.
  2. B) These plans refer to the strategic plans of organizations.
  3. C) Tactical plans are prepared for long-term purposes.
  4. D) Tactical plans cover all functions in an organization.
  5. E) Operational issues are not covered under tactical plans.

Answer:  A

Explanation:  A) The names and contents of tactical plans vary widely by industry, company, and business function.

Page Ref: 147

Difficulty:  Moderate

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

51) ________ is the process of arranging resources to carry out an organization’s plans. It is one of the major functions of managers.

  1. A) Planning
  2. B) Directing
  3. C) Organizing
  4. D) Analyzing
  5. E) Controlling

Answer:  C

Explanation:  C) Organizing is the process of arranging resources to carry out an organization’s plans. It is one of the major functions of managers.

Page Ref: 148

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

52) Which of the following functions is typically performed by top managers?

  1. A) establishing the structure for the organization
  2. B) supervising lower-level managers
  3. C) translating strategic goals into actions
  4. D) putting the systems and resources in place
  5. E) translating strategic objectives into the actions

Answer:  A

Explanation:  A) Top managers in an organization establish the structure for the organization as a whole, and they select the people who fill the upper-level positions.

Page Ref: 149

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

53) Which of the following is a typical role of middle managers in an organization?

  1. A) defining the strategic orientation of the organization
  2. B) supervising workers on an assembly line
  3. C) supervising knowledge workers
  4. D) making long-range plans for the organization
  5. E) translating strategic goals and objective into actions

Answer:  E

Explanation:  E) Middle managers play the essential role of translating strategic goals and objective into the actions that allow the company to meet those targets. While they may not do the actual day-to-day work, middle managers are the ones who put the systems and resources in place so that front-line teams can work efficiently and with coordinated purpose.

Page Ref: 149

Difficulty:  Moderate

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

54) Josephine is an employee supervisor in a manufacturing firm. She supervises a small group of assembly workers on one of her company’s assembly lines. Josephine is a(n) ________ manager.

  1. A) upper-level
  2. B) top
  3. C) first-line
  4. D) middle
  5. E) executive level

Answer:  C

Explanation:  C) First-line managers are those at the lowest level of the management hierarchy. They supervise the operating employees and implement the plans set at the higher management levels. Josephine is a first-line manager.

Page Ref: 149

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Application

 

55) ________ is the process of influencing and motivating people to work willingly and effectively toward common goals.

  1. A) Organizing
  2. B) Leading
  3. C) Planning
  4. D) Directing
  5. E) Controlling

Answer:  B

Explanation:  B) Leading is the process of influencing and motivating people to work willingly and effectively toward common goals. Managers with good leadership skills have greater success in influencing the attitudes and actions of others and motivating employees to put forth their best performance.

Page Ref: 150

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

56) ________ intelligence involves reasoning, problem solving, memorization, and other rational skills.

  1. A) Cognitive
  2. B) Emotional
  3. C) Social
  4. D) Collaborative
  5. E) Networking

Answer:  A

Explanation:  A) Cognitive intelligence involves reasoning, problem solving, memorization, and other rational skills. Obviously, leaders need a sufficient degree of cognitive intelligence to understand and process the information required for planning and decision making in the jobs.

Page Ref: 150

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

57) A manager has the capability of reducing his disruptive impulses and moods. He also has the ability to understand others’ feelings. These capabilities are indicative of ________.

  1. A) low cognitive intelligence
  2. B) high degree of autocracy
  3. C) low social intelligence
  4. D) high emotional intelligence
  5. E) high cognitive intelligence

Answer:  D

Explanation:  D) People with high emotional intelligence recognize their own emotional states and the effect those emotions have on others. They are able to regulate their emotional responses in order to control or reduce disruptive impulses and moods, and they have a high degree of empathy (the ability to understand others’ feelings).

Page Ref: 150; 151

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

58) Socially adept managers will have a knack for ________.

  1. A) solving problems quickly using their reasoning abilities
  2. B) exhibiting rational skills to make high-quality decisions
  3. C) controlling their own emotions and impulses
  4. D) judging others based on a variety of objective parameters
  5. E) finding and building common ground with people of all kinds

Answer:  E

Explanation:  E) Socially adept managers have a knack for finding and building common ground with people of all kinds. Moreover, leaders, in a sense, infect their organizations with their own emotions, positive or negative.

Page Ref: 151

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

59) Danielle has an innate ability to solve interpersonal issues that the employees face and she is always considerate toward her subordinates. She is capable of coordinating with different types of employees in the organization. Danielle has high ________ intelligence.

  1. A) informational
  2. B) cognitive
  3. C) critical
  4. D) social
  5. E) emotional

Answer:  D

Explanation:  D) Social intelligence involves looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own. Socially adept managers have a knack for finding and building common ground with people of all kinds.

Page Ref: 151

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Application

 

60) Under ________ leadership, subordinates have little or no freedom to make decisions, deviate from plans, or provide contrary input.

  1. A) democratic
  2. B) autocratic
  3. C) laissez-faire
  4. D) transformational
  5. E) participative

Answer:  B

Explanation:  B) Under autocratic leadership, a manager makes the decisions and issues directives down the chain of command. Subordinates have little or no freedom to make decisions, deviate from plans, or provide contrary input.

Page Ref: 151

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

61) Arthur is a plant supervisor at Skyline Constructions. Twenty construction workers report to Arthur. Arthur provides them the work designs and schedules every week and does not allow them to make any changes to the schedule. Workers often complain that he is not receptive to suggestions from them. Arthur is following ________ leadership in this case.

  1. A) transformational
  2. B) autocratic
  3. C) democratic
  4. D) laissez-faire
  5. E) participative

Answer:  B

Explanation:  B) Under autocratic leadership, manager makes the decisions and issues directives down the chain of command. Subordinates have little or no freedom to make decisions, deviate from plans, or provide contrary input.

Page Ref: 151

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Application

 

62) ________ leaders act as advisors and supporters and generally let subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives.

  1. A) Participative
  2. B) Consultative
  3. C) Autocratic
  4. D) Transactional
  5. E) Laissez-faire

Answer:  E

Explanation:  E) Laissez-faire leaders act as advisor and supporter, offering input when asked but generally letting subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives.

Page Ref: 151

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

63) You have been working under the same manager for nearly a year and have been allowed to do your job with almost no interference from your manager. The manager’s only concern seems to be that you are efficient and productive and meet your goals. Since this manager surrenders most of her responsibility to her subordinates, she would be referred to as a(n) ________ leader.

  1. A) democratic
  2. B) transactional
  3. C) autocratic
  4. D) laissez-faire
  5. E) authoritarian

Answer:  D

Explanation:  D) This manager is following a laissez-faire leadership. Laissez-faire leaders act as advisor and supporter, offering input when asked but generally letting subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives.

Page Ref: 151

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Application

 

64) Julia is the product manager of an automobile manufacturer. She allots part of her duties to her subordinates and involves them when making key decisions. She is receptive to new ideas and accepts valuable ideas from others. Julia is a ________ leader.

  1. A) autocratic
  2. B) democratic
  3. C) laissez-faire
  4. D) directive
  5. E) transactional

Answer:  B

Explanation:  B) Democratic leaders delegate authority and involve employees in decision making. Also known as collaborative leaders, these managers invite and seek out input from anyone in the organization who can add insight to the decision-making process. From the scenario, we can determine that Julia is a democratic leader.

Page Ref: 152

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Application

 

65) Danny leads a team of fifteen programmers. Danny divides the project into independent modules and assigns each programmer a module. Danny tells the employees that they are responsible for the completion of the modules and he would assist them only if they need help. Identify the leadership style that Danny is following.

  1. A) democratic leadership
  2. B) directive leadership
  3. C) transactional leadership
  4. D) autocratic leadership
  5. E) laissez-faire leadership

Answer:  E

Explanation:  E) Danny is following a laissez-faire leadership. In such leadership, a manager acts as advisor and supporter, offering input when asked but generally letting subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives.

Page Ref: 152

Difficulty:  Difficult

AACSB:  Analytic Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Application

 

66) The first step in managing organizational change is ________.

  1. A) monitoring continued progress of the change effort
  2. B) identifying the need for change
  3. C) reinforcing the changed behavior
  4. D) analyzing the forces acting against the change
  5. E) choosing the technique to be used in instituting the change

Answer:  B

Explanation:  B) The first step in managing change is identifying everything that needs to be changed.

Page Ref: 152

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

67) ________ is the management function of keeping a company’s activities on track toward previously established goals.

  1. A) Organizing
  2. B) Leading
  3. C) Planning
  4. D) Motivating
  5. E) Controlling

Answer:  E

Explanation:  E) Controlling is the management function of keeping a company’s activities on track toward previously established goals. The nature of control varies widely, from directly intervening in a process to modifying policies or systems in a way that enables employees to reach their objectives.

Page Ref: 154

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

68) Directly intervening in organizational processes to improve performance is an example of the ________ function of management.

  1. A) communicating
  2. B) controlling
  3. C) planning
  4. D) organizing
  5. E) decision making

Answer:  B

Explanation:  B) Controlling is the management function of keeping a company’s activities on track toward previously established goals. The nature of control varies from directly intervening in a process to modifying policies or systems in a way that enables employees to reach their objectives.

Page Ref: 154

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

69) The criteria against which performance is measured are referred to as ________.

  1. A) standards
  2. B) tools
  3. C) controls
  4. D) measures
  5. E) frameworks

Answer:  A

Explanation:  A) Standards refer to the criteria against which performance is measured. Managers set standards in the first step of the control cycle.

Page Ref: 155

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

70) Benchmarking refers to ________.

  1. A) comparing performance results between work groups in the organization
  2. B) determining departmental standards of performance
  3. C) establishing a timeline to determine efficiency
  4. D) balancing process and performance data within the company
  5. E) comparing process and performance data from other companies

Answer:  E

Explanation:  E) A common approach to setting standards is benchmarking. It involves collecting and comparing process and performance data from other companies.

Page Ref: 155

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

71) ________ is a measure of how closely a product conforms to predetermined standards and customer expectations.

  1. A) Productivity
  2. B) Yield
  3. C) Quality
  4. D) Efficiency
  5. E) Structure

Answer:  C

Explanation:  C) Quality is a measure of how closely a product conforms to predetermined standards and customer expectations. It is one of the most important performance variables that fall under managerial control.

Page Ref: 155

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

72) Balanced scorecard is a method of ________.

  1. A) creating schedules for non-routine organizational tasks
  2. B) monitoring the performance from multiple perspectives
  3. C) evaluating the external threats of an organization
  4. D) documenting the strategic goals of an organization
  5. E) monitoring the external opportunities of an organization

Answer:  B

Explanation:  B) Balanced scorecard is a method of monitoring the performance from four perspectives: finances, operations, customer relationships, and the growth and development of employees and intellectual property.

Page Ref: 156

Difficulty:  Easy

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

73) ________ skills are required to understand others and to interact effectively with them.

  1. A) Technical
  2. B) Decisional
  3. C) Conceptual
  4. D) Administrative
  5. E) Interpersonal

Answer:  E

Explanation:  E) Interpersonal skills are required to understand other people and to interact effectively with them.

Page Ref: 157

Difficulty:  Easy

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

74) ________ is the most important and pervasive interpersonal skill that managers use.

  1. A) Communication
  2. B) Evaluation
  3. C) Analytic ability
  4. D) Negotiation skill
  5. E) Technical skill

Answer:  A

Explanation:  A) Communication is the most important and pervasive interpersonal skill that managers use. Effective communication not only increases a manager’s and an organization’s productivity but also shapes the impression made on colleagues.

Page Ref: 157

Difficulty:  Easy

AACSB:  Communication Abilities

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

75) Which of the following skills refer to the ability and knowledge to perform the mechanics of a particular job?

  1. A) cognitive skills
  2. B) technical skills
  3. C) conceptual skills
  4. D) decisional skills
  5. E) organizational skills

Answer:  B

Explanation:  B) Technical skills refer to the ability and knowledge to perform the mechanics of a particular job.

Page Ref: 158

Difficulty:  Easy

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

76) Which of the following is the best example of a technical skill that managers must possess?

  1. A) capability of making accurate decisions on issues
  2. B) ability to get along well with the subordinates
  3. C) ability to prepare a formal profit and loss statement
  4. D) ability to collaborate well with workers
  5. E) capability to understand the relationship between parts and whole

Answer:  C

Explanation:  C) A person who knows how to operate a machine, prepare a financial statement, or use a web content management system has technical skills. Technical skills refer to the ability and knowledge to perform the mechanics of a particular job.

Page Ref: 158

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

77) ________ skills refer to technical skills in information gathering, data analysis, planning, organizing, and other aspects of managerial work.

  1. A) Collaborative
  2. B) Decisional
  3. C) Conceptual
  4. D) Administrative
  5. E) Interpersonal

Answer:  D

Explanation:  D) Administrative skills are technical skills in information gathering, data analysis, planning, organizing, and other aspects of managerial work.

Page Ref: 158

Difficulty:  Easy

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

78) Which of the following is an example of an administrative skill that managers possess?

  1. A) ability to make correct hiring decisions
  2. B) being skillful in information gathering
  3. C) being skillful in operating machines
  4. D) ability to understand others’ feeling
  5. E) having a sense of empathy with subordinates

Answer:  B

Explanation:  B) Administrative skills refer to the technical skills in information gathering, data analysis, planning, organizing, and other aspects of managerial work.

Page Ref: 158

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

79) ________ skills refer to the ability to understand the relationship of parts to the whole.

  1. A) Interpersonal
  2. B) Conceptual
  3. C) Technical
  4. D) Administrative
  5. E) Decision-making

Answer:  B

Explanation:  B) Conceptual skills refer to the ability to understand the relationship of parts to the whole. Managers need conceptual skills to visualize organizations, systems, markets, and solutions, both as complete entities on their own and as interrelated pieces of a whole.

Page Ref: 158

Difficulty:  Easy

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

80) Systems thinking ability refers to the ability to understand the relationship between components and the larger out put. Systems thinking ability is an example of a(n) ________ skill.

  1. A) interpersonal
  2. B) conceptual
  3. C) technical
  4. D) administrative
  5. E) decision-making

Answer:  B

Explanation:  B) Conceptual skills refer to the ability to understand the relationship of parts to the whole. Systems thinking ability, as described in the question, is a conceptual skill.

Page Ref: 158

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

81) Managers need conceptual skills to ________.

  1. A) perform such tasks as operating a machine and preparing a financial statement
  2. B) gather information relating various managerial and non-managerial issues
  3. C) accurately perform the mechanics of a particular job
  4. D) understand other people and to interact effectively with them
  5. E) visualize elements both as complete entities on their own and as interrelated pieces of a whole

Answer:  E

Explanation:  E) Managers need conceptual skills to visualize organizations, systems, markets, and solutions—both as complete entities on their own and as interrelated pieces of a whole.

Page Ref: 158

Difficulty:  Moderate

Chapter LO:  6

Classification:  Concept

 

82) ________ skills refer to the ability to identify a decision situation, analyze the problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results.

  1. A) Interpersonal
  2. B) Technical
  3. C) Administrative
  4. D) Decision-making
  5. E) Interpersonal

Answer:  D

Explanation:  D) Decision-making skills refer to the ability to identify a decision situation, analyze the problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results.

Page Ref: 158

Difficulty:  Easy

Chapter LO:  6

Classification:  Concept

 

83) The first step in a decision-making process is to ________.

  1. A) generate options or alternatives
  2. B) select the best or optimum option
  3. C) recognize and define the problem
  4. D) implement the decision
  5. E) monitor the results

Answer:  C

Explanation:  C) The first step in a decision-making process is to recognize and define the problem or opportunity. Most companies look for problems or opportunities by gathering customer feedback, conducting studies, or monitoring such warning signals as declining sales or profits, excess inventory buildup, or high customer turnover.

Page Ref: 158

Difficulty:  Easy

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

84) Cite an example of a person who holds a managerial position and categorize the various activities that he or she performs into informational roles, decisional roles, and interpersonal roles.

Answer:  Students may consider a manager who is familiar to them, such as the dean of their shool. Students may list the various tasks that he or she performs and categorize them into different types of roles. Student answers will vary due to the nature of this question.

Page Ref: 141; 142

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

85) Explain the decisional roles of managers.

Answer:  Managers up and down the organizational ladder face an endless stream of decisions. Many of these decisions are fairly routine, such as choosing which of several job candidates to hire or setting the prices of new products. Other decisions, however, might occur only once or twice in a manager’s career, such as responding to a product-tampering crisis or the threat of a hostile takeover. Some decisions are made after extensive information gathering and analysis; others have to be made on the spot, with little but judgment and intuition to guide the manager’s choice.

Page Ref: 143

Difficulty:  Moderate

Chapter LO:  1

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

86) Compare and contrast mission statements, vision statements, and values statements.

Answer:  A mission statement is a brief statement of why an organization exists. In other words, what the organization aims to accomplish for customers, investors, and other stakeholders. A vision statement is a brief and inspirational expression of what a company aspires to be. Values statement is a brief articulation of the principles that guide a company’s decisions and behaviors.

Page Ref: 144; 145

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

87) Compare and contrast an organization’s strengths with opportunities.

Answer:  Strengths are positive internal factors that contribute to a company’s success, which can be anything from a team of expert employees to financial resources to unique technologies. Opportunities are positive situations that represent the possibility of generating new revenue. Opportunities are not under an organization’s control, whereas strengths can be controlled by the organization. A respected brand name is a strength, whereas a booming economy is an opportunity.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

88) Compare and contrast quantitative forecasts with qualitative forecasts.

Answer:  Managerial forecasts fall under two broad categories: quantitative forecasts, which are typically based on historical data or tests and often involve complex statistical computations, and qualitative forecasts, which are based more on intuitive judgments. Neither method is foolproof, but both are valuable tools and are often used together to help managers fill in the unknown variables that inevitably crop up in the planning process.

Page Ref: 146

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

 

89) Describe ‘SMART’ goals with an example.

Answer:  Business people are often advised to make their goals and objectives “SMART,” as in specific, measurable, attainable, relevant, and time limited. For example, “substantially increase our sales” is a poorly worded statement because it doesn’t define what substantial means or when it should be measured.

Page Ref: 147

Difficulty:  Easy

Chapter LO:  2

Course LO:  Describe the skills and functions of management

Classification:  Concept

90) Briefly describe the organizing function of management.

Answer:  Organizing is the process of arranging resources to carry out an organization’s plans. It is the second major function of managers. To organize effectively, managers must think through all the activities that employees perform, as well as all the facilities and equipment employees need in order to complete those activities.

Page Ref: 148

Difficulty:  Easy

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

91) Compare and contrast the roles of top managers and middle managers.

Answer:  Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions. Top managers also make long-range plans, establish major policies, and often represent the company to the media, the community, and other stakeholders.

Middle managers have similar responsibilities but on a smaller scale, such as for an individual division or facility. Managers at this level report upward to top executives, while first-line managers report to them. Middle managers play the essential role of translating strategic goals and objectives into the actions that allow the company to meet those targets.

Page Ref: 149

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

 

92) Do you think middle managers are essential to organizations? Explain your answer.

Answer:  The term middle management is sometimes used disparagingly, giving the impression that middle managers are people who clog up the works without adding much value. Some highly regarded opinion leaders have gone so far as to blame such managers for much that ails the modern corporation. Many companies have also flattened their organizational structures by removing one or more layers of middle management. However, middle managers play the essential role of translating strategic goals and objective into the actions that allow the company to meet those targets. Students may agree or disagree with the idea of having middle managers. Student answers will vary due to the nature of this question.

Page Ref: 149

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  3

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

93) Compare and contrast cognitive intelligence and social intelligence.

Answer:  Cognitive intelligence involves reasoning, problem solving, memorization, and other rational skills. Obviously, leaders need a sufficient degree of cognitive intelligence to understand and process the information required for planning and decision making in the jobs. Social intelligence involves looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own. Socially adept managers have a knack for finding and building common ground with people of all kinds.

Page Ref: 150; 151

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

94) Explain how democratic leaders function.

Answer:  Democratic leaders delegate authority and involve employees in decision making. Also known as collaborative leaders, these managers invite and seek out input from anyone in the organization who can add insight to the decision-making process. This style is often called participative management.

Page Ref: 152

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

95) Do you think having a positive culture is important to an organization? Explain your answer.

Answer:  Organizational culture refers to a set of shared values and norms that support the management system and that guide management and employee behavior. Culture can be a negative or a positive force in an organization, and managers set the tone by establishing expectations, defining rules and policies that shape behavior, and acting as role models. Positive cultures create an environment that encourages employees to make smart decisions for the good of the company and its customers. So it is important for organizations to make a positive culture.

Page Ref: 153; 154

Difficulty:  Moderate

Chapter LO:  4

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

96) Consider an automobile manufacturing company that manufactures low cost cars. Construct a model of control cycle for this organization.

Answer:  The students should design a model based on the framework given in the text. The cycle is described in exhibit 7.7. Student answers will vary due to the nature of this question.

Page Ref: 154; 155

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

97) Explain a balanced scorecard.

Answer:  Balanced scorecard is a method of monitoring the performance from four perspectives: finances, operations, customer relationships, and the growth and development of employees and intellectual property. It is used by managers in the second step of the control cycle.

Page Ref: 156

Difficulty:  Moderate

Chapter LO:  5

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

 

98) Briefly explain the four basic categories of management skills.

Answer:  The four types of skills are explained below.

(1) Interpersonal skills: These are skills required to understand other people and to interact effectively with them.

(2) Technical skills: They refer to the ability and knowledge to perform the mechanics of a particular job.

(3) Conceptual skills: They refer to the ability to understand the relationship of parts to the whole.

(4) Decision-making skills: They refer to the ability to identify a decision situation, analyze the problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results.

Page Ref: 157; 158

Difficulty:  Moderate

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Concept

 

99) Compare and contrast technical skills and conceptual skills.

Answer:  Technical skills refer to the ability and knowledge to perform the mechanics of a particular job. A person who knows how to operate a machine, prepare a financial statement, or use a web content management system has technical skills. Conceptual skills refer to the ability to understand the relationship of parts to the whole. Managers need conceptual skills to visualize organizations, systems, markets, and solutions – both as complete entities on their own and as interrelated pieces of a whole.

Page Ref: 158

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Synthesis

 

100) Think of a situation where you have used decision-making skills to solve a problem. Analyze the situation based on the decision-making steps discussed in the text.

Answer:  The steps described in the text are the following:

(1) Recognize and define the situation

(2) Identify options

(3) Analyze options

(4) Select the best option

(5) Implement the decision

(6) Monitor and evaluate the results

Students should relate the decision that they have made to these steps.

Page Ref: 158; 159

Difficulty:  Difficult

AACSB:  Reflective Thinking Skills

Chapter LO:  6

Course LO:  Describe the skills and functions of management

Classification:  Synthesis