BUSI 101 Exam 2 solutions complete answers

BUSI 101 Exam 2 solutions complete answers 

 

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

 

The reason a professional such as a lawyer or doctor would incorporate his/her business is:

 

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months, the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which was more than their initial investment in the company. Jamie and Maria can:

 

The form of business ownership best suited to raising large amounts of money for expansion is the:

 

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

 

Compared to sole proprietorships, an advantage of partnerships is their ability to obtain more financial resources.

 

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

 

One drawback of franchises is that they have a higher failure rate than other types of business ventures.

 

Jayne started a small bakery in a resort town. She was certain she had the ideal location, with plenty of hotels and inns within walking distance of her establishment. She planned to use her grandmother's recipes, using only the finest ingredients for her upscale resort customers. During the first week of business, she was disappointed with lackluster sales. When she drove past the regular breakfast-style restaurants and even the Starbucks, she noticed they were rather bustling. Jayne most likely:

 

Enterprise zones are:

 

The Making Ethical Decisions box "Should You Stay or Should You Go?" addresses a dilemma worthy of consideration. It describes:

 

One of the challenges of running a home-based business is:

 

When Kelsey began the Cookie Kitchen, she located the operation at a small business center to get help with accounting, legal advice, and secretarial help for a very low cost. Electing to join the incubator helped her company to survive because it provided assistance while her company was in its infancy.

 

The principles of management of a large business are similar to the principles of management of a small business.

 

Many entrepreneurs got the idea for their own business from their experience of working for others.

 

Felicia decided to work for a floral design studio before opening her own shop. This approach to learning the business is okay, but her time would be put to better use starting her own business.

 

Leadership, coaching, and morale building are all part of a manager's _________ skills.

 

Management is more progressive today. There is more emphasis on:

 

Harper is a sales rep for an eyeglass company. The company is always on the cutting edge of trendy designs. In her job, she frequently relies on the marketing department to provide her with information and materials. When using customer satisfaction to judge the success of their company, Harper's managers should:

 

Gabriella is responsible for hiring, motivating, and retaining the best employees for her organization. Gabriella is in charge of:

 

Good leaders motivate workers and create the environment for workers to motivate themselves.

 

When setting standards used in controlling, it is better to simply state general goals such as "better quality" or "higher levels of consumer satisfaction" than it is to spend a lot of time and effort developing more specific standards.

 

The traits that characterize participative leaders include flexibility, good listening skills, and empathy.

 

The question of how to implement change within an organization is the responsibility of the firm's CEO.

 

Zach recently got his Ph.D. in analytical chemistry and was fortunate to be asked to join a lab at a prestigious eastern university. After a month on the job, he remarked to another graduate student at his former university that the spirit of help and cooperation at the lab was remarkable. He enjoyed going to work each day and sometimes exchanged calls with other lab partners in the evening with ideas to improve each other's experiments. Zach remarked, "Now I know why this lab is considered one of the best in the nation!" Zach is referring to:

 

In a bureaucratic organization:

 

Lockdown Industries produces a variety of anti-crime and safety products such as burglar alarms, smoke detectors, surveillance cameras, and specialty locks. Lockdown sells to households, businesses, and government agencies. They have found that each market requires a different marketing strategy. Lockdown would probably benefit from departmentalization by:

 

Chang is a project manager at Paradox Industries. He is able to borrow specialists from the organization on a regular basis to assist in major projects. After the project ends, the specialists return to their functional units to await new assignments. Paradox Industries utilizes a:

 

Looking at a traditional organization chart, you will view who reports to whom; you will have a sense of each person's authority and responsibility, and the type of work that they perform for the organization.

 

A bureaucracy is designed to be customer focused.

 

The team experts in a matrix organization remain part of the traditional line-and-staff structure.

 

Weber believed that employees should be empowered to make their own decisions.

 

The goal of lean manufacturing is to:

 

__________ has transformed the purchasing function in recent years by helping firms find the best suppliers and the best prices.

 

Operations management planning does not include decisions about:

 

Megatronics, Inc., obtains computer components from a variety of suppliers and puts them together according to customer specifications to create custom-made computers. This process is an example of:

 

Solarsys Aeronautics was awarded a contract to build a large lab module that will be attached to a new space station. The module is approximately 48 feet long, 17 feet in diameter, and weighs over 60 tons. Solarsys should use an assembly-line plant layout to produce this module.

 

One important issue with respect to managing the operation of a business is to make certain that customers leave feeling as though they had a good experience with your service and with your company in general.

 

Companies that achieve lean manufacturing use less of everything (raw materials, labor, etc.) to produce the same amount of products.

 

One key to the resurgence of U.S. firms as world-class competitors has been the implementation of a focus on quality.

 

The corporation is the most common form of business ownership.

 

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

 

Few people today start their own business.

 

Once a business is established, it's almost impossible to change from one form of business ownership to another.

 

When two or more people legally agree to become co-owners of a business, the form of business is called a partnership.

 

A legal entity with authority to act and have liability separate from its owners is called a partnership.

 

Corporations represent 20 percent of all the businesses in the U.S. and earn 81 percent of the total U.S. business receipts.

 

A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish.

 

The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.

 

It is usually easy to start and end a sole proprietorship.

 

The profits of a sole proprietorship are taxed as the personal income of the owner.

 

The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.

 

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

 

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

 

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

 

A drawback of sole proprietorships is that they usually have limited access to additional financial resources.

 

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

 

If a sole proprietorship fails, the owner may lose whatever was invested in the business; however, the owner's personal assets are not at risk.

 

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

 

A difficulty that sole proprietors try to overcome is the fact that they have trouble competing with large firms for expert talent. Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.

 

Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they need not worry about a court of law requiring them to sell off personal assets to pay for the debts of the firm.

 

Eric wants to start a business. He is attracted to the idea of being his own boss, and wants to get started with a minimum of expense and hassle. He is confident in his abilities, and the market he can draw from, so he is not particularly worried about financial risks. All of these factors suggest that Eric may favor starting his business as a sole proprietorship.

 

Sandy Beech, a talented fashion designer who wants to start her own women's swimwear and beach towel line, is trying to decide which form of business ownership is right for her. As a young mother who aspires to send her children to college some day, she does not want to jeopardize her savings account in any way. In order to overcome these risks, Sandy should start her business as a sole proprietorship.

 

Rocky Rhodes is convinced that he has a great idea for a new business. Unfortunately, the type of business he wants to start would require a fairly high initial investment and Rocky has a poor credit rating and very little personal wealth. Rocky would be unlikely to find success if he organized his business as a sole proprietorship.

 

A general partner takes an active role in the management of the business.

 

All partners in a general partnership have limited liability for the debts of their firm.

 

In a general partnership, all partners share in management of the business and in the liability for the firm's debts.

 

In a general partnership, all partners are entitled to an equal share of the firm's profits.

 

Limited partnerships are just like general partnerships, except that they are partners for a limited time period.

 

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

 

A limited partnership consists of one or more general partners and one or more limited partners.

 

Although shares of master limited partnerships can be purchased on one of the national stock exchanges, these companies are taxed like partnerships.

 

The Uniform Partnership Act is law in every state except Louisiana.

 

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.

 

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business.

 

A recent study showed that partnerships are more likely to fail than sole proprietorships.

 

A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision.

 

One of the major disadvantages of a partnership is that profits must be divided equally.

 

A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts.

 

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

 

One advantage of a partnership is that there is a simple process for partners to terminate their business.

 

Compared to sole proprietorships, an advantage of partnerships is their ability to obtain more financial resources.

 

Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.

 

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

 

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

 

In a limited partnership, the general partners should encourage the limited partners to take a more active role in the operations of the business. After all, the limited partner has comparable liability in the business, even though he/she may not be a partner for as long a period of time as the general partners.

 

If a partner in a limited partnership dies, the partnership ceases to exist.

 

In the Figure 5.2, the authors suggest that potential partners discuss the types of skills that each brings to the business. Partners with complementary skills may enhance the business.

 

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a wellwritten partnership agreement.

 

According to Figure 5.2, attributes such as trust and integrity are not something you should get overly concerned about when selecting partners, due to the fact that this is a business decision, not a friendly game of golf.

 

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

 

Ted and Mark are partners in a dry cleaning business. They would like their brother Todd to join them. Unfortunately, partnership law states that only two partners can participate in a partnership.

 

Connie is a general partner in a retail cookie store. Her personal assets are legally protected from the debts of the business.

 

Two of Diana's friends have approached her about starting a new business. Diana is willing to invest money in the business and share in its profits, but she has no desire to be involved in the day-to-day management of the company, nor is she willing to risk any amount beyond her initial investment. Diana's preferences suggest that she prefers a general partnership form of business ownership.

 

Emma Pebble and Chase Stone formed a partnership in a landscape business. Under their arrangement, Emma actively manages the company and assumes unlimited liability for the firm's debts. Chase has invested several thousand dollars of his money with plans to share in the profits, but does not actively make management decisions, nor will he assume liability beyond his initial investment. Emma and Chase participate in a limited partnership.

 

Sergio has agreed to become a partner in his brother's horse-breeding business. Since he provided 30 percent of the money to start the firm and built an air-conditioned barn, he is entitled to 30 percent of any profits the firm earns during its first year of operation.

 

After spending a summer "down under," two Oregon friends, Rick and Mick, created a general partnership to import emu from Australia to the U.S. After a year, Rick found himself at the mercy of Mick, who seemed to keep the books and seldom share the financial results, even though Rick was out selling the emu idea to farmers and ecologically conscious consumers and shipments were increasing. As their consultant, one of the first things that you inquire about is whether they are familiar with the UPA (Uniform Partnership Act), specifically the right to participate in managing the operations of the business.

 

Marco is a limited partner in an e-commerce company. As a limited partner, Marco can be involved with the company for a maximum of five years.

 

Last night as you scrolled through the TV channels to find an action flick, you came across an old movie with tough guy James Cagney, called "Yankee Doodle Dandy." Although not particularly your kind of movie, you stayed on that channel for a few minutes because Cagney and another guy were in partnership together. They were arguing over who was the senior partner and who was the junior partner, even though, clearly, they started the business at the same time. If you were brought on board as their present-day business advisor, you would explain to them that all partnerships have at least one general partner (known as the senior partner) and one limited partner (known as the junior partner).

 

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

 

In today's economy, only large business enterprises should operate as corporations.

 

The owners of a corporation are known as general corporate partners.

 

A corporation can raise financial capital by selling shares of stock to interested investors.

 

Stockholders in a corporation accept unlimited liability for the corporation's debts.

 

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

 

When one of the owners of a corporation dies, the corporation legally ceases to exist.

 

Corporations are easy to start and easy to terminate.

 

A disadvantage of corporations is that they generally require extensive paperwork.

 

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

 

Stockholders in a corporation normally exert a significant degree of control over the company's daily operations.

 

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

 

Stockholders in a corporation exert a significant degree of control over the company's daily operations.

 

Stockholders in a corporation have limited liability.

 

Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company.

 

One advantage of corporations is that the initial cost of organization is usually lower than for other forms of business ownership.

 

States may levy special taxes on corporations that are not imposed on other businesses.

 

Most states have legal restrictions that prevent individuals from incorporating.

 

One reason individuals incorporate is to obtain the advantage of limited liability.

 

An alien corporation does business abroad but is chartered in the U.S.

 

A domestic corporation does business in the state in which it's chartered.

 

A foreign corporation is chartered in a country outside the U.S.

 

Delaware is a popular state in which to seek incorporation due to its reduced costs and other perks.

 

A closed corporation is one whose stock is held by a few people and is not available to the general public.

 

A nonprofit corporation does not seek personal profit for its owners.

 

A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.

 

A multinational corporation is a firm that operates in several countries.

 

To change ownership in a corporation you simply sell your stock to someone else.

 

Stock options are the right to purchase shares of the corporation for a fixed price.

 

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

 

It is said that corporations have perpetual life.

 

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income, thus avoiding the problem of double taxation.

 

By filling out the correct paperwork annually, any corporation can qualify to be classified as an S corporation.

 

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

 

An S corporation has fewer ownership rules than a limited liability company.

 

The S corporation form of business would be particularly attractive to fast growing companies that want to attract thousands of new stockholders.

 

A limited liability company is similar to an S corporation, but without the special eligibility requirements.

 

Limited liability companies have both flexibility in tax treatment of earnings and limited liability protection for owners.

 

One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership.

 

Like stockholders of a C corporation, owners of a limited liability company (LLC) are free to sell their ownership without the approval of other members.

 

The limited liability company requires a minimum of 10 members.

 

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

 

Public utilities are examples of quasi-public corporations.

 

In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.

 

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

 

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

 

If a corporation distributes after-tax profits to its stockholders in the form of dividends, the government considers these distributions as part of each stockholder's personal income. Stockholders pay taxes on these distributions.

 

If a corporation has after-tax profits of $360,000, and elects to distribute this amount in the form of dividends to its stockholders, these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution.

 

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

 

The major differences between an S corporation and a limited liability company are limits on the number of owners and the citizenship status of individuals who are owners.

 

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

 

A group of medical doctors are interested in incorporating their business. There is no advantage due to the costs involved.

 

Nutty Dough is a small chain of donut shops currently owned and operated by a group of seven partners. The owners think that their chain has the potential for rapid growth, but several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business.

 

Chad recently invented Wave-Aerobics, a next generation watercraft that can safely perform water stunts similar to an amusement park ride. As the founder of a fast growing business, you think his goal of incorporating, "to remain in steadfast control of the firm's operations for an indefinite number of years," is good strategy.

 

Mojo Motors is a small conventional corporation with only 212 stockholders. Eleven of the stockholders are citizens of Mexico, and eight others are citizens of Canada. Due to its size and diversity in ownership, you would recommend that Mojo Motors change to an S corporation.

 

The owners of Idle Time Gaming Company would like to become an S corporation. Unfortunately, their lawyer advised them that they do not meet some of the requirements necessary to qualify as an S corporation. An alternative form of business that would give them similar advantages is a limited liability company.

 

The owners of California Canines, a firm that designs and manufactures coats, sweaters, jackets, and rainwear for dogs, want to organize as an LLC. Two members are college students and two others are thirty-something couples with young children. This is good strategy because each member can choose to commit to limited or unlimited liability.

 

A few years back, your friends who are horse fanatics inherited several acres of land that they turned into a retirement haven for race horses. Peaceful Pastures was recently incorporated as a limited liability company. The members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits—not just on the salaries they pay themselves.

 

After a successful five years, Peaceful Pastures, LLC (a retirement ranch for race horses), thinks it may be able to attract donations from animal activist groups and even the federal government if it becomes a nonprofit corporation. As its business advisor, you explain that as a nonprofit corporation, the owner(s) may earn a salary but the business should not seek after-tax profits.

 

Chipper's Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its 18-hole golf course. After talking with her banker, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation.

 

When two firms join together to form one company, it is called a merger.

 

The three major types of mergers are acquisition, joint, and connective.

 

An acquisition is when one company buys the property and obligations of another company.

 

Taking a firm private involves converting a firm from a corporation to a general partnership.

 

If firms wish to gain market share in their current market, they would consider a conglomerate merger.

 

The purpose of a conglomerate merger is to diversify operations and investments.

 

A merger between two businesses in different stages of related businesses is known as a vertical merger.

 

A horizontal merger refers to a merger between two companies that serve entirely different markets.

 

A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets.

 

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

 

When a group of investors take a firm private, they purchase all the company's outstanding stock.

 

In recent years, foreign firms were reluctant to merge with or acquire American corporations.

 

A merger is a mutual agreement where a firm joins together with another firm, whereas an acquisition is when one firm purchases the assets and obligations of another firm.

 

One reason that a firm would choose to merge or acquire another company would be to gain market share.

 

One reason that a firm may choose to merge or acquire another company would be diversity of products or services.

 

The strategy of a leveraged buyout is used when employee talent is at a minimum.

 

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

 

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.

 

Hole-In-One Golf Company announced plans to purchase the property and assume the obligations of Champion Golf, Inc., one of its major competitors. Hole-In-One Golf Company's plans are an example of a merger.

 

Two competitors, Stanley's Food Mart and Bluejay Groceries, recently issued a joint announcement stating their decision to merge. The announcement claimed that the new firm would have more financial resources, which would enable it to expand services and broaden offerings to consumers. This proposed merger is an example of a horizontal merger.

 

Tech Solutions, Inc., a manufacturer of laptops, is considering a merger with Outtel, a leading producer of microprocessors and other computer chips. Tech Solutions believes such a merger would give them a guaranteed source of needed components, and enable them to have better control over quality. If this merger occurs, it would be an example of a horizontal merger.

 

Cory Raider is leading a group of stockholders who want to take the Bigbux Corporation private. If Cory's group succeeds, Bigbux's stock will no longer be available to investors on the open market.

 

Due to several years of poor performance, Scrappy's Metal Fabrication, Inc., is closing. Through the use of debt financing, workers plan to purchase the company's stock from current shareholders in order to buy the firm, improve company performance, and save jobs.

 

A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee.

 

A franchise may be organized as a sole proprietorship, partnership, or corporation.

 

Franchisees are not always pleased with management regulations handed down from the franchisor. In some cases, franchisees have been known to band together to express concern over marketing and management direction.

 

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

 

The most popular businesses for franchising are restaurants.

 

In a franchise arrangement, ownership remains in the hands of the franchisor.

 

One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor.

 

Franchisees must follow more rules, regulations, and procedures than if they operated independently owned businesses.

 

The coattail effect refers to the burden of corporate rules and regulations on franchisees.

 

The coattail effect refers to inevitable repercussions on your business if a fellow franchisee should fail.

 

One drawback of franchises is that they have a higher failure rate than other types of business ventures.

 

The franchisee pays the franchisor a share of profits or a percentage commission on sales, known as a royalty.

 

Many franchisors have rules that prohibit franchisees from sponsoring their own websites.

 

Because of the growth of minority-owned businesses in the U.S., franchisors are becoming more focused on recruiting minority franchisees.

 

It is impossible to run a franchise completely from home.

 

Franchising is popular in the United States, but legal barriers have limited its popularity in foreign countries.

 

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

 

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

 

Franchisors sometimes pay reverse royalties to franchisees if it is evident that the franchisor's Internet sales have negatively impacted the profits of traditional bricks and mortar franchisee businesses.

 

In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.

 

Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation.

 

It is correct to say that if a franchisor expects a 6% royalty fee on revenue, the franchisor earns 6 cents on each dollar of revenue the franchisee generates.

 

The financial advantage to the parent company (the franchisor) in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

 

If a firm is advertising that it is selling franchise opportunities, the prospective franchisee can be assured that the government has performed due diligence on this company, and has deemed it a safe investment.

 

If a franchisee decides he wants out of the business, he is free to close up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement.

 

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation.

 

According to the Spotlight on Small Business box, restaurants aren't the only franchises attractive to potential franchisees. Some prefer a low-cost and easily reproducible business model.

 

In the Adapting to Change box, digital franchising is an impossible feat and could not be successful.

 

Joshua wants to run his own business. A friend suggested that an inexpensive way to get started is to buy a franchise, where he will have the freedom to run it exactly as he sees fit. As a recent student of business, you concur with this advice.

 

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland, Ohio. With the franchise fee behind her, she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland area.

 

Liam owns a Far Horizons Travel Agency franchise. As a franchisee, Liam is guaranteed the right to retain all of his franchise's revenues and profits.

 

Leanne, a franchisee, runs a chain of small restaurants with a well-known name. Due to her hard work and people skills, her locations are doing quite well. She has noticed that several other franchisees in the same franchise system have let their restaurants deteriorate, especially in terms of lack of upgrades. Leanne should be concerned about this trend, since it eventually could affect her own business.

 

Maria is already a successful franchisee with Nite Lite, a chain of "no frills" motels that provide clean rooms and good service at affordable rates. The motel she currently operates is located in Texas, but she is considering an opportunity to open another Nite Lite motel in Canada. Although her costs of operating in a foreign nation may be higher, she has the benefit of an expanding market and less competition.

 

A well-known franchised food chain was brought to its knees when several customers got sick from tainted beef. Although the food chain recovered due to its quick and consistent action, several franchisees sued the parent company for loss of sales. The franchisees experienced the coattail effects of the bad publicity this event received.

 

Alex's uncle recently passed away and left him an American Dream Real Estate franchise business. Alex is not a licensed agent or broker, nor does he know anything about the real estate business. He plans to sell his American Dream franchise to his friend Derek, who recently got his real estate license. One of the advantages of owning a franchise is that you can decide to sell out to anyone you believe is suitable for the business.

 

Your friend Brett called to tell you he just heard a sales pitch for a new website development franchise where "he can get in for a few thousand dollars." He wants to know if you are ready to invest too. Although you lack expertise in graphic design or html programming, this should be a safe investment since it is already advertised as a franchise system. It's probably too good to pass up.

 

A cooperative is simply another name for a corporation.

 

A cooperative consists of people with similar needs who pool their resources for mutual gain.

 

It is not unusual for members of cooperatives to work for and help manage their cooperative.

 

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

 

The companies Blue Diamond, Ocean Spray, and Land O'Lakes are well-known cooperatives.

 

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

 

At one time there were many farm cooperatives, but more recently other forms of business ownership have replaced them.

 

Originally, food cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things.

 

Jocelyn belongs to a food cooperative in her community. As a member, she can expect to have a vote in the election of the cooperative's board of directors.

 

Jane has always disliked the notion that the customers, managers and workers of a business are separate individuals with competing goals. She has joined with many other people in her community who share this view to become a member, and part owner, of a child care center. Jane and the other members operate the center for their own benefit, and each is expected to work at the center at least 12 hours each month. The type of organization Jane belongs to is known as a joint venture.

 

The __________ is the most common form of business ownership.

 

A ___________ is a form of business that is owned, and usually managed, by one person.

 

____________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

 

To many businesspeople, one of the major attractions of a sole proprietorship is:

 

The __________ is usually the easiest form of business to start and end.

 

One of the major disadvantages of a sole proprietorship is the:

 

Starting a new business as a sole proprietorship:

 

In a sole proprietorship, the profits earned by the business are:

 

With respect to taxes, the sole proprietorship:

 

A significant disadvantage of owning a sole proprietorship is the:

 

When a sole proprietor dies:

 

Unlimited liability means:

 

Any debts or damages incurred by a firm organized as a sole proprietorship are:

 

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a:

 

Which of the following statements is the most accurate? Sole proprietorships:

 

Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to:

 

Being your own boss means:

 

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

 

Maria has a lot of self-confidence and business knowledge. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to:

 

Kali owns Dog Trotters, a dog-walking business that she started to earn money after school and supplement her allowance. She planned to keep all the profits, and has kept things simple by putting a flier on the bulletin board at the local grocery store announcing that she was available to provide this service. Kali's business is a:

 

Nick wants to start his own business. Nick should consider a sole proprietorship if he:

 

Javier is the sole proprietor of a golf shop. Because he is a sole proprietor, any profit Javier's business earns is:

 

Selma owns a roofing business. She enjoys being her own boss, but her satisfaction comes at a price. Her days are filled with organizing the activities of her employees and soliciting new customers. She often misses activities with friends and family because of the obligations of running her own business. She also knows that she has unlimited personal liability for any of her firm's debts. Selma's business is organized as a(n):

 

Halle wants to start a business. She has two goals. First, given her limited personal wealth and eagerness to get started, she wants to get her business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Halle chooses a sole proprietorship, she would:

 

In a partnership, a(n) __________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.

 

A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

 

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

 

According to the Uniform Partnership Act, the three key elements of any general partnership are:

 

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

 

Compared to a sole proprietorship, which of the following is considered an advantage of a general partnership?

 

In a limited liability partnership, each partner's risk of losing personal assets is:

 

Which of the following is an advantage of a partnership?

 

When entering into a new partnership, a good strategy is to:

 

One difference between partnerships and sole proprietorships is that partnerships:

 

Which of the following statements about partnerships is most accurate?

 

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they:

 

A good reason why partners should spell out the details of their partnership arrangements in writing is:

 

A master limited partnership (MLP) is:

 

Which of the following is not a disclosure that should be part of a partnership agreement?

 

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a:

 

Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to perform his managerial duties while he is gone. As a limited partner, Finley:

 

Kristen and her brothers and sisters decided to form a partnership that specializes in home design of all types. One of their goals is to maintain the loving relationship they currently enjoy, so they are following the Model Business Corporation Act recommendations as they write the partnership agreement. Which of the following is an accurate recommendation of the Act?

 

Maya plans to open a shop specializing in foods and cultural items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. Apparently Maya wants to:

 

Zach and Mac own an auto repair business that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Zach and Mac operate as a ________.

 

Mel, Tim, and Bill agreed to partner in a small rehab business. Initially, they were enthusiastic contributors until their first project took more work than Mel initially estimated; Tim wanted morning meetings and long lunch hours; and Bill decided to go on vacation even though the project was not complete and ready to sell. As Figure 5.2 indicates,

 

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months, the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which was more than their initial investment in the company. Jamie and Maria can:

 

Randy and Mandy plan to pool their money and musical talents to form a general partnership and begin booking weekend gigs. One of the first things Randy and Mandy should do is:

 

Travis has agreed to invest $16,000 in a partnership with his sister and brother-in-law. He does not intend to actively work in the partnership, nor does he wish to risk any of his own assets other than the $16,000 he initially invests. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Travis is a ______________ in this partnership.

 

Jim is one of several general partners who own Beef 'N Beer, a small chain of restaurants located in Missouri and Illinois. Jim is interested in converting the partnership into a master limited partnership. If he convinces other partners to go along with his idea, Beef 'N Beer will:

 

Kristen and her brothers and sisters set up a design firm called Houses by Design LLP. Although key business functions are centralized, each sibling is a licensed architect that designs, builds, and installs residential and commercial buildings for his/her own clients. Unfortunately, a design created and installed for one of their clients resulted in water damage to the basement of the client's new home. The limited liability partnership:

 

A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

 

An owner of a corporation is known as a(n):

 

Which of the following statements about the operation of a corporation is correct?

 

The form of business ownership best suited to raising large amounts of money for expansion is the:

 

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

 

Compared to partnerships and sole proprietorships, a major advantage of the C (conventional) corporation as a form of business ownership is that it:

 

Which of the following is normally considered a disadvantage of the corporate form of business?

 

The board of directors for a corporation is elected by its:

 

A separation between ownership and management is most likely to occur in a:

 

One disadvantage of _________ is the initial cost of formation.

 

The form of business ownership that usually requires the most detailed record keeping is the:

 

A major advantage of S corporations is that they:

 

One reason many companies do not organize themselves as an S corporation is that this form of business:

 

To qualify as an S corporation, a company must:

 

The income generated by S corporations:

 

_____________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

 

One disadvantage of a limited liability company is that it:

 

One reason limited liability companies have become so popular is that they:

 

Earnings of C corporations can be:

 

Which of the following is an attractive benefit of a corporation?

 

The reason a professional such as a lawyer or doctor would incorporate his/her business is:

 

Which of the following statements about S corporations is most accurate?

 

The organizational structure of a corporation permits:

 

Which of the following statements is the most accurate? A foreign corporation:

 

The S corporation is likely to be less popular in the future because:

 

Compared to the C corporation, the limited liability company is an attractive form of business ownership because:

 

Double taxation means:

 

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

 

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails. One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n):

 

Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria is a(n) ______________ of this company.

 

Dane is a stockholder in SmallWorld, Inc., a C corporation that manufactures amusement park rides. The company recently lost a major court decision and will probably be forced into bankruptcy. In fact, the damages awarded are so great that, even if all company assets are sold and the proceeds are used to pay its debts, SmallWorld is likely to still owe money to its creditors. If SmallWorld goes bankrupt, Dane and the other stockholders will:

 

Ramon lives in Mexico City and is a Mexican citizen. He has several friends in the United States who own shares in an S corporation. Ramon would like to invest in this company. Ramon:

 

Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C corporation, but the owners are interested in switching to be an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

 

Emily wants to open a chain of hair styling salons and hopes to attract investors to help finance growth. She considered forming a C corporation, but wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Emily can satisfy her objectives by setting up a(n):

 

A few years back, your three U.S. born friends that live in the State of Wyoming inherited a dude ranch that they plan to turn into a retirement haven for race horses. Peaceful Pastures wants to open its doors by spring of 2018. After attending several small business seminars, the three friends are certain they need limited liability. The high-risk, labor-intensive business will require a sizeable investment including an air-conditioned barn, several fenced-in pastures and loads of animal feed. You recently heard that one form of business ownership requires owners to pay self-employment taxes on the entire amount of earnings. You are fairly certain this is one tax liability your friends would like to avoid. You recommend:

 

Double taxation is experienced by corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation?

 

Khalid is a 39-year-old married business owner who runs a dry cleaning service with three locations. His personal obligations are the home that he owns with his wife who works for a well-known insurance company; the health needs of his family; and his commitment toward saving for the future higher education needs of his three children. Khalid knows that two of his locations require a large infusion of cash to pay for new and expensive dry cleaning equipment. Although his wife's job provides the family with health insurance, it also places the family in a higher income tax bracket. Khalid would certainly like to minimize his taxes. Which of the following forms of business ownership would you suggest for Khalid? Khalid should consider:

 

One reason that companies participate in mergers and acquisitions is:

 

A ____________ is two firms combining to form one company.

 

A(n) _________ occurs when one company buys the property and obligations of another company.

 

Three types of corporate mergers are:

 

A ______________ merger unites firms at different stages of related businesses.

 

When two companies in the same industry agree to become one firm, the result is called a:

 

When two companies in completely unrelated industries agree to become one firm, the result is called a:

 

A conglomerate merger will:

 

One result of taking a firm private is:

 

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n):

 

If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as:

 

The difference between a merger and an acquisition is:

 

When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ____________ merger.

 

A merger involving a commercial bakery and a grocery retailer would be an example of a:

 

A merger involving a software producer and a clothing manufacturer is an example of a:

 

In a leveraged buyout, the managers of a firm, its employees, or other investors:

 

When investors successfully take a firm private, the firm's stock is:

 

Modern Screen Entertainment, Inc., recently bought Star Power Pictures, Inc., for an undisclosed amount of money. It now owns all of Star Power Picture's properties and obligations. This is an example of a(n):

 

Continental Foods is considering a conglomerate merger with a company that makes storage solutions. A likely reason is:

 

Several years ago, Regis Corporation, a very large hair styling salon company, purchased 60 "Your Father's Mustache" salons. Although this was initially an acquisition, the merging of these two businesses was a(n) __________. Regis went on to purchase several hair care product companies. Joining forces with hair care product companies would represent a ___________.

 

The strategy of investors who are attempting a leveraged buyout is to:

 

Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n) _________________ with a negotiated selling price of $52 billion.

 

Adam is a major stockholder in Precision Transmission Services (PTS), a nationwide network of transmission repair shops founded by his father. Currently, PTS stock is sold on the open market, but Adam has talked to several relatives about his desire to get all of the PTS stock back in his family's hands. Adam is interested in _____________________________.

 

Hidden Valley Communications, Inc., located in a remote area of Utah, made a special device that was used in LTE phones. After three years of local operations, the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore. Under the direction of a financial services company that financed the deal, the employees agreed to become owners of the company and continue to operate the business. The business concept that describes this arrangement is:

 

A(n) ___________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

 

A(n) _____________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.

 

A person who buys the right to use a business name and sell a product within a given territory is called a:

 

A franchise can be formed:

 

The most popular type of business for franchising is:

 

A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor.

 

Which of the following is an advantage of franchises?

 

One reason franchises have become so popular is that this arrangement provides the franchisee with:

 

Global franchising offers:

 

Opening and operating a franchise in a different country:

 

Franchisors may send reverse royalties to franchisees who:

 

_____________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

 

Franchised businesses are successful (both domestically and internationally) because:

 

An evaluation of franchising would conclude that this type of arrangement:

 

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

 

One important consideration when prospecting for a good franchise business is:

 

Which of the following statements about buying a franchise is most accurate?

 

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

 

Sierra is interested in becoming a franchise owner, by opening and operating one of 50 Cactus Katie's Grills, a very successful fast food chain specializing in food dishes from the American southwest. Which of the following problems is Sierra most likely to encounter if she agrees to become a franchisee?

 

Marco is a franchisee with Daggies, a chain of sandwich shops. His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops. Soon afterward, Marco's business deteriorated and he too was forced to close. This is an example of:

 

Daggie's Sandwiches, Inc., sells the rights to use its name and sell its sandwiches in a given market area to aspiring businesspeople who are willing to pay agreed-upon fees and meet certain contractual terms. Daggie's:

 

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products. In a franchise arrangement, Midas would be the ________, and the buyer of the franchise is the ________.

 

Jenna plans to invest in a cleaning service franchise called Spare Time. At her first interview with the franchisor's selling agent, she learned that the parent company expects royalties of 5%. These are:

 

A prospective franchise owner wants to keep his monthly costs at a minimum. The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month. The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

 

Naomi is planning to invest in a new online franchise, the Novel Artist, Inc. The franchisor provides proprietary software and training for designing invitations and cards for special occasions such as weddings, graduations, and birth announcements. The franchisee is obligated to pay a monthly fee to the franchisor. Naomi will use the software to create her own special designs that she will ultimately feature on her website. Order turn-around time must be fast. She can only take on as many clients as she can make good on delivery. An advantage of Naomi's online franchise is:

 

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

 

A ___________ is an organization that is owned and controlled by the people who use it—producers, consumers and workers with similar needs pool their resources for mutual gain.

 

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.

 

Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.

 

The purpose of a farm cooperative is to:

 

In a cooperative, members/customers:

 

People who form cooperatives:

 

A distinguishing feature of a cooperative is that it:

 

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

 

Which of the following people would be most interested in participating in a business organized as a cooperative?

 

Twenty-six years ago, several small vineyard owners in California joined voluntarily to market their grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services. The arrangement established by these vineyard owners is an example of a(n):

 

For as long as she could remember, Jenna Raiter's passion was cars. As a teenager, she spent hours with her dad tinkering with the family car, learning to change the oil and making minor repairs. She got a job at a local garage while still in high school. A few years after graduating from high school and completing the auto mechanics degree at a local community college, Jenna decided she wanted to be her own boss. She quit her job, borrowed some money from her dad, and began her own repair shop, the AutoMotion Garage. Jenna's hard work gradually attracted a loyal clientele of satisfied customers. Her success has her thinking about opening garages in two other locations, but she lacks the financial resources needed for expansion. Furthermore, the success of her business is forcing Jenna to spend more time managing the business and less time doing the actual technical work she still enjoys. She wants to find business partners who can help her with management and provide additional financial resources. She has approached a couple of friends she met in high school: Al Ternator and Lew Banfilter, to see if they would like to join the business.

 

Currently, AutoMotion Garage is operated as a(n):

 

Jenna approached Al Ternator about joining the business as an owner. She proposed that she continue to provide the technical expertise and deal directly with customers, while Al, who has a college degree in finance, handles many of the financial aspects of running AutoMotion. In addition, Jenna wants Al to contribute some much-needed money for expansion. Under Jenna's proposal, she and Al would operate the business together as:

 

Although Lew Banfilter, now a young attorney, is impressed with AutoMotion and believes it could be a place to invest money, he informed Jenna that his professional position at a law firm prevents him from taking an active role in the business. He is also concerned about accepting more risk since he has a young family. He mentioned a preference for unlimited liability. If Lew joined Jenna and Al, the three might consider forming a(n):

 

When Jenna confided in Lew and Al that she too was concerned about adding additional risk, Lew suggested that they explore the possibility of one of the newest forms of business ownership, a(n) __________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

 

Al also suggested another way Jenna could finance her expansion. He described setting up a chain of AutoMotion Garages by selling the rights to use AutoMotion's name, business model, garage design and service ideas to others who would like to own a similar shop. These individuals would pay AutoMotion an initial fee and monthly royalties based on earnings. Al is suggesting that Jenna set up a:

 

With all these choice, Jenna's head is swirling with ideas. She knows that Al and Lew have expertise in business and management, but she also knows that she will need to read on her own for more information. Referring back to a textbook she had in her Introduction to Business class in college, she comes upon the following statement:

 

Entrepreneurship involves accepting the risk of starting and running a business.

 

Entrepreneurship is another name for management.

 

Entrepreneurs are less important now than in the past to the U.S. economy.

 

According to the Spotlight on Small Business box, people between 16 to 34 years old are not attracted to starting their own business.

 

While entrepreneurs frequently earn significant profits for themselves, their impact on society is quite small.

 

Many businesses started by entrepreneurs have grown into major corporations employing thousands of workers.

 

Entrepreneurs are motivated by the desire to earn a profit.

 

Entrepreneurs take calculated risks.

 

Most entrepreneurs prefer working for someone else.

 

Most entrepreneurs are more interested in personal achievement than in power.

 

If you have managerial skills and leadership ability, you also posses the personality to be an entrepreneur.

 

Because of the stress of being in business for yourself, it's important that entrepreneurs have people around them to help replenish their enthusiasm.

 

Successful entrepreneurs rely on others for direction and support.

 

Successful entrepreneurs accept the risk of failure.

 

Entrepreneurs avoid risk and place a high priority on security.

 

It is important for an entrepreneur to be highly energetic.

 

Most entrepreneurs get the ideas for their products and services from a flash of inspiration.

 

Potential entrepreneurs would be well advised to surround themselves with people who are smarter than they are.

 

An entrepreneurial team is a group of experienced managers who share the same skills and abilities.

 

Entrepreneurial teams combine the creative marketing and production ideas of a group of experienced people.

 

Successful entrepreneurs often make use of professional managers to introduce new ideas.

 

Micropreneurs is a term used to describe entrepreneurs who focus on the continued growth of their businesses.

 

The most important difference between entrepreneurs and micropreneurs is the focus placed by micropreneurs on balancing the demands of work and family.

 

The primary concern of micropreneurs is to balance the risk of starting your own business with the desire to build a powerful organization earning significant profits.

 

Many micropreneurs are home-based business owners.

 

Micropreneurs are motivated by a desire to have both a satisfying family life and rewarding work.

 

Advancements in computer technology put home-based businesses at a disadvantage.

 

Many micropreneurs operate home-based businesses in the service industry.

 

Corporate downsizing reduces the opportunities for home-based businesses.

 

Successful micropreneurs require self-discipline to separate work from family responsibilities.

 

Micropreneurs are exempt from the local ordinances that restrict home-based businesses from operating in residential areas.

 

One advantage enjoyed by home-based businesses is the relative ease in attracting new customers.

 

Small businesses have not significantly participated in web-based online sales.

 

The Internet provides a resource for entrepreneurs for information regarding the steps needed to take their business online.

 

Web-based businesses avoid the risk of failure faced by traditional start-up businesses.

 

An intrapreneur is the creative person who starts and manages a nonprofit organization.

 

Creative people working as entrepreneurs within a large organization are called intrapreneurs.

 

Entrepreneurial spirit is unique to a small business environment.

 

Large organizations encourage intrapreneurship as a strategy to improve their profitability through new products.

 

By passing the Immigration Act of 1990, the U.S. government acted to encourage entrepreneurs to immigrate to the United States.

 

The U.S. government offers investor visas to attract more entrepreneurs.

 

The position of our government is to restrict foreign entrepreneurs from operating within the U.S.

 

Business incubators provide assistance to established companies attempting to generate foreign sales.

 

A National Business Incubator Association study indicates that over 85 percent of incubator graduates remain in business.

 

Enterprise zones offer lower tax rates and government assistance to attract private business investment.

 

Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship.

 

Successful entrepreneurs are exclusively motivated by the desire to become rich.

 

Although corporate managers often exhibit the skills required of successful entrepreneurs, they seldom have the desire to give up the perks and fringe benefits of corporate life and start their own business.

 

To be successful, entrepreneurs are dependent on the support of others for encouragement.

 

Entrepreneurial teams increase the cooperation between marketing, production and other functional areas of a business venture.

 

State governments create new start-up business organizations called enterprise zones that are later sold to private investors.

 

The Spotlight on Small Business box is testimonial to the fact that entrepreneurs are problem solvers.

 

Juanita wants to operate her own business. Although she admits it would be nice to earn a healthy profit, her primary motivation is the excitement and challenge of starting and running a business. Juanita's attitude is different from most small business owners, who usually focus solely on the earnings potential of their ventures, as well as the opportunity to acquire power and prestige.

 

Ramsey is a dreamer rather than a doer. This is an important attribute for an entrepreneur since their job is to be creative and develop new ideas that are then implemented by others.

 

Jacques has eliminated the risk of entrepreneurship by preparing a detailed business plan.

 

Jason, Robin, and Ian currently work in the marketing department of a large corporation. They have similar backgrounds and training and are thinking about leaving their company to start their own business. Successful entrepreneurial teams are comprised of these types of people because similarities in knowledge and skill ensure harmony and consistency in their new business.

 

Anthony is an employee of a textbook publisher. However, his desire is to establish a home-based business providing his services to a variety of publishers. Anthony's primary motivation is to escape the 9 to 5 world of corporate publishing and to enjoy the opportunity of working for himself. Anthony is an example of a micropreneur.

 

Kylie is employed by Street Wheels, a large corporation that produces accessories for scooters, bicycles, and other children's vehicles. She is a creative force within the company and has helped create and launch several new successful products. Kylie is an example of an intrapreneur.

 

Jon received a letter in the mail explaining that HE COULD EARN THOUSANDS!!!! by working just a few hours from home. Most likely Jon's letter was a work-at-home scam.

 

The United States government views entrepreneurship as a result of an individual's self-motivation. The government can do very little to encourage an individual to become an entrepreneur.

 

When Kelsey began the Cookie Kitchen, she located the operation at a small business center to get help with accounting, legal advice, and secretarial help for a very low cost. Electing to join the incubator helped her company to survive because it provided assistance while her company was in its infancy.

 

The principles of management of a large business are similar to the principles of management of a small business.

 

To be classified as a small business, a firm must have no more than 100 employees.

 

According to the Small Business Administration's definition, small businesses are independently owned and operated.

 

A business is considered small by comparing its size to others in the same industry.

 

Small businesses create 65% of the new jobs in the United States each year.

 

Small businesses account for over 50% of the U.S.'s gross domestic product (GDP).

 

Upwards of 80% of all U.S. workers find their first job in small business.

 

Of all nonfarm businesses in the United States, almost 97% are considered small by the Small Business Administration (SBA) standards.

 

Compared to small businesses, large firms have a greater ability to provide personalized customer service.

 

Big businesses do not serve all the needs of a market.

 

Economist Bruce Kirchhoff contends that business failures are much lower than traditionally reported.

 

The most common small business failures occur in businesses that are the easiest to start.

 

Only about 10% of all businesses qualify as small businesses using the definition of the Small Business Administration.

 

The small business sector that has the best chance of significant growth is legal services.

 

Small businesses can often provide more personalized customer service than bigger rivals.

 

Recent evidence suggests that the small business failure rate is significantly higher than previously reported.

 

Bad luck is the most often reported cause for small business failure.

 

The business opportunities with the greatest growth potential tend to be in the high technology industries.

 

The easiest businesses to start are those that offer the greatest profit potential.

 

Most business opportunities offer entrepreneurs high levels of security and profits.

 

The easiest businesses to start also have the least growth potential and the greatest failure rates.

 

While the first job for many people is working for a small business, larger corporations create most of the permanent new jobs.

 

If you are trying to prevent failure, it is a good idea to go into the business with good record-keeping techniques.

 

If you go through the exercise of preparing a business plan, only to determine that you need twice the amount of money to start the business than you have, the SBA and other expert organizations encourage you to go ahead with your plans because if you understand the market, you can use the revenues you accrue to make up the shortfall.

 

Small businesses lack the resources to compete directly with big businesses.

 

Because of their superior financial resources and specialized staffs, big corporations can almost always outperform small businesses.

 

Marina has just completed her business degree. She should focus her job search to only include large corporations.

 

Renee, a manager at a small manufacturing firm, has offered to help manage a local branch of the YMCA. Unfortunately, Renee will find that the skills acquired managing a small business will not be useful in managing a nonprofit organization.

 

Your brother, a family dentist, has opened a new office in your hometown. As a business student you know that this type of business experiences low failure rates.

 

Samantha wants to start a small business. If her primary goal is fast growth and high profits, her best chances would be in the manufacturing sector.

 

While Jing wants to start a small business, she has not yet uncovered an opportunity that would offer her security and the likelihood of high profits. Jing will likely find that one must risk more in order to attain high profits.

 

The best way to learn about small business is to "bite the bullet" and start your own.

 

Individuals desiring to learn about small business operations are advised to learn from other entrepreneurs.

 

Many entrepreneurs got the idea for their own business from their experience of working for others.

 

Since entrepreneurs are starting new businesses, experience gained from working for an established business isn't particularly helpful.

 

Offering to manage an established business for a percentage of the profits plus a salary offers experience to the would-be entrepreneur and free time to the business owner.

 

Entrepreneurs are well advised to avoid starting businesses in the same market in which they were previously employed.

 

You can negotiate a win-win situation by offering to manage an established small business. You win from the experience; the owner wins with free time.

 

If you were to begin gathering information on a particular type of business, it is doubtful that a community college class would benefit your search because the information you would gain is too generic in nature.

 

There are several ethical considerations when starting a business, but competing against current and former work relationships is always fair game.

 

Carlos hopes to start his own business. He needs to avoid talking to other small business owners about his plans because they might steal his ideas.

 

Felicia decided to work for a floral design studio before opening her own shop. This approach to learning the business is okay, but her time would be put to better use starting her own business.

 

As an employee of a small business, DeMonte has observed the owner's desire to retire. Since DeMonte would like to buy the business, he needs to determine how much the business is worth. In order to determine a fair price for the business, DeMonte should add up the market value of all of the firm's physical assets such as buildings, machinery, equipment, and inventory, and willingly pay this amount for the business.

 

The two primary concerns of an entrepreneur starting a new business are planning and record keeping.

 

According to the Small Business Administration, poor management is the cause of the majority of small business failures.

 

Business plans are necessarily a bit vague since these are prepared prior to the beginning of business operations.

 

A good business plan describes the nature of the proposed business, the target market, the competitive advantages, and the qualifications of the owners.

 

Bankers and investors require entrepreneurs to present a well-conceived business plan.

 

An entrepreneur's personal financial position will have a minor impact on negotiations with bankers for a small business loan.

 

Getting a business plan into the hands of the right people is nearly as important as getting the right information in the plan.

 

The entrepreneur's integrity is not relevant to bankers when determining the creditworthiness of a business loan.

 

Software designed to help create business plans has proven to be of little value because it is difficult to apply it to every business situation.

 

Since creating a detailed business plan is almost impossible, entrepreneurs should focus on the other tasks needed to get their firm started.

 

Management includes attention toward financing the business, hiring employees, marketing, and record keeping.

 

Identifying poor management as the cause of a small business failure likely covers a variety of problems.

 

Aside from personal savings, the only other viable source of financing for an entrepreneur would be funds available from friends and family.

 

Potential suppliers can be an excellent source of financing for a new business since lending money to a new customer may be very much in their own interest.

 

Angel investors are the government agencies that invest money in new companies before they go public.

 

Venture capitalists provide funds for start-up businesses in exchange for part ownership in the new firm.

 

State and local governments often act as venture capitalists.

 

While the Small Business Administration provides management advice to new business owners, it is not empowered to provide financial assistance.

 

Venture capitalists provide funds for small businesses as part of their philanthropy programs.

 

Venture capitalists prefer investing in smaller start-up businesses in order to reduce their overall risk.

 

The Small Business Administration's microloan program offers small businesses very small loans.

 

Small Business Administration microloans are based on the borrowers' integrity rather than collateral and credit history.

 

In order to qualify for a microloan from the SBA, an entrepreneur must have adequate collateral, and a proven track record of success.

 

Small Business Investment Companies (SBICs) are privately owned companies licensed by the Small Business Administration to lend money to small businesses.

 

The SBA may guarantee loans made by a financial institution and repay them if the borrowers stop making payments.

 

Success in running a business depends on knowing your customers, managing your employees, and keeping efficient records.

 

In the business world, a market consists of those people who have a willingness to buy a particular product.

 

One of the greatest advantages that small businesses have over larger ones is the ability to know their customers better and to adapt quickly to the customers' needs.

 

Attracting qualified workers presents a problem for small businesses since they usually offer less money, fewer benefits, and less room for advancement than larger firms offer.

 

As their firms grow and prosper, busy entrepreneurs take pleasure in delegating authority to others.

 

Studies show that seniority is the most important criterion when selecting employees for promotion to management positions.

 

Compared to employees of large businesses, small business employees are less satisfied with their work because they see their jobs as less challenging.

 

Hiring family members offers the best answer to the problem of attracting qualified employees.

 

Questions about how much authority to delegate and to whom are easier issues for family-run businesses since they can't fire family.

 

With fewer employees and less revenue, small businesses have less need for detailed records than do larger business organizations.

 

Many small business owners report that they needed assistance with accounting when they first started businesses.

 

Commercial loan officers and insurance agents offer expert assistance that can be valuable to small business owners.

 

One way to control the legal costs associated with operating a small business is to purchase a prepaid legal plan.

 

Commercial loan officers serve as a resource for small business owners for information regarding risk management.

 

Many more new entrepreneurs are turning to crowdfunding sites, like Kickstarter, to raise funds for their endeavors.

 

According to the Adapting to Change box, one uspide to crowdfunding is that potential future investors will be attracted to companies that already have large numbers of investors.

 

Management includes attention toward financing the business, hiring employees, marketing, and record keeping.

 

Prior to creating a business plan, discussions with bankers and investors can help entrepreneurs determine the amount of financing available.

 

An effective business plan analyzes the competition and identifies the resources required to profitably serve a target market.

 

When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business.

 

As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.

 

A major advantage of preparing a formal business plan is that prospective entrepreneurs must identify the resources and activities required to successfully operate their proposed venture.

 

Prospective entrepreneurs turned down by private lenders have little hope of getting financial help from the Small Business Administration, since the SBA's standards are even tougher than those of private lenders.

 

If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to submit a business plan.

 

As a prospective entrepreneur, Chantal considered a variety of financing sources. Her discussions with a venture capitalist revealed that this type of investor expects to receive a significant ownership interest in her firm.

 

Hoping to qualify for a microloan from the Small Business Administration, Magdalena's business plan clearly identifies her strategy to profitably serve a target market. Unfortunately, her lack of business experience and limited collateral greatly reduce her chances of obtaining the microloan.

 

Austin's interest in computers helped fuel his design of a new hard drive that is far superior to anything on the market. Austin's product and business plan will likely attract several sources of financing if he is willing to give up part ownership in his company.

 

Because college students realize the importance of nursing homes for our aging population, students comprise an attractive market for nursing home insurance policies.

 

In order to better serve their customers, small business owners should avoid delegating authority to their employees.

 

Justin feels that his family-run business will be more likely to avoid the problems many growing businesses have with managing employees. His attitude will likely hinder the growth of his company.

 

Whitney wants to start her own business, but she is concerned about her limited financial resources. She would be well advised to save money by delaying her meeting with lawyers and accountants until the business has been operating for a few years.

 

While only a small percentage of small businesses export, the number has increased dramatically recently.

 

Large multinational firms dominate the international market, leaving few opportunities for small businesses.

 

One advantage enjoyed by small businesses in international markets is that overseas buyers like dealing with individuals rather than large corporate bureaucracies.

 

Due in part to government support, the majority of U.S. small businesses are involved in exporting.

 

Exporting offers small businesses opportunities to reduce their dependence on domestic sales and extend product lives.

 

Small Business Administration loans help firms finance their domestic operations. These funds however, cannot be used to finance exports since the money is provided by U.S. taxpayers.

 

Small businesses can provide more personalized service than a large corporation to overseas customers.

 

The Internet has slowed small businesses participation in international markets.

 

As the owner of a small manufacturing business, Myles has an interest in exporting. However, he doesn't know how to get started. Fortunately, the government provides an abundance of information to encourage entrepreneurs like Myles.

 

From a competitive standpoint, small businesses cannot expect to successfully compete with large corporations in international markets.

 

The only real barrier preventing small businesses from exporting is insufficient knowledge of the opportunities available.

 

Marcos is a recent college graduate. He learned in his business courses that as a potential small business owner, he should focus his sights on domestic business only.

 

Entrepreneurship is:

 

Which of the following U.S. issues does entrepreneurship most directly affect?

 

Which of the following explains why individuals accept the risks of business ownership?

 

Which of the following is a characteristic of successful entrepreneurs?

 

Which of the following best describes entrepreneurial personality traits?

 

A(n) ________________ is a group of experienced professionals from different areas of business who join together to develop, make, and market a new product.

 

An entrepreneurial team consists of:

 

Business owners who prefer to maintain their businesses at a manageable size are called:

 

One of the challenges of running a home-based business is:

 

A successful web-based strategy that helps a business spread the word about its website and products is called ____________.

 

A creative person working within a corporation to launch new products and generate new profits is known as a(n):

 

The goal of an intrapreneur is:

 

The U.S. government's Immigration Act of 1990:

 

Enterprise zones are specific geographic areas that:

 

Business incubators are usually government-funded facilities intended to:

 

Historically entrepreneurs in the U.S.

 

Which of the following statements explains one of the reasons that people in the U.S. take the entrepreneurial challenge?

 

Successful entrepreneurs are self-nurturing. This means they:

 

Which of the following statements is characteristic of entrepreneurs?

 

Although successful entrepreneurs are more tolerant of uncertainty,

 

Effective entrepreneurial teams combine:

 

Successful entrepreneurial teams:

 

One reason we have seen continued growth in home-based businesses is:

 

Which of the following statements is not a challenge for home-based businesses?

 

Affiliate marketing is a web-based business strategy that:

 

Which of the following best describes the difference between an intrapreneur and an entrepreneur?

 

Intrapreneurs make use of __________ to develop and launch new products and generate new profits.

 

Enterprise zones are:

 

Enterprise zones and investor visas are examples of:

 

State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, _______________ continue to grow in popularity.

 

The Spotlight on Small Business box "Earning While Learning" features students who

 

Kyra recently quit a job with a large corporation to start her own business. While she realizes that her decision comes with risk, she is excited at the chance to be independent and by the challenges of running her own firm. Kyra is an example of a(n):

 

Erin developed a new type of exercise equipment she calls the Tush N' Tone. After unsuccessfully searching for potential investors, she arranged a personal loan and borrowed additional money from her parents. Her willingness to continue believing in her idea and to remain enthusiastic shows that Erin is:

 

Apple's smart team is an example of a firm that succeeded by:

 

Anna recently left a large insurance firm and opened a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect:

 

Jake is an innovative engineering graduate who works for a large company that makes adhesive products for commercial and consumer use. One of his primary responsibilities is to initiate and develop new products to complement the firm's current product line. Jake's company is _________.

 

Southwest College received a government grant to establish a business incubator. This facility will offer:

 

Keaton is an intrapreneur for a multinational electronics company. As an intrapreneur Keaton:

 

Yesterday, on Facebook, one of Sarah's friends suggested that she spread the word about Mia Bella Boutique, an online company that designs hats and shoes. If Sarah's efforts generate 25 more people to spread the word, Sarah will receive 30% off her order. Mia Bella is utilizing _____________, an effective strategy for increasing awareness and market share for web-based businesses.

 

Juan recently completed 20 years of service in the Army. During this time, he managed to save a little money and is entitled to a government pension. His goal is to go back to his home state of Colorado and start a business making small, solar powered panels for residential use. Although he knows he needs a storefront and manufacturing site, he is not 100% convinced about where to locate. He knows for certain that one of his top priorities is to limit his tax liability associated with this new business. Your suggestion for Juan is:

 

Pete inherited a thriving dry cleaning business from his father and mother. He continued the tradition of offering quality service to the customers he served. As the surrounding towns expanded, several people suggested that Pete expand the business to offer service in new locations. He chose to maintain only one operation, so as not to lose control and to keep his work life and home life balanced. Pete is a good example of a(n) ____________.

 

Located at Monsanto's world headquarters, the Nidus Center is a unique ___________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small start-up ventures that receive approval to further develop their ideas at the Nidus Center.

 

Small businesses:

 

The Small Business Administration defines a small business as a firm that:

 

Small businesses create about __________ percent of the new jobs in the United States.

 

A business's size is measured:

 

According to economist Bruce Kirchhoff, small business failures are:

 

When comparing small businesses to their larger competitors, it is clear that:

 

Which of the following is not a reason stated for small business failure?

 

Which of the following will not help your small business succeed?

 

Small businesses are important to the U.S. economy because:

 

Using the analogy of boulders vs. sand for filling a hole, the textbook points out that:

 

Which of the following employment statistics about small businesses is true?

 

According to SBA guidelines, a manufacturing firm with 1,000 employees:

 

Which of the following statements accurately depicts an advantage that small business has over big business?

 

Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in:

 

A review of small business successes and failures indicates that the:

 

After graduation, Manny focused his attention on finding full-time employment. He has decided to narrow his job search to jobs with a major corporation. His job search strategy:

 

After several years of working as a regional manager for a nationally known nonprofit, Janelle landed a management position with an innovative small business. If she accepts the job offer, she is likely to find that:

 

As a result of corporate downsizing, Alex lost his job as an IT manager for a large telecommunications company. A bonafide computer geek in his own right, Alex knew that several of his past company contacts often outsourced their computer problems. He decided it was a good time to test the waters and see if he could secure enough computer clients to be in business for himself. His success demonstrated that:

 

Jennifer, a talented photography student, started a corporate photography business. She planned to solicit jobs from large corporations which needed pictures for their annual reports and websites. Although filling a unique niche, Jennifer needed the security that the business would thrive and that she would earn enough to support herself and her child. She also hoped that she would spend less time each day calling on potential clients and more time doing the actual shoots. As her small business consultant, which of the following suggestions would you have for Jennifer?

 

Dr. Smiley White just graduated from dental school. She is hoping to acquire the necessary funding to start her own dental practice. One advantage of this type of business is:

 

Jayne started a small bakery in a resort town. She was certain she had the ideal location, with plenty of hotels and inns within walking distance of her establishment. She planned to use her grandmother's recipes, using only the finest ingredients for her upscale resort customers. During the first week of business, she was disappointed with lackluster sales. When she drove past the regular breakfast-style restaurants and even the Starbucks, she noticed they were rather bustling. Jayne most likely:

 

John, James, and Frank wanted to open J2F Sports Bar that offers unique brands of beer, weekend entertainment, and a limited menu. In one of the preliminary meetings, James presented a list of reasons that small businesses fail. Although many of the ideas on this list were applicable to many types of business, one challenge pertained specifically to the restaurant and bar business. The challenge he referred to was:

 

When Crystal graduates from culinary school she dreams of opening her own Asian fusion restaurant. Her other passion is skiing in Colorado, where she schedules four or five trips each year. As her small business advisor, you believe it necessary to provide her with information that will help her make good business decisions. Which of the following would be helpful for Crystal to know?

 

A small business management course at a community college may offer entrepreneurs an opportunity to:

 

One way to get into business is to buy an existing company. The value of the business used to determine a fair purchase price is based on:

 

Conversations with people who start their own business often reveal that:

 

For prospective entrepreneurs, enrolling in an introduction to business or small business management course offered through their community college:

 

Which of the following suggestions would an experienced business owner offer to help someone who is thinking about starting a business venture?

 

Successful small business owners are:

 

When starting a small business, it's important to remember:

 

The Making Ethical Decisions box "Should You Stay or Should You Go?" addresses a dilemma worthy of consideration. It describes:

 

Motivated by his desire to operate his own business, Nick considers purchasing an existing business. As he carefully weighs this option, he is likely to find that:

 

Carrie, a student at Metropolitan Community College, dreams of starting her own business. In an effort to learn as much as she can about small business management, she talked to four friends who each offered their advice. Which of these suggestions is likely to help Carrie the most?

 

Greg benefited from his experience working for an established private company that provided innovative lighting for large music venues. Although confident that he could start his own lighting business, he had limited capital to buy the necessary equipment needed to successfully compete with established companies. Which of the following strategies would best help Greg achieve his goal of business ownership?

 

As a young boy, Drew remembers his grandfather telling him, "Son, if you can find something you like to do, and somebody is willing to pay you to do it, well, that's the secret to a great life." The way Drew saw it, this was his big break. For the past five years, he split his time between school and working for a local tree farm/nursery business. The owner recently announced he was ready to retire. As Drew began creating a business plan, he contemplated what the business might be worth. How much will he need to buy this business? For starters, Drew:

 

Two key management functions that need particular attention when starting a business are:

 

A __________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management.

 

The business plan will include ____________.

 

A detailed written statement that describes the nature of the business, the target market, the firm's competitive advantages, as well as the owner's resources and qualifications is a:

 

Entrepreneurs seeking financial support from bankers and potential investors should:

 

Bankers and potential investors are likely to read ___________ first.

 

After personal savings, the next largest source of capital for entrepreneurs is from:

 

________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies.

 

Due to the credit crunch during the recent recession, many small businesses found that _____________ were more willing to lend money to smaller operations.

 

A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a:

 

Which of the following government agencies is responsible for encouraging the development of small business?

 

Which of the following sources of investment is the least likely type available to entrepreneurs?

 

The Small Business Administration's microloan program awards loans to entrepreneurs based primarily on their:

 

A Small Business Investment Company (SBIC) is a(n):

 

One of the best places for young entrepreneurs to start shopping for an SBA loan is a(n):

 

A ________ refers to people with unsatisfied wants and needs who are willing and able to buy a product or service.

 

To be considered part of a market, an individual must:

 

Small business owners often struggle in attracting qualified workers. Which of the following contributes to this problem?

 

Employees of small businesses often have greater job satisfaction than do employees of larger firms. One reason for this difference in job satisfaction is that employees of small businesses often:

 

A new business that sets up a(n) _____________ from the start is saving itself time and grief later.

 

Small businesses must seek advice from outside experts. In order to put together official documents such as leases, contracts, and partnership agreements, it is important to seek the advice of ________.

 

A(n) ____________ is a valuable source of information regarding techniques to reduce a firm's exposure to risk.

 

Similar to how large businesses proceed, small businesses make marketing decisions ____________.

 

The Small Business Administration sponsors volunteers from industry, trade associations, and education who offer advice to small business owners. These volunteers are called:

 

Entrepreneurs applying for a bank loan should realize that bankers will:

 

A good business plan will:

 

The executive summary section of the business plan contains:

 

When seeking financial backing from a venture capitalist, a small business owner should realize that the venture capitalist will:

 

A market consists of potential buyers of a good or service. However, for a market to exist:

 

Small business employees:

 

Entrepreneurs learn that there are many legal and financial issues involved in starting their business. The best way for the small business owner to resolve these issues and protect the firm's resources is:

 

Which of the following is not a recommended source of small business advice for persons contemplating a new business?

 

In order to finance The Shortbread Shack, a mobile bakery business that services several large Silicon Valley companies, Marcy demonstrated her steadfast desire to get her bakery off the ground by visiting several bankers with ___________.

 

In order to improve his chances of small business success, Demitri prepared a business plan. Most often, a positive outcome of this exercise is:

 

After several years of volunteering to play the piano and sing at a local nursing home, Callie decided the time was right to tap into the growing elder care market. She started Music and Memories, Inc., a nonprofit corporation that would hire local talent to perform her own music productions directed toward this market. In order to write and produce several productions each year, Callie needed startup funds. An instructor at the local community college suggested that she begin by ____________, because this effort would help introduce her idea to interested investors as well as suggest government grant applications that Callie might pursue.

 

As a high net worth individual, Allison searches for growth firms in need of additional funding to achieve their goals. In return for this __________, Allison expects to assume ownership in the business.

 

Chris is an angel investor. This means that he:

 

Christine recently applied for a microloan from the SBA. Although several criteria are important, the Small Business Administration's decision to grant or deny the loan will largely depend upon:

 

Nigel came to the U.S. on a swimming scholarship. After a few months of frustration with trying to find swim goggles like he used in his native country, he started a website that offered specialty goggles for swimming, skiing, and snowboarding. Before launching the website and filling orders, Nigel spent a few months going to swim meets and gathering preferences about goggles from other swimmers. Nigel's actions:

 

Ben got a phone call from one of his regular customers asking if he had time to repair a couple of broken sprinkler heads on the customer's underground sprinkling system. Although it was already 6:00 p.m. and Ben had put in a full day of work, he turned his car around and headed for the customer's house. As a small business owner, Ben demonstrates:

 

Ameet's three employees have been with him since he started Employment Recruiters, Inc., nearly 10 years ago. As he contemplates the staffing for his new branch office, he senses that none of these three are ready to manage the office. Faced with this difficult situation, he should:

 

After Kate graduated from college, her grandfather created a bookkeeping position for her in his furniture retail business. Her older brother is in charge of purchasing inventory for the store, yet often the store runs out of popular furniture or becomes overstocked with pieces that must be marked down to be sold. Kate is confident that her brother is more suited for handling accounting and finance, while she has a sense of what sells and how much sells. Although she has spoken with her grandfather about it a couple of times, he seems reluctant to change. As the founder of the business, he may:

 

As a small business owner, Tanika can't afford to provide her employees with the high wages and benefits offered by big corporations. One way to retain her employees and create a high level of motivation would be to:

 

After retiring as a telecommunications executive, Chad joined SCORE. As a SCORE counselor Chad will:

 

The size of the world market is about:

 

Increased participation in small business exporting owes credit to _______.

 

One of the hurdles small businesses face when deciding to export is:

 

One reason why many U.S. small businesses are not involved in exporting is:

 

The SBA's ________ program provides export-financing opportunities for small businesses.

 

Which of the following best describes the outlook for small businesses in international markets?

 

Small businesses often have advantages in international markets. One advantage is:

 

Labels Plus, LLC, exports specialty printing equipment for the labeling, flexible packaging, and carton industry. Due to increased support from ______, this company's sales to Brazilian companies and other global opportunities have significantly increased.

 

Jake wants to sell his workout DVDs in the European, Asian, and Latin American markets. _______________ will help him reach vendors abroad, without the expense of traveling to meet them face-to-face.

 

Luis is a partner in a firm that specializes in producing vitamins and health food products. While the business is considered small by U.S. standards, he is attempting to persuade his partner to expand internationally. Luis would list which of the following as an advantage of going global?

 

Antoine is considering marketing his bicycles in Brazil. If he enters the Brazilian market, he is likely to learn that __________.

 

Peppy Roaney believes that pizza is a much more versatile dish than most people realize. As the national marketing manager for Pizza Guys, he observed how consumers were delighted with barbecue pizza, Hawaiian pizza, Mexican pizza and other unique combinations. His suggestions for other unusual pizzas, however, were met with a negative response by his superiors. Even some of his colleagues laughed at his ideas. Peppy's confidence in his ability to understand the market has led him to focus on planning a business of his own. Peppy realizes that he will take a risk when he leaves his job with Pizza Guys and embarks upon a new venture: Peppy's Pizzazzeria. Peppy is excited about the potential of profitably catering to the unmet desires of pizza consumers.

 

Given Peppy's willingness to accept the risks of opening and running Peppy's Pizzazzeria, he is clearly an example of a(n):

 

Peppy remains confident and enthusiastic even though his colleagues have poked fun at his ideas. This shows that Peppy is:

 

Peppy is confident that Peppy's Pizzazzeria will be a success, but only if he has enough money to do things right. Since Peppy has very little personal wealth, he knows he must obtain financial assistance. In order prepare for meetings with bankers and potential investors, Peppy should:

 

Peppy has inquired about the possibility of obtaining a microloan from the SBA. This type of loan is awarded primarily on the basis of the:

 

Peppy knows a lot about marketing, but not much about the legal or financial aspects of starting a new business. He wants to consult with a lawyer and accountant, but his budget is tight with all of the expenses involved in getting Peppy's Pizzazzeria up and running. Peppy should:

 

Due to the fact that Peppy has worked in the field of marketing for a large corporation:

 

The main job of managers today is to watch over people to be sure they do what the manager asks of them.

 

The best way to get people to do what a manager wants is for the manager to reprimand those who don't do things correctly.

 

Managers in progressive firms of all kinds tend to be friendly, and treat employees as partners.

 

Managers must earn the trust of their employees.

 

Because of their importance and skills, few managers lost their jobs in the recent economic crisis.

 

A modern manager's main job is to issue orders, then follow up to make sure employees do as they were told.

 

Managers in progressive organizations tend to emphasize teamwork and cooperation rather than discipline and giving orders.

 

Despite all of the changes in the business environment, the basic way a manager performs his or her job has remained remarkably constant.

 

Given the lack of discipline and short attention spans of today's workers, modern managers must watch their workers closely, set strict rules, and vigorously enforce policies.

 

In most high-tech industries, the best way to respond quickly to rapid technological changes is to keep most authority and responsibility in the hands of a few key managers who provide precise, detailed directions to the workers.

 

Due to the fact that employees today often know much more about technology and the technical aspects of their jobs than their managers do, progressive managers emphasize teamwork and cooperation as a strategy for getting work done.

 

John is the general manager of a retail outlet. By emphasizing teamwork and acting in a role of coach rather than boss, John is considered to be a modern manager.

 

As an office manager, Sylvie consistently tells her employees what to do, watches over their tasks, and reprimands those who don't listen to her orders. Sylvie is a modern manager.

 

Managers make decisions about how to use organizational resources to accomplish goals.

 

Financing is one of the four key functions of management.

 

The four key management functions are planning, organizing, leading, and controlling.

 

One trend of the leading management function is to empower employees, giving them as much freedom as possible to become self-directed and self-motivated.

 

Leading is the management function of designing the structure of the organization so that everyone can function together.

 

As a management function, the main focus of controlling is to keep complete and up-to-date records of the organization's financial transactions for tax and regulatory purposes.

 

The management function that involves guiding, training, and motivating others to work toward the achievement of an organization's goals is called leading.

 

In many smaller firms the manager's role is to direct the employees, telling them exactly what to do.

 

Planning is the function of management that includes anticipating future trends and determining the best strategies and tactics to achieve an organization's goals and objectives.

 

Planning is a key management function because other management functions depend on having a good plan.

 

Managers focus on making efficient use of their organization's human resources, but leave decisions about the efficient use of other resources such as buildings, machinery, and supplies to engineers and accountants.

 

Today's progressive organizations are designed around the needs of the customer. The idea is to organize systems to be responsive to customer needs.

 

Beth has spent the last two hours going over some consumer surveys to see how well her company is achieving its goal of improving customer satisfaction. Beth's efforts are an example of the controlling function of management.

 

Jack, a manager with Tiny Tots Toy Company, has just participated in a meeting that looked at future trends in the toy industry, and identified new challenges and opportunities for Tiny Tots. Jack's participation in this meeting was part of the organizing function of management.

 

Harold is a no-nonsense boss who believes that the best way for an organization to achieve its goals is for workers to follow their boss's orders. Thus, he tells workers exactly what to do and how to do it. Harold's approach is an example of directing.

 

Rita is a manager of a medium-sized service company. She is currently involved in redesigning her department to ensure that employees and other resources can respond more quickly and efficiently to the needs of its customers. Rita's efforts are part of the organizing function of management.

 

Planning involves setting the organizational vision, goals and objectives.

 

Progressive managers consider planning to be of little importance in today's rapidly changing business environment.

 

Goals tend to be broad and focus on the long term while objectives tend to be specific and more short term in their focus.

 

A vision is a detailed set of specific steps that a firm must take to achieve its short-run objectives.

 

A statement about why an organization exists and what it is trying to achieve is called the organization's directive.

 

A vision is the overall explanation of why an organization exists and where it is trying to head.

 

A vision gives the organization a sense of purpose and a set of values that unite employees toward a common destiny.

 

A mission statement outlines the fundamental purposes of an organization.

 

Today, a mission statement should also address social responsibility.

 

Goals are broad, long-term accomplishments an organization wants to achieve.

 

While goals are measurable, objectives are not.

 

Goals are developed and agreed to by management so that the workers can follow them.

 

Objectives should be expressed as broad, general principles rather than as specific short-term results.

 

Continuous planning is not necessary, because plans that worked well in the past are likely to continue to work well in the future.

 

Planning is a continuous process.

 

The SWOT analysis helps firms identify competitive threats and market opportunities.

 

An analysis of the business environment helps managers identify threats and opportunities that face their firm.

 

Strategic planning is now much easier than it used to be because managers have access to very reliable computerized forecasting tools.

 

Tactical planning deals with setting long-range goals, while strategic planning develops the specific strategies needed to achieve the organization's operational goals.

 

Strategic planning determines the major goals of the organization.

 

Today's business environment changes so rapidly that strategic planning is becoming more difficult and subject to change.

 

Managers or teams of managers at the lower levels of an organization normally develop 

 

Contingency planning involves developing alternative courses of action to be used if the primary plans do not achieve the desired results.

 

Operational planning looks at the organization as a whole, while strategic planning focuses on specific departmental actions.

 

One example of tactical planning is setting annual budgets and deciding on other details and activities necessary to meet the strategic objectives.

 

Many cities and businesses are now developing contingency plans to respond to potential terrorist attacks.

 

Instead of creating detailed strategic plans, the leaders of market-based companies (companies that respond quickly to environmental changes) set flexible directions so as to allow for change and seize opportunities when they come.

 

Decision making occurs in all management functions.

 

The first step in the rational decision-making model is to identify alternative solutions.

 

The last step in the rational decision-making model is to determine whether the decision was a good one and follow up.

 

One step in the rational decision-making model is to develop alternatives.

 

Brainstorming is coming up with as many solutions as possible in a short period of time with a focus toward not censoring anyone's ideas.

 

Problem solving is more formal than using the rational decision-making model.

 

PMI is a problem-solving technique that involves listing pluses, minuses and implications.

 

A mission statement should provide a detailed explanation of how a company will achieve its objectives.

 

The SWOT analysis focuses only on the internal activities of the firm, while a PERT analysis is used to review the external environment in which the firm operates.

 

Tactical planning involves making decisions about which customers to serve, what products or services to sell, and the geographic areas in which the firm will compete.

 

Contingency planning is most important in markets where conditions are relatively stable and market growth is predictable.

 

The top managers at the Sax Department Store find that their employees do not really share a common sense of purpose or have a common set of values. This suggests that top management has not provided a clear vision for the firm.

 

In order to ensure effective implementation, managers should make only one set of plans and carefully follow them to ensure that the organization's objectives are achieved.

 

Lucy is part of the top management team at Cloudy Daze Rain Gear, a company that produces umbrellas, raincoats, hats and all-weather shoes. As a member of top management, Lucy is more likely to be involved in strategic planning than in tactical planning.

 

Jamika is a manager at a well-known retail store. Each morning she determines the order in which store projects are performed; she sets work schedules for employees and standards that must be met. These activities suggest that Jamika is involved in operational planning.

 

Sharon needed to solve a problem quickly, so she called together the work team in her department and asked them to list as many possible solutions as they could come up with in a short period of time. During the process she encouraged responses and avoided censoring what her workers said. Sharon is utilizing a problem-solving technique known as brainstorming.

 

After management has created a plan of action, the focus turns to the controlling function to recheck and often redo the plan.

 

Organizing involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives.

 

The visual illustration of the relationships among the people within an organization that shows who is accountable for the work and who reports to whom is called a Gantt Chart.

 

Branch and plant managers and division heads are classified as first-line managers.

 

A CEO is often the president of the firm and is responsible for developing the strategic plans.

 

The recent recession eliminated many middle managers giving the remaining managers more employees to supervise.

 

Supervisory managers are those who directly oversee the activities of workers and evaluate their daily performance.

 

Middle managers usually are responsible for tactical planning and controlling.

 

The CIO, COO, and CFO are classified as top management positions.

 

In this day of rapidly changing technology, technical skills are the most important skills for all levels of management.

 

Conceptual skills refer to the ability of a manager to perform the tasks associated with a specific discipline or department.

 

First-line managers typically spend less time on conceptual tasks and more time on technical skills.

 

Most of a top manager's time is devoted to conceptual and human relations activities.

 

The ability to plan, coordinate, and delegate are among a manager's most basic technical skills.

 

A person who is a good first-line manager is automatically likely to be a good middle or top manager.

 

Human relations skills include those associated with leadership, coaching, morale building and supportiveness.

 

The question of how to implement change within an organization is the responsibility of the firm's CEO.

 

Staffing involves recruiting, hiring, motivating, and retaining the best people available for the organization.

 

Due to the growth of the Internet, recruiting is less important today than in the past.

 

Staffing is a less important management function today than in the past.

 

Organizing involves developing a structure or framework that relates all workers, tasks and resources to each other.

 

Top management is also known as first-line management because it deals with key managerial decisions on a priority basis.

 

Supervisory managers usually work more with ideas than with people.

 

Because of the complex nature of their jobs, top managers spend most of their time developing and using technical skills.

 

The experience gained by first-line managers as they perform their jobs enables them to acquire all the skills they will need when promoted to higher levels of management.

 

According to the Reaching Across Our Borders box, business leaders must strive to thoroughly understand a nation's culture and respect its strengths and challenges in order to be successful in the global market.

 

Mark is a manager for Cable Connection. He spends most of his time scheduling the specific service calls that each employee performs during the day, verifying job completion, and evaluating employee performance on each call. These responsibilities suggest that Mark is a middle manager.

 

Chris was recently promoted to a position as a first-line manager. At this level of management, he will use human relations and conceptual skills as well as technical skills.

 

Liz is a first-line manager at her company, which is very traditional in its approach to management. In her position, Liz probably spends a lot of time giving employees detailed and specific instructions.

 

Fatma wants to become a manager. However, she is shy and avoids conversation with strangers. She is very comfortable with computers and information technology and has great technical skills in these areas. Fatma's personal traits make her a good candidate for a top management position.

 

Staffing is less important at Sony, IBM and other high-tech firms because these firms sell technology.

 

People who are good leaders also are almost always good managers.

 

Leadership is the management function of checking to determine whether or not an organization is progressing toward its objectives, and taking corrective action if it is not.

 

One difference between managers and leaders is that managers strive to achieve stability while leaders embrace change.

 

Management carries out of the vision created by leadership.

 

Effective leadership includes the ability both to welcome change and to promote ethical behavior.

 

Good leaders motivate workers and create the environment for workers to motivate themselves.

 

Managers must lead by doing, not just by saying.

 

A leader's most important job may be to transform the way the company does business so that it's more effective and efficient.

 

Researchers have determined that all effective leaders have similar traits.

 

There is no single leadership style that works best in all situations.

 

Research has shown that the democratic style of leadership is the most effective style of leadership.

 

Research on leadership supports the idea that the best leadership style depends on several factors, including the people being led and the situation.

 

The autocratic style of leadership can be very effective in emergency situations.

 

The traits used by autocratic leaders include warmth, friendliness, and understanding.

 

The traits that characterize participative leaders include flexibility, good listening skills, and empathy.

 

Autocratic leadership is most effective with workers who like to work independently and make their own decisions.

 

Research has shown that employee participation in decision making improves job satisfaction.

 

Free-rein leaders tend to carefully monitor their subordinates to make sure they are doing the job in the correct way.

 

Managers are most effective when they consistently use the same leadership style with every employee assigned to their work group.

 

In traditional organizations, directing includes both giving assignments to workers and providing feedback on their performance.

 

Empowerment means that more authority and responsibility is given to top management.

 

Enabling is the term used to describe the process by which employees recognize and respect the authority of managers to issue orders.

 

Knowledge management involves finding the right information, keeping the information accessible, and making the information known to everyone in the firm.

 

The focus of knowledge management is to make sure top managers have all of the information they need to run the company.

 

The first step to developing a knowledge management system is to develop the technology to keep information secure.

 

The amount of data gathered has grown so much that the term big data is used to describe the vast amount of information available.

 

A comparison of leadership and management suggests that leadership is about creating a vision, while management is about carrying out that vision.

 

The Adapting to Change box showed us that what people think of a company is influenced by their responses on social media.

 

Heather has a strong desire to maintain and preserve order and stability. She is very good at developing tactical plans to achieve her company's goals and objectives. These characteristics suggest that Heather has characteristics of an exceptional leader.

 

Brett heads a department in a major manufacturing corporation. He strives to maintain a free-rein approach to leadership in most situations. Recently, Brett's company lost a major contract that it needs to continue the current level of operation. The company needs to take quick action to adjust, including slashing expenses. Under these conditions, Brett should maintain his free-rein style of leadership.

 

Lamont is quick and decisive. He makes most decisions by himself, issues orders, and expects his subordinates to follow them without question. Lamont's behavior is an example of the free-rein style of leadership.

 

A recent customer survey has convinced top managers at Akwip Corporation that their firm is doing a poor job of responding quickly to the needs of customers. The managers are very concerned about this problem. Empowerment might be an approach that would help Akwip improve its responsiveness.

 

Juanita is a project manager for a group of experienced and creative programmers at Idle Time Gaming, a publisher of popular computer games. Since the programmers are bright, creative, and highly motivated, Juanita brainstorms basic ideas with her group, then allows the programmers a great deal of freedom to do what it takes to reach the agreed-upon objectives. Juanita is using a free-rein leadership style.

 

Bryce has worked for Carolina Hotel for 10 years. Greg is a new employee at the hotel. Rachel, who oversees both of these employees, may find that she should use a different leadership style with Greg than with Bryce.

 

Joseph, a department chair at a major university, always gives department faculty members a chance to express their opinions and encourages them to participate in decision making. Employees who work with Joseph are likely to have a high level of job satisfaction.

 

Zoe is a middle manager at Watta-Deihl Incorporated. The company's top management has just announced that they are going to initiate a policy of empowerment. In order for this policy to succeed, Zoe and other managers will need to adopt a more autocratic style of leadership.

 

The steps of the controlling function include assigning tasks and establishing procedures to accomplish organizational goals.

 

Controlling provides managers and workers with feedback that helps them adjust to deviations from plans.

 

If managers do a good job planning and organizing, there shouldn't be a need for them to be involved with controlling.

 

Two of the key components of the control process are setting clear performance standards and communicating results and deviations to the employees involved.

 

The first step in the controlling process is to monitor and record the actual results.

 

Without clear standards, the control process is impossible to implement.

 

In the control process, performance standards should be stated in general terms in order to give management as much flexibility as possible.

 

In order to be effective, performance standards must be specific, attainable, and measurable.

 

Accounting and finance are important for control systems because they provide the numbers management needs to evaluate progress.

 

External customers are those individuals or units that receive services from other units within the same organization.

 

A customer-oriented firm should focus exclusively on satisfying its internal customers.

 

When all is said and done, financial standards such as profit and return on investment are the only relevant measures of how well a firm is meeting its goals.

 

When setting standards used in controlling, it is better to simply state general goals such as "better quality" or "higher levels of consumer satisfaction" than it is to spend a lot of time and effort developing more specific standards.

 

Chase is a manager for World Graphic Design, Inc., a firm that designs and manufactures greeting cards, invitations, announcements, and other event material. Chase spends a lot of time trying to find the right people for various positions at his company. These efforts are part of the controlling function of management.

 

Rebecca is concerned about the number of customers complaining about the poor service provided by the department she manages for a hardware store. She is convinced that her employees can provide better service and cut complaints significantly. Rebecca has set a goal for her department to reduce customer complaints by 15% within six months. This goal is an example of the type of performance standard needed for effective controlling.

 

Pro Fit, Inc., a maker of men's sportswear, has just reported a record profit. This proves that the firm is successfully achieving its goals.

 

Management is more progressive today. There is more emphasis on:

 

One of the challenges facing today's managers is to:

 

Today's progressive managers:

 

The revolution in management that is currently under way suggests that the most effective managers of the future will:

 

How are managers today different from managers in the past?

 

Which of the following statements has resulted in changes in the role of management?

 

__________ is the art of utilizing organizational resources to accomplish goals at work.

 

One of the four primary functions of management is:

 

The management function concerned with anticipating future trends and determining the best strategies to achieve an organization's goals and objectives is known as:

 

When managers work on creating conditions and systems to ensure that everything and everyone works together to achieve the organization's goals, they are involved in the __________ function of management.

 

__________ is the management function that involves determining whether an organization is progressing toward its goals, rewarding employees for doing a good job, and taking corrective action when they are not.

 

___________ is the management function that involves setting goals, strategies, and tactics for achieving the organization's goals and objectives.

 

___________ is the management function of creating a vision for the organization and guiding, training, coaching, and motivating employees to help achieve the goals and objectives of the organization.

 

Which of the following goals best describes today's view of the organizing function? Organizing today focuses on:

 

When managers determine that an organization is not making sufficient progress toward achieving its goals and objectives and they develop corrective measures, they are involved in:

 

When managers identify a market trend that suggests a new opportunity and then devise a strategy to go after this new opportunity, they are involved in the function of:

 

Which of the following activities would be a part of the leading function of management?

 

Which of the following activities is part of the planning function of management?

 

Which of the following activities is part of the organizing function of management?

 

As a manager, two of Sylvia's strengths are her ability to communicate goals clearly, and her ability to guide, coach, and motivate workers. Based on these strengths, __________ is a management function that Sylvia is likely to be good at performing.

 

Amanda, a regional manager for Flairol Cosmetics, has just seen a report showing that sales in her region are trending lower than anticipated for the third quarter. Her next task is to determine the reason for the disappointing results and find a way to get sales up to their desired level. Amanda's efforts are part of the ____________ function of management.

 

A __________ is an overall explanation of why an organization exists and where it is trying to head.

 

A vision for a company is:

 

A meaningful mission statement should address topics such as the organization's:

 

Employees often work with managers to develop a(n) __________ that outlines the fundamental purposes of their organization.

 

__________ involves setting the organization's vision, goals, and objectives.

 

___________ are broad, long-term accomplishments an organization wants to achieve.

 

__________ are specific, short-term, measurable results an organization wants to achieve in order to fulfill its long-term goals.

 

A __________ analysis is used to help companies evaluate their internal strengths and weaknesses, and develop an awareness of external threats and opportunities.

 

__________ planning determines the major goals of an organization and lays the foundation for obtaining and using resources to achieve those goals.

 

The type of planning that is concerned with developing detailed short-term actions about what is to be done, who is to do it, and how it is to be done is known as __________ planning.

 

__________ planning prepares alternative courses of action that may be used if the primary plans are not achieving objectives.

 

Tactical planning is concerned with:

 

Which of the following is involved in setting work standards and schedules needed to implement the firm's tactical objectives?

 

A(n) __________ would be used by a department manager as a tool for making daily and weekly assignments.

 

Strategic planning looks at the organization as a whole, while ________ planning focuses on daily tasks and decisions.

 

_________ planning is a part of contingency planning that is used to deal with sudden and unexpected changes in the business environment.

 

__________ is choosing among two or more alternatives.

 

The first step in the rational decision-making model is to:

 

__________ is a problem solving technique that attempts to come up with as many solutions as possible in a short time without censoring the ideas.

 

PMI is a:

 

In a company in which an effective vision has been provided:

 

A basic difference between goals and objectives is that goals are:

 

Which of the following would be a concern addressed in a strategic plan?

 

Because economic and competitive environments frequently change, organizations should:

 

Which of the following techniques would a team of workers be most likely to use if they wanted to evaluate several possible solutions to a specific problem their company needs to solve?

 

Jenna Raiter, the president and CEO of AutoMotion Auto Service Centers, has asked several managers and employees to help establish a statement to outline the fundamental purposes of their company. The result of this effort is likely to be a document known as a(n):

 

Jamal is part of a management group that is examining whether his company, State Engineering, should offer some important new services that would broaden its business by appealing to a different group of potential clients. Jamal's group is involved with:

 

Monica was hired by the Misty Mount Corporation to take over as the new chief executive officer. Her initial impression is that the company is in disarray, primarily because the employees do not have a sense of purpose or a common set of values. Monica's observations suggest that she needs to provide a(n) _________ for Misty Mount.

 

Customers who visit any Good As New Appliance Repair Center see a framed statement prominently displayed near the front door. The plaque describes the company's fundamental purposes. In part, it states that "All Good As New Centers operate under the belief that every customer deserves good quality parts, fast and dependable service, and a fair price." The words on this plaque reflect the ____________ of Good As New.

 

Setting contingency plans in an organization is considered very important today mainly because:

 

When a firm makes use of SWOT analysis, one of its objectives is to:

 

Jermaine is a manager with Drevil Industries. Part of his job is to make specific short-term decisions about what his department must do to achieve Drevil's long-term success. Jermaine is involved in:

 

Kayla is a supervisor who manages a production line. She spends several hours each week developing specific employee work assignments and production schedules for the coming week so that the production department can meet its short-term production objectives. This suggests that a significant component of Kayla's job involves:

 

Carlos had been thinking of setting up a graphic design service business for quite some time. He knew that he wanted to work at home and he now had several leads for prospective customers. He also knew how much money he needed to make to cover his expenses. He had several ways to approach his new business including working by himself or taking on a partner. Both ways needed more thought to determine what each would involve. In terms of the rational decision-making model, Carlos is in which of the following steps?

 

__________ is the management function that involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives.

 

The level of management that is directly responsible for assigning specific jobs to workers and evaluating their daily performance is called:

 

Middle managers are responsible for:

 

General and divisional managers, plant managers, and deans and department heads at colleges are classified as:

 

Supervisory managers spend most of their time on:

 

___________ skills involve a manager's ability to picture the organization as a whole and the relationships among its various parts.

 

____________ skills include the ability to perform tasks of a specific department or job, such as selling (marketing) or bookkeeping (accounting).

 

Leadership, coaching, and morale building are all part of a manager's _________ skills.

 

Although top managers most often possess these skills, they usually make less use of __________ skills than supervisory managers.

 

The downsizing that has occurred in recent years has __________ middle managers in many organizations.

 

Which of the following management positions is responsible for getting the right information to other managers to enable them to make better decisions?

 

The further up the managerial ladder a person moves, the __________ his or her original job skills become.

 

A chief operating officer (COO) would be classified as part of a firm's:

 

___________ involves recruiting, hiring, motivating, and retaining the best people available to accomplish the company's objectives.

 

In comparing the types of skills used by managers at different levels within an organization, which of the following is true?

 

Gabriella is responsible for hiring, motivating, and retaining the best employees for her organization. Gabriella is in charge of:

 

After thirteen years as a laborer for Hendrix Construction, Jimmy was promoted to the position of foreman. He is directly responsible for assigning various jobs to his work crew and evaluating their performance on a daily basis. Jimmy is now a member of:

 

By completing the courses needed to obtain a college major in accounting, marketing, or some other field, a student can go a long way toward acquiring the _________ skills managers need to rise through the ranks of their area of specialization.

 

Which of the following persons is most likely to be involved in strategic planning?

 

Axel is in a new position, serving as a first-line manager. Axel's position will require him to spend a lot of time:

 

Anita is employed as plant manager for Mojo Industries, Incorporated. Though she spends some time performing all management functions, she is particularly concerned with tactical planning and controlling. Anita's position would be classified as part of Mojo's:

 

After working for eleven years as a production line worker, Hollis recently was made a foreman. In his new position, Hollis will rely on:

 

Ricardo works as a department head at Barnes Hospital. His job requires Ricardo to spend most of his time training and coaching employees to perform their jobs more effectively and teaching other managers to be better leaders. Ricardo's job requires him to make full use of his:

 

Rob intends to major in accounting because he is confident that an ability to read and interpret financial and accounting data is the way to get to the top in business. Rob seems to be concerned with developing his:

 

_____________ involves creating a vision for others to follow, establishing corporate values and ethics, and transforming the way an organization does business so that it is more effective and efficient.

 

Leaders:

 

The __________ style of leadership is characterized by making managerial decisions without consulting others.

 

Managers who listen to their subordinates and allow them to participate in decision making are using the ____________ style of leadership.

 

A(n) __________ leader would set objectives and give employees a great deal of freedom to decide for themselves how to accomplish those objectives.

 

A key to effective leadership is the ability to:

 

__________ is the term used to describe giving workers the education and tools they need to assume additional decision-making powers.

 

_____________ means giving employees the authority and responsibility to respond quickly to customer requests.

 

In traditional organizations, ____________ involves giving explicit instructions to workers, telling them what to do to meet the goals and objectives of the organization.

 

____________ is concerned with finding the right information and making that information accessible and understood by everyone in an organization.

 

The first step in developing a knowledge management system is to:

 

One difference between managers and leaders is that:

 

Which of the following statements about effective leadership is the most accurate?

 

Autocratic leadership is likely to be effective when:

 

Which of the following statements about leadership styles is most accurate?

 

As firms make greater use of empowerment and teams, managers will find that they:

 

The Adapting to Change box reflects upon the use of Twitter and other social media sources to measure customer satisfaction. GM employees scanned various social media sites to stay current with customer perceptions and complaints. It is important that customers perceive that products and services are meeting or exceeding the standards that companies set. The _____________ of management involves the monitoring of product and service performance.

 

When we think of successful music entertainment groups of the past 60 years, the Beatles almost always appear in the top 5! In the early days, the entertainment group's life cycle could have ended as so many other rock groups do—here today, gone tomorrow. The four musicians were definitely creative and passionate about their craft and genre of music. As the informal leader of the group, John Lennon _____________ the others to make important compositional contributions. All four members had the opportunity to create musical compositions and receive copyright credit for their contributions.

 

Which of the following best summarizes the type of leader future organizations are likely to need? In the future, organizations will need leaders who:

 

The CEO of peripheral company QuickDrive uses a leadership style that encourages employees to discuss management issues with the CEO and to work together to resolve those issues in a democratic manner. Which of the following statements would the CEO of QuickDrive most likely make?

 

Well-known retired basketball coach Bob Knight was known for his emotional antics at Indiana University and Texas Tech. If you talk with Bob, he believes in total dedication from his team and total compliance to his style of coaching. It's "his way or the highway." Bob typifies the _____________ style of leader.

 

At Holyfield Chemicals, department heads usually make decisions after meeting with employees and seeking their ideas and suggestions. Department heads at Holyfield Chemicals make extensive use of the ___________ style of leadership.

 

At Lifeline Pharmaceuticals, highly regarded research personnel rely on top management to provide strategic direction. Beyond that, researchers work on their own to develop new drugs to satisfy customer needs and company profit objectives. Middle management at Lifeline practice ___________.

 

Recently, a senior software engineer complained that his boss was always in the command and control mode: "He doesn't trust us to make the right decision!" The boss rarely took the advice of his employees. There were occasions when productivity was hampered because he chose to do things only his way. Referring to leadership styles, this would best be described as:

 

Andrew Bryant of the New York Times interviewed the CEO of Aruba Networks, who said he valued a mentor he had at Hewlett Packard several years earlier. In reference to his former mentor, the CEO recalled: "Basically, he would push you and give you as much as you could handle until you started failing. He would encourage you to not be afraid of failing—because when you start failing, that's when you know where your limit is, and then you can improve around that. So he actually sometimes would reward failure because that means that you have pushed yourself." The CEO was describing a former mentor who _______ his employees.

 

Last year, Idle Time Gaming, Inc., experienced one of the most successful introductions of one of its new action videos since the company's inception. The CEO announced that sales and profits had exceeded company projections. He attributed the success to a flexible plan, which included good design, accurate product testing, and innovative marketing and sales tactics. In order to have good recall of the procedures that were put in place for this successful introduction, he has charged a team of managers to develop a(n) __________________ system, so the company can avoid "reinventing the wheel." For future introductions, he wants to be able to recall what worked and what didn't work.

 

The first step in controlling consists of:

 

In order for standards to be useful in the controlling process, they must have certain characteristics. One of these characteristics is that they must be:

 

Which of the following should form the foundation of a firm's control system?

 

__________ are units within an organization that receive services from other units within the organization.

 

__________ include dealers, who buy products to sell to others, and ultimate customers who buy products for their own personal use.

 

Ho Han has just spent two hours going over quality reports to determine whether his department is meeting quality standards he set for the current month. Ho's efforts are part of the ___________ function of management.

 

Pam is a sales manager for Paradise Beauty Products. She has told her sales people that she expects each of them to increase their customer contacts by at least 5% in the next month. Pam has set a(n):

 

Which of the following is a clear performance standard?

 

Two years ago, Travis started his own restaurant supply company, serving the greater Chicago area. Until recently, he has never concerned himself with establishing a formal control system. Now, with a recession looming, he is experiencing cost-conscious restaurant owners. He has decided that a formal control system is needed. The first step Travis should take is:

 

Idle Time Gaming, Inc., has established clear standards of performance for its latest video game that will involve physical challenges such as hand-eye coordination and the player's ability to react quickly. After a significant amount of testing, the results are compared to the previously established development standards. If necessary, the engineering team will correct deficiencies before customers test the game. These activities are part of the _____________ of management.

 

As a middle manager for her firm, Tori just finished comparing the results of a promotional campaign with the outcome expectations. The next step in the control process is:

 

Harper is a sales rep for an eyeglass company. The company is always on the cutting edge of trendy designs. In her job, she frequently relies on the marketing department to provide her with information and materials. When using customer satisfaction to judge the success of their company, Harper's managers should:

 

Customers who shop on Amazon find it helpful to read the customer reviews associated with products that others have purchased. After making a purchase, the customer can go to Amazon's website and post his/her opinion of the product recently purchased. This strategy not only assists other customers with their decision making, it helps Amazon react more quickly to the performance of the products it sells. Which of the following statements attests to the value of this service?

 

When establishing criteria to measure the success of a customer-oriented business, managers should:

 

Lauzy Fare left his position as senior vice president at Blue Skies Electronics a few weeks ago to become the new CEO of Idle Time Gaming. Before joining the new company, Lauzy spent time studying Idle Time's competitive position and talking to employees in all divisions and at all levels of the organization. Based on his findings, Lauzy believes that Idle Time has potential, but also faces some serious challenges if it expects to grow. Lauzy found that when confronted by him, most of Idle Time's professional employees seemed almost afraid to express their opinions. He learned that Otto Craddick, the previous CEO and founder of the company, viewed himself as the boss, and, as such, micromanaged every aspect of the business. This discouraged employees from using their own initiative and ideas to solve problems. For example, Otto required sales and service representatives to get his approval before they made any major commitments to customers. Otto's policy prevented the organization from responding quickly to customer requests, so sales were lost. Unlike his predecessor, Lauzy believes it is important for sales and service personnel to be able to deal with many types of customer requests without needing approval from top management. He is confident that giving employees the authority and flexibility to deal with customers, and providing them with the training and resources to help them do so, will improve morale within the company, create customer satisfaction, and grow revenues. Lauzy also wants to make workers throughout the organization feel more appreciated. He plans to continue meeting with them on a regular basis to seek their advice. He hopes his work colleagues will eventually respond to his leadership style. He has already encouraged middle managers to get employees more involved in decision making, and has suggested some problem-solving techniques the managers could try. Although he thought that changing the rigidity of the company culture would be his first challenge at the new firm, Lauzy quickly realized that there were no standards in place to measure the progress of changes in internal morale, customer satisfaction, and profitability. He has asked managers in those departments to spend more time setting performance standards and then monitoring actual performance. Lauzy is confident that in a relatively short period of time internal changes will lead to good company performance. As a member of top management, Lauzy performs a variety of important tasks.

 

Otto, the previous CEO at Idle Time Gaming, relied on a(n) ___________ style of management.

 

Lauzy seems to prefer a(n) __________ style of leadership.

 

Lauzy favors problem-solving techniques that allow teams of workers to freely identify and discuss possible solutions to a problem without having their ideas censored. Which of the following is a problem-solving technique that Lauzy is likely to suggest to his managers?

 

Lauzy's decision to establish well-defined standards for monitoring performance means that he expects management to seriously engage in the _________ function of management.

 

Which of the following statements best describes the relative importance of the various types of skills Lauzy will use to perform these tasks? The tasks Lauzy performs will require:

 

Organizing the structure of the company means deciding how many jobs need to be done and who is responsible for doing them.

 

In a capitalist economy, organizations seldom reorganize due to changing markets.

 

One key to organizational success is to go back to basic principles and build the business on a sound foundation.

 

Small business organizations lack the size required to reap the benefits of labor specialization.

 

The purpose of a division of labor and specialization is to improve an employee's job performance.

 

Managing a growing business often requires managers to create departments to accomplish various tasks.

 

The process of creating individual departments to do specialized tasks is called departmentalization.

 

Division of labor refers to deciding how many jobs must be accomplished and then dividing them up amongst the labor force.

 

The success of the firm often depends on assigning the right tasks to the right person.

 

The process of setting up individual departments to do specialized tasks is called job specialization.

 

Correctly structuring a business organization allows managers to avoid delegating responsibility and authority to employees.

 

Division of labor is difficult to achieve in small businesses.

 

Departments are functional units within the business such as sales, accounting, finance, and marketing.

 

As indicated in the Making Ethical Decisions box, "Would You Sacrifice Safety for Profit?" organizational decisions that affect profits in a negative way should be avoided at all cost.

 

In its effort to reorganize its floor space, Backstreet Books decided to eliminate seating space in its stores in order to make room for bookshelves to accommodate the growing interest in books about how to go green. This company's effort is an example of how a firm may reduce its emphasis in one product line in order to serve customer preferences and trends.

 

To better organize his landscaping business, Frank divides each job into several parts. One part is excavation and removal of old landscaping, the next part is design, followed by purchasing, and the last part is installation of new plants. If he assigns a different employee to each part, this action would be an example of departmentalization.

 

Alicia dreams of opening her own restaurant and knows that she will need to organize her business. Organizing begins with determining the work to be done.

 

When Eric Schmidt joined Google he tackled the organization function head-on. In speaking at a large conference with its founders, Sergey Brin and Larry Page, he commented that Google was running pretty well but "it just needed a little structure." Schmidt was referring to basic organization principles such as division of labor, specialization, and getting the departments running smoothly.

 

The driving force behind the change in business organizations is the change in consumer expectations.

 

Henri Fayol and Max Weber are best known for their contributions to accounting theory.

 

Fayol's principle of the division of labor says that functions should be divided into areas of specialization such as production, marketing, and finance.

 

One of Fayol's principles suggests that managers should have the right to give orders and expect others to follow.

 

Fayol's principle of esprit de corps says that employees should be divided into small groups that can be directed efficiently by a single manager.

 

Fayol's principles suggest that the goals of the firm are less important than the goals of individual workers.

 

According to Fayol's principle of authority, if you have authority you also have responsibility.

 

Fayol believed that the amount of decision-making power vested in top management should be the same in all situations.

 

Fayol believed that managers should treat employees and peers with respect and justice.

 

Clear communication among workers and keeping order in materials and people are included in Fayol's principles.

 

Max Weber's principles of organization were similar to those of Henri Fayol.

 

Weber believed that large organizations required everyone to follow the established rules and guidelines precisely.

 

Weber was critical of bureaucrats because he felt they undermined the efficiency of the organization.

 

Weber had a great deal of faith in managers. He was confident that a firm would do well if employees simply did as they were told.

 

Weber promoted the idea of the pyramid-shaped organization structure for large businesses.

 

Max Weber's organizational theories require an educated workforce to operate efficiently.

 

Weber was a strong proponent of bureaucracy.

 

Some business organizations still follow the 1940s organizational theory of Max Weber.

 

Weber believed that employees should be empowered to make their own decisions.

 

Job descriptions are an important part of Max Weber's organizational theory.

 

Max Weber believed that promotion should be based solely on seniority.

 

The design of a bureaucratic organization assumes a well-educated workforce.

 

An organizational hierarchy establishes one person at the top of an organization.

 

A chain of command is a line of authority that moves from the lowest level of the hierarchy to the top.

 

A hierarchy requires many top managers, but only a few middle managers.

 

According to Weber, a bureaucrat is a middle manager whose job is to implement top management's orders.

 

A bureaucracy empowers employees to quickly respond to customers' wants and desires.

 

A bureaucracy is an organization with many layers of managers who set rules and regulations and oversee all decisions.

 

Bureaucratic organizations establish rules and regulations that everyone is expected to follow.

 

Bureaucratic organizations are not very responsive to customers.

 

A bureaucracy is designed to be customer focused.

 

Bureaucratic organizations are structured to empower employees and please customers.

 

A bureaucratic style of organization is slow when responding to change.

 

Empowerment works only when employees are given the proper training and resources to respond.

 

The basic idea behind the organization design of Fayol and Weber was that management wanted to control workers.

 

An organization chart shows who is accountable for the completion of specific work and who reports to whom.

 

Looking at a traditional organization chart, you will view who reports to whom; you will have a sense of each person's authority and responsibility, and the type of work that they perform for the organization.

 

As organizations grew, the use of Fayol's principles led to rigid organizations that didn't always respond quickly to consumer requests.

 

In today's fast-paced business environment, Weber's bureaucratic ideas work well. These principles permit business to respond quickly to customer changes.

 

When we experience economies of scale, this means that as production levels rise (we make more of something), the cost of supplies and the cost of labor that go into the production go down.

 

The purpose of Weber's and Fayol's principles was for the benefit of management, as opposed to pleasing customers.

 

Weber put great trust in the creativity, skills, and pride of employees and believed that managers should act more as coaches than as bosses.

 

Blake is a manager at a car seat manufacturing company. He believes that it is very important and less confusing if each worker has only one boss. Blake's view is consistent with Fayol's unity of command principle.

 

Rob is a middle manager who spends much of his time devising ways to implement the ideas of top management. Max Weber would have considered Rob a bureaucrat.

 

Paige believes all workers should receive the same wage rate regardless of their position within a company. Paige's views on wages illustrate Fayol's principle of equity.

 

Kate holds a middle-management position with a large corporation. She prefers to involve her subordinates in decision making. She also favors allowing workers a fair amount of flexibility in how they do their jobs. Kate's approach to management exemplifies the principles first popularized by Max Weber.

 

Most businesses adopt a bureaucratic organization in order to speed up their decision-making process.

 

Antonio works in the accounting department of a large firm. This is an example of Fayol's division of labor concept.

 

As a new employee in a bureaucratic organization, Nelle can expect a great deal of independence and authority.

 

Soprano Industries follows a chain of command with authority moving from the top of the hierarchy down to lower-level managers. The company is organized by department with established rules and regulations that everyone is expected to follow. These characteristics suggest that Soprano Industries is an example of a bureaucratic organization.

 

At Dilly-Dally Sportswear Store a manager needs to be called to the front of the store and sign off on every return that a cashier performs. The CEO continues this policy because he wants every manager to "look those customers right in the eye" and "stake their job on taking those items back." Clearly, Dilly-Dally empowers its employees to make decisions at their jobs.

 

Sam supervised a group of people in a very large organization. The refrigerator in their lunchroom stopped functioning. He started the paperwork on the day it died, and the refrigerator request went out for bid; two middle managers needed to approve acceptance of the bid and document their decision, and the purchasing director had final approval. The refrigerator arrived six months later. Max Weber would have approved of the decision process and documentation of it at Sam's company to back up such a refrigerator purchase.

 

The degree to which an organization allows lower-level managers to make decisions reflects the degree of decentralization.

 

An advantage of decentralized authority is that those individuals closest to the customers and more familiar with local conditions make decisions.

 

Centralized authority provides for the delegation of authority to employees who are then better able to respond to customers' needs.

 

As a result of rapidly changing markets and global differences in consumer tastes, more firms are considering centralized authority.

 

A weakened corporate image is one of the disadvantages of a decentralized business organization.

 

In firms with centralized authority, each business unit is treated as if it is a completely separate and independent organization.

 

Span of control refers to the number of different markets a business can serve efficiently.

 

The optimum number of subordinates a manager should supervise is referred to as the span of control.

 

In today's business environment, the trend is to decrease the span of control.

 

The more standardized the work, the wider the span of control.

 

Managers near the top of an organization have the broadest span of control.

 

The more complex the job, the narrower the span of control.

 

When employees are self-managed, a company can implement a wider span of control.

 

Improvements in information technology have permitted companies to increase their span of control.

 

A tall organization structure consists of multiple levels of management.

 

A flat organizational structure is designed to be more responsive to the needs of management.

 

Flat organizations have fewer managers.

 

An advantage of a tall organization is that it ensures fast and efficient communications throughout the organization.

 

A recent business trend is the elimination of layers of management, creating flatter organizations and subsequently, a wider span of control.

 

Departmentalization is the dividing of organizational functions into separate units.

 

The traditional way to departmentalize an organization is by geographical area served.

 

Departmentalization by function allows employees opportunity to further develop their skills.

 

Departmentalization by function typically increases the cost of doing business.

 

Departmentalization by function groups employees based on similar skills, expertise, or resource use.

 

An advantage of departmentalization is groupthink.

 

Organizations that utilize functional departmentalization benefit from improved communication between departments.

 

Departmentalization creates an environment in which people are trained in a variety of managerial responsibilities.

 

Economies of scale can be achieved through departmentalization.

 

Some firms use a combination of departmentalization techniques.

 

The decision on how to departmentalize should depend on the customer and the product or service the firm is offering.

 

Departmentalizing by customer group has proven ineffective.

 

If there are several steps in getting the product to its final state, the company may choose to departmentalize by process.

 

Some companies have created hybrid versions of departmentalization, where they combine two or more traditional ways of departmentalizing.

 

When management structures the organization, it clarifies who gets to make decisions, how many people report to one manager, and how many different departments the company needs in order to operate effectively.

 

When management structures the organization, it makes decisions about which products and services it will offer and how it is going to finance the company.

 

Because top managers supervise the firm's most talented workers, they generally have a broader span of control than middle or first-line managers.

 

As the span of control widens, there is usually a reduction of middle management and an emphasis on empowerment.

 

A flat organization is less likely to respond quickly to customer needs.

 

To avoid losing that small company feel, fast growing companies try to maintain a flat organization structure.

 

Although a firm may experience better cost controls through departmentalization, it may not increase its responsiveness to customer needs.

 

Businesses seldom create separate departments to serve customers with different needs.

 

Rise 'n Shine Bakeries is a nationwide chain that has plants located throughout the U.S. Top management at Rise 'n Shine believes that customers in different regions have different tastes. It also recognizes that its bakeries face more intense competition in some regions than in others. Therefore, Rise 'n Shine's top management gives local managers the freedom to offer different types of breads and desserts, and to decide on a reasonable pricing strategy for its products. Rise 'n Shine typifies a decentralized organization.

 

Management at Hottie Potatee, a nationwide potato bar chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its potato bars anywhere in the U.S., they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Hottie Potatee should adopt a decentralized organization. 

 

A study at the Slumber Inn Co. identified poor employee morale. Employee respondents indicated frustration with their inability to deal directly with customers' concerns and complaints. These employees feel that if they were empowered with the authority to make decisions, customer satisfaction would dramatically increase. This illustrates one of the disadvantages of decentralized authority.

 

In the Crescent City manufacturing plant of the Granite Works Corp., a foreman supervises workers. The foreman reports to the shift supervisor who reports to the head of the production department, who then reports to the assistant plant manager, who reports to the plant manager. The plant manager, in turn, reports to a district manager, who then reports to a product group manager, who reports to an assistant vice president of operations, who keeps in close touch with an executive vice president. The layers of management indicate that Granite Works Corporation is a tall organization.

 

Martina is an experienced manager with excellent communications skills. The workers in her area are highly skilled and capable of doing their work with very little direct supervision. Martina's span of control is likely to be quite broad.

 

Rome Corporation is organized into departments such as finance, production, marketing, data processing, and accounting. Rome has chosen to departmentalize by function.

 

Top management at Topdown, Inc., wants to encourage communication among different departments to prevent employees from becoming narrow specialists. The best way to accomplish these goals is to departmentalize Topdown's organization by function.

 

Green Landscapes, a company that installs underground sprinkler systems, serves several commercial customers, as well as residential customers. As the business expands, Green Landscapes' management may want to consider departmentalizing by customer group and then by process.

 

Jesse started a successful telecommunications company that provided voicemail services to business clients in the Midwest. As the business grew, Jesse added functional departments including a marketing department and an accounting department. After a few years, he realized that employees who specialized in these areas no longer shared knowledge with each other in the same way they did when the operation was smaller. As one of Jesse's business consultants, you explain that as the company grows taller, it cannot avoid this pitfall, and he should focus on continued functional departmentalization, especially if he supports innovation and learning.

 

Jackie works in the finance department at the home office of a large retailer. Her main responsibility is to watch department expenditures and find ways to cut costs whenever possible. Tim, the marketing director for the same company, shares information with Jackie only when necessary. He finds her inflexible, and not understanding of what it takes to roll out a new product line. Jackie and Tim typify a disadvantage of departmentalization.

 

Traditional organizational models such as a line model or a line-and-staff model provide the flexibility demanded in a changing business environment.

 

In a line organization, there are many specialists who serve as advisors and assistants to the managers who make decisions.

 

Small businesses often use a line organization model.

 

Line organizations follow Fayol's traditional management rules.

 

Line managers issue orders, enforce discipline, and adjust the organization as conditions change.

 

In large businesses, a line organization provides firms the ability to respond quickly to a changing environment.

 

Line organizations clearly define the lines of authority and responsibility.

 

Line organizations often experience the problem of employees reporting to more than one boss.

 

A line organization in a large business often suffers from excessively slow lines of communication.

 

Staff personnel perform functions such as production and sales that contribute directly to the primary goals of the organization.

 

In a line-and-staff organization, staff positions are temporary jobs to train new line managers.

 

While staff personnel have the authority to make policy decisions, line personnel have the authority to advise and make suggestions.

 

An advantage of a line-and-staff organization is that it provides people that advise and assist line managers as they perform their jobs.

 

The matrix organization model brings together experts from different functional units of the firm to work on specific projects.

 

The team experts in a matrix organization remain part of the traditional line-and-staff structure.

 

A matrix organization produces an environment that discourages cooperation and teamwork.

 

Team participants in a matrix organization model may report to two managers at one time.

 

A disadvantage of the matrix organization is the temporary nature of the teams.

 

Matrix organizations give managers flexibility in assigning people to projects.

 

Matrix organization structures provide for more efficient use of organizational resources.

 

A recent trend in organization models is the development of cross-functional, self-managed teams of employees who work together on a long-term basis.

 

Cross-functional self-managed teams are groups of employees empowered to work with suppliers and customers to develop new products and give great service.

 

Cross-functional teams serve as advisory committees offering their expertise to line decision makers.

 

Cross-functional teams defy the trend toward customer-driven organizations.

 

Cross-functional teams consist of employees from different departments who work together on a longterm basis.

 

Cross-functional teams avoid involving groups outside of the firm to ensure their plans are not leaked to their competitors.

 

Cross-functional teams work best when the voice of the customer is brought into organizations.

 

Cross-functional teams work well when leadership of the team is shared.

 

Including customers and suppliers on cross-functional teams violates the interests of stockholders.

 

By structuring the company with cross-functional teams, there is a greater chance that a business is more responsive to social trends affecting customer preferences.

 

A matrix team for an aerospace company may consist of a project manager, a finance expert, a marketing specialist, a member of production, and two design engineers.

 

It is strategically not sensible for a firm to consider asking suppliers and customers to join a crossfunctional self-managed team that is testing iterations of future products.

 

One disadvantage of the matrix style of organization is that it is more difficult to keep development projects on schedule. The model slows down the time from design to production, and then to market.

 

Due to the competitive nature of companies that compete for the same customers, cross-functional teams never consist of individuals from more than one firm.

 

Cross-functional teams that go beyond company boundaries share production information but seldom market information.

 

Buzzoff Co. is a medium-sized organization, organized with well-defined lines of authority and responsibility. Each employee reports to only one boss. The managers at Buzzoff complain that they have no expert support staff available to offer legal advice. Lately opportunities are slipping through the cracks due to inefficient long lines of communication. These characteristics suggest that Buzzoff employs a matrix organization.

 

Julie is an attorney who works for Worldwide Food Science, Inc., who provides legal advice and assistance to the firm's managers. Julie's job would be classified as a staff position.

 

Wizard Manufacturing makes small consumer electronics products like mixers and toasters. The industry is relatively stable, having few new advances in product development. Wizard should use a line or line-and-staff organizational structure to ensure efficient operations.

 

Joel, an employee of the engineering department, was temporarily assigned to work with a team of specialists from other departments to develop a new product. Upon completion of this project, Joel returned to his position in the engineering department. This arrangement illustrates the use of a crossfunctional team.

 

Alleta Publishing Company, Inc., is considering the use of cross-functional teams. In order to be most effective, Alleta should include customers as members of the teams.

 

Barclay developed two interactive computer games. He didn't do it entirely alone. Last year he started a small company, and hired two programmers and a marketing graduate. He considers himself a cutting-edge kind of guy and wants to position his company the same way. He solicits your advice as to how he should structure his organization as he moves forward, and you suggest that he hire a few potential customers to join his team of employees as product testers. And, you suggest, maybe he should solicit globally. The structure you have described would simulate a line-and-staff organization.

 

Julio is the owner of Celebration, Inc., a small party supply company. The company provides tents, tables, chairs, and related paraphernalia for wedding, Bar Mitzvah, Bat Mitzvah, graduation, birthday, and other celebratory events. As sales have increased, the organization has hired more personnel and departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Celebration's organization chart, you agree it uses a line organization model.

 

Networking uses communication technology to link organizations, allowing them to work together on common objectives.

 

The Internet makes real-time availability of data possible.

 

Transparency describes the relationship between a firm and its stockholders.

 

Transparency allows two companies to work more efficiently together.

 

Most companies are no longer self-sufficient or self-contained.

 

Networking requires transparency to work most effectively.

 

A virtual corporation refers to a permanent network of firms linked by high-tech communication systems.

 

A virtual corporation is a networked organization made up of replaceable firms that join the network and leave it as needed.

 

Benchmarking requires organizations to compare each organizational function against the best in the world.

 

Competitive benchmarking rates an organization's products and operations against the industry average.

 

Competitive benchmarking compares a company's practices, processes, and products against others in its industry, with the goal of doing it better than the competition.

 

The functions that a company can perform as well as or better than anyone else in the world are known as that firm's optimized capabilities.

 

An organization's core competencies are those functions that the firm performs as well as or better than anyone else in the world.

 

If a particular function is one of a firm's core competencies, it typically performs this function itself rather than outsourcing it to another organization.

 

Assigning various functions that a firm might do for itself to outside organizations is known as competitive allocation.

 

Outsourcing involves assigning various functions to outside organizations.

 

Baby Boomers are often referenced as digital natives.

 

Restructuring involves the redesign of an organization to be more responsive to customers.

 

To better serve customers, many firms are restructuring to empower front-line employees.

 

New technology such as the Internet has opened up opportunities for firms to sell to new markets.

 

Digital natives, those who grew up with the Internet, are an important customer group that most businesses want to reach.

 

Introducing change into an organization is an easy task for a manager.

 

Inverted organizations define the role of front-line employees as those workers who follow the orders of top and middle management.

 

Inverted organizations empower employees by adding multiple layers of management and long lines of communication.

 

In an inverted organization, the purpose of management is to assist and support the decisions of employees who work directly with customers.

 

Companies have learned that working transparently through real-time networks has provided competitive advantages in the marketplace.

 

Outsourcing has become commonplace, particularly when organizations want to focus on core competencies.

 

Once a company has restructured a firm to be more competitive in today's market, it alleviates the need to scan the external environment.

 

The virtual corporation does all its business online with partners considered a permanent part of the network.

 

The Spotlight on Small Business box titled "Cutting Back While Cutting Costs" discusses the decline of outsourcing jobs in the small business sector. Outsourcing is just for big business.

 

According to the Spotlight on Small Business box titled "Cutting Back While Cutting Costs," the growth of small business outsourcing can be attributed to the presence of online job marketplaces.

 

According to the Adapting to Change box titled "When Open Communication Should Not Be So Open," France is considering legislation to block work e-mails and phone calls to allow workers time to rest.

 

Cardinal Foods is a wholesaler serving grocery stores. High-tech communications allows Cardinal to work closely with its suppliers and customers in real time. Networking allows these organizations to operate more efficiently.

 

In order to improve services to customers, Northwest Electric, a regional monopoly, recently rated their company's processes and products against the results achieved by the world's best at similar processes and products. Northwest Electric has adopted a policy of international standardization.

 

The Nutmeg Soccer Club outsourced its accounting work. This suggests that management at Nutmeg does not believe that accounting is one of the firm's core competencies.

 

Last week at Happy Trails Financial Services Company, all financial advisors who serve more than 150 clients each received a notice from the VP of Operations that every client's investment portfolio should consist of 50% individual stock purchases, 25% bonds, and 25% property. Advisors were ordered to review all client portfolios for compliance to this directive. Clearly, Happy Trails is an inverted organization because management directives such as the one described are very common.

 

Milton Learning Centers is a private firm specializing in helping students with learning problems. Located around the country, each center employs a manager and several tutors and counselors. The counselors and tutors have a great deal of flexibility to design programs specifically for individual students. In fact, these first-line employees are considered to be the key people in the organization, and the manager's main function is to assist these employees in matters such as scheduling and securing necessary materials. This type of arrangement suggests that Milton is an inverted organization.

 

Jason is a self-employed patent attorney. These days he is seldom without work. Large corporations hire him on an as-needed basis to review prospective ideas and help with securing patents for a variety of inventions including surgical instruments, medicines, and high-tech gadgets. Once he secures a contract, Jason knows approximately how many weeks or months he will work. Jason works for virtual corporations.

 

Ben was confident that sports fans would fill the seats in his brewery restaurant after major league baseball games if they just knew about the place. After all, he offered convenience, easy walking distance, great local talent for entertainment and several fresh premium brews. He decided to join sites such as Twitter and Facebook, and offer wireless services and lunch for afternoon customers. These are worthy strategies for reaching digital natives.

 

Organizations with positive images for performing exceptional service to customers are usually friendly places to work, as well.

 

Organizational culture can produce either a positive or negative impact on an organization.

 

The very best organizations have cultures that emphasize service to others, especially customers.

 

Organizational culture refers to the widely shared values within a corporation that foster unity and cooperation.

 

The informal organization is created by the decisions of top management.

 

While most organizations have a formal organization structure, only poorly managed firms also have an informal organization.

 

A firm's informal organization refers to the structure that identifies the authority, responsibility, and position of people within the organization.

 

The informal organization of a business can help generate creative solutions and inspire teamwork and camaraderie.

 

The formal organization of a firm provides the lines of authority to follow in routine situations.

 

The grapevine refers to the formal channel used for confidential communications between members of top management.

 

An informal organization can be a valuable asset to managers attempting to create an environment of harmony among workers and establish the corporate culture.

 

The informal organization appears as dashed lines on a firm's organizational chart.

 

The informal organization is best suited for decision making on big issues.

 

The key people in a company's grapevine typically have considerable influence in the organization.

 

Successful managers will find the balance between promoting the informal organization and maintaining a formalized structure, as well.

 

Samad accepted a managerial position at City Bank. In order to be more effective in his new position, he should try to learn who the important people are in City's informal organization.

 

Molly, a production-line employee at Holiday Industries learned from a friend at her coffee break that one of the managers in accounting is about to be fired. She is eager to learn if other friends at Holiday know any more about the situation. This flow of information is an example of Holiday's grapevine.

 

Rapid Response Security Firm, a company that provides on-site security services for malls and other retail environments, needs to review current procedures used by its professional officers to make certain they are in compliance with new laws. On crucial issues such as this, it is more important to gather information through the informal organization, as opposed to the formal organization.

 

Jack just learned that several people in Arizona became ill from the peanut butter that was produced and jarred in his plant. As he walks the back stairs at the plant, he ponders, "It's time to get the informal organization in on this. We've got to stop this in its tracks!" Jack is taking the right approach to solving this serious problem.

 

Organizing a business begins with:

 

Dividing the required work among a group of employees is called:

 

Dividing tasks into smaller jobs is called:

 

The process of setting up individual functional units of the business to do specialized tasks is called:

 

Job specialization is known to:

 

Which of the following is an example of a move to reorganize?

 

The proven success of job specialization lies in the fact that:

 

In the Making Ethical Decisions box titled "Would You Sacrifice Safety for Profit?" which of the following statements best expresses the theme of the discussion?

 

As Brett prepares to open his new business, he has identified the tasks that need to be accomplished and has assigned employees to each task. This illustrates:

 

As your good friend ponders putting some structure to his/her graphic design business idea, which of the following do you not advise him/her to do?

 

The concept of ____________ suggests that as a firm produces more, the average cost of goods produced goes down.

 

Henri Fayol and Max Weber are best known for their contributions to:

 

Organization theorists emerged during the era of mass production, meaning:

 

Fayol's _____________ principle states that each worker should report to one, and only one, boss.

 

Fayol's ____________ principle says that tasks should be divided into areas of specialization.

 

Fayol's ____________ principle says that workers' attitudes can create an environment of pride and loyalty within an organization.

 

__________ believed that managers were trustworthy and companies would do well if employees simply did what they were told.

 

Max Weber used the term ________ to describe middle managers whose job was to implement the orders of top management.

 

A(n) ________________ is a visual device which shows relationships among people and divides the organization's work.

 

In Weber's view of a bureaucratic organization, the role of top management is to:

 

In Weber's view of a bureaucratic organization, the organization demands:

 

The line of authority that moves from the top of a hierarchy to the lowest level is called the:

 

A(n) __________ consists of one person at the top of the organization and many levels of managers who are responsible to that person.

 

A(n) __________ is used by an organization to show who is accountable for the completion of specific work and who reports to whom.

 

In a bureaucratic organization:

 

One advantage of a bureaucratic organization is that:

 

______________ organizations are characterized of many layers of management and function with well-defined rules and procedures.

 

Economies of scale:

 

Max Weber favored which of the following?

 

Fayol believed that decision-making authority should remain in the hands of top management:

 

Which of the following statements explains the unity of command principle of management?

 

If companies follow the theories of Fayol and Weber, which of the following scenarios is likely to result?

 

Which of the following statements most closely identifies the problem with adopting Fayol's principles of organization design for contemporary businesses?

 

Campbell is a middle manager for a bureaucratic organization. According to Max Weber's views on bureaucratic organizations, Campbell's function within the organization is to:

 

At Green Acres Fencing Company, eight employees perform various aspects of the company's work. One person does sales; four perform installation; one purchases materials; one does billing; one performs after-sales inspections. This type of organization reflects Fayol's principle of:

 

Sarah is a designer for a business that installs underground sprinkler systems for residential and commercial customers. Tom and Bill share the ownership responsibilities of the business. Tom is in charge of commercial accounts and Bill is in charge of residential accounts. Sometimes Tom and Bill double book Sarah's time, creating frustration and animosity. Since they share supervisory responsibility, there is no clear way to decide whose accounts are most important. This type of situation represents a violation of Fayol's ____________ principle.

 

Bill, a financial manager at Carlyle Bank and Trust, always strives to treat each subordinate with respect and fairness. Bill's treatment of employees is an example of Fayol's principle of:

 

John recently accepted a job in the marketing department with the Burbank Bagel Boys. After just a few days on the job, John learned that the company has many layers of management, and seems to have a rule to cover almost every situation. These conditions suggest that Burbank Bagel Boys is a(n):

 

When Brian started his auto mechanic shop, his business plan included a(n) _______________ that showed the relationships among employees in his organization and the lines of authority and responsibility.

 

Fairview Community College is a multi-district college with four campuses. Each campus has one president, two vice presidents, five deans, 12 department chairs, over 100 faculty members, and several persons in support roles. The presidents from each campus report to four vice chancellors and the vice chancellors report to the chancellor. It is clear that Fairview has a well-defined ___________.

 

Andrew's company is a bureaucratic organization. Andrew is likely to encounter which of the following conditions?

 

The management at Patriot Mills works hard to ensure that no one in its organization has more than one boss and all workers are treated with fairness and respect. Additionally, the firm divides the work into areas of specialization so that everyone knows to whom they should report. The management of Patriot Mills reflects the ideas and principles of:

 

As a manager of a retail-clothing store, Lance favors detailed job descriptions, formal rules and regulations, detailed records, and standardized procedures. He also believes that staffing and promotion decisions should be based strictly on the qualifications of the people under consideration. Lance's attitudes suggest that he is strongly influenced by the ideas of:

 

Which of the following statements would best summarize Max Weber's views on the role of workers in an organization?

 

Which of the following determines the degree of decentralization of a firm?

 

In a(n) _____________ organization, decision-making authority is concentrated at the top level of management.

 

_______________ means that decision-making authority is delegated to lower-level managers and employees.

 

The optimum number of subordinates a manager can supervise is referred to as the:

 

The span of control for a manager:

 

Due to more emphasis on empowerment and more talented and better-educated lower-level management, span of control in organizations has _________.

 

An organization that consists of many layers of management is referred to as a(n) ____________ organization.

 

The ________ an organization's structure, the ________ the span of control.

 

An organization with only a few layers of management is known as a(n):

 

In recent years, large organizations have tried to improve their efficiency in communication and decision making by:

 

________ refers to the process of dividing organizational functions (sales, production, accounting/bookkeeping) into separate units.

 

The traditional technique used to departmentalize an organization is by:

 

Which of the following is considered to be a disadvantage of functional departmentalization?

 

Which of the following is considered to be an advantage of functional departmentalization?

 

Within its production department, Sooner Manufacturing has shift leaders, supervisors, assistant plant managers, plant managers, product group managers, assistant division managers, division managers, an assistant vice president for production, and a vice president in charge of production. Given its multiple-layer management structure, Sooner Manufacturing is an example of a(n) ____________ organization.

 

Which of the following factors help determine a manager's span of control?

 

Organizations that require consistent production standards to help create a high-quality public image would tend to favor:

 

Today's preference for flat rather than tall organization structures is mainly due to a flat organization's ability to:

 

Greenwave Garden Centers is a national chain of discount gardening stores. The top management realizes that different regions of the U.S. have very different climates and soil conditions, so they give regional managers a great deal of freedom to decide exactly what types of plants, fertilizers, and other items to stock and how to best market these products. Greenwave is an example of a _______________ organization.

 

HipHop Music Company assigns workers to departments based on similar skills. Currently, the company has a marketing department, a production department, a finance department, and a human resources department. This suggests that HipHop departmentalizes by:

 

Lockdown Industries produces a variety of anti-crime and safety products such as burglar alarms, smoke detectors, surveillance cameras, and specialty locks. Lockdown sells to households, businesses, and government agencies. They have found that each market requires a different marketing strategy. Lockdown would probably benefit from departmentalization by:

 

As the head of the engineering department for her company, Jody works with her team on complex and challenging projects. The level of detail in this work requires Jody to spend a significant amount of time with each team member, providing advice and support. Due to the complexity and time involvement of each project, Jody has a(n) ________ span of control.

 

Vaughn Studios organizes its operations by activity, such as production, marketing, accounting, and finance. Vaughn utilizes _____________ departmentalization in order to maximize their efficiency.

 

Springfield National Bank organizes its loan operations based on the market served, such as consumer, small business, and nonprofit organizations. Departmentalization based on ________ allows Springfield to better serve borrowers with different needs.

 

JayLo Corporation has experienced rapid growth during its five years of existence. While still relatively small, JayLo is now big enough that Jessa, the firm's CEO, has decided to organize the firm into functional departments. Jessa can likely expect which of the following to occur?

 

International Inns and Conference Centers (IICC), a national chain of professional event centers, utilizes a centralized authority structure. Which of the following provides the most likely explanation for why management at IICC would favor centralized authority?

 

As a response to a rapidly changing marketplace, Idea Electronics found it necessary to reorganize, including a significant downsize of its middle management. This action will likely result in _________.

 

During the past six years, the marketing department manager at Creative Concepts International made a strong push to hire mover/shaker professionals that had superior performance records prior to joining this company. It didn't take long for these enthusiastic marketers to recognize the many talents within their department. They marveled at how much they were like each other and how they seemed to agree with each other's work styles and ideas. After a while, it became difficult for others in the organization to present to this group. If the idea did not originate within the marketing department, marketers did not give it much credence. Management counselors would describe this phenomenon as ____.

 

Management at Hottie Potatee, a nationwide potato bar chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its potato bar chain restaurants anywhere in the United States, they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Hottie Potatee adopted a(n) ______ structure.

 

A ____________ organization is characterized by direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.

 

__________ are responsible for directly achieving organizational goals.

 

Employees who perform functions that advise and assist line personnel are known as:

 

Which of the organization models follows all of Fayol's traditional management rules?

 

Staff positions in an organization:

 

In a _____________ organization, specialists from different parts of the organization are brought together on a temporary basis to work on specific projects.

 

Line-and-staff organizations work well in organizations with:

 

Matrix organizational structures were first developed in:

 

Which of the following was created as a solution to the temporary nature of the matrix structure?

 

Which of the following describes a group of employees from different departments working together on a long-term basis?

 

Cross-functional self-managed teams work best when ______________.

 

Which of the following is an advantage of a line organization in a large business?

 

Which of the following positions would be classified as a staff position?

 

Which of the following is an advantage of a matrix organization structure?

 

Which of the following is true of cross-functional teams?

 

The main difference between a matrix-style organization model and a cross-functional team is:

 

Which one of the following would be the least likely to serve on a cross-functional team for the Discovery Corporation?

 

The organizational structure of the U.S. Army's 1st Infantry Division provides for direct two-way lines of responsibility, authority, and communication running from the top to the bottom. Additionally, each person in the division reports to only one superior. The 1st Infantry Division is clearly an example of a(n):

 

Eileen works in the human resources department of a corporation with several hundred employees. Her main function is to advise and assist managers in other departments, such as marketing and production, when they make staffing decisions. Eileen's position would be classified as a(n) ___________ position.

 

Joe, a production engineer at Freestone Tires, recently joined a team of specialists from other areas, such as marketing and finance. His long-term assignment to this team has produced several new products. Joe enjoys this work environment, in part because Freestone's management has given the team the freedom and flexibility to make decisions. A recent development is the inclusion of outsiders from Freestone's major distributors and suppliers on the team. It appears that Joe's team is a(n):

 

Julio is the owner of Celebration, Inc., a small party supply company. The company provides tents, tables, chairs, and related paraphernalia for wedding, Bar Mitzvah, Bat Mitzvah, graduation, birthday, and other celebratory events. As sales have increased, the organization has hired more personnel and departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Celebration's organization chart, you agree it uses a _____________.

 

Barclay developed two interactive computer games. He didn't do it entirely alone. Last year he started a small company, and hired two programmers and a marketing graduate. He considers himself a cutting-edge kind of guy and wants to position his company the same way. He has solicited your advice as to how he should structure his organization as he moves forward, and you suggest that he hire a few potential customers to join his team of employees as product testers. And, you suggest, maybe he should solicit globally. You are suggesting to Barclay that he put together a _________.

 

Chang is a project manager at Paradox Industries. He is able to borrow specialists from the organization on a regular basis to assist in major projects. After the project ends, the specialists return to their functional units to await new assignments. Paradox Industries utilizes a:

 

_____________ is using communications technology and other means to link organizations and allow them to work together on common objectives.

 

Which of the following describes an environment in which data is instantly available via the Internet to organizational partners?

 

Which term describes a company being so open to other companies working with it that electronic information is shared as if the companies were one?

 

Which of the following describes a temporary networked organization made up of replaceable firms that join and leave as needed?

 

The process of rating an organization's practices, processes, and products against the best of the world is known as:

 

Which of the following describes the activity of a firm that assigns specific functions, such as accounting or legal work, to other organizations rather than performing these functions themselves?

 

_____________ refers to companies headquartered abroad who elect to bring production and manufacturing to domestic subsidiaries.

 

__________ refer to those functions that an organization does as well as, or better than, any other organization in the world.

 

Young people today are often called __________ because they have never known life without the Internet.

 

Which of the following are common responses of employees when faced with change?

 

Which of the following describes the redesigning of an organization so that it can more effectively and efficiently serve its customers?

 

An organization that has contact people at the top and the chief executive officer at the bottom is known as a(n):

 

Empowering employees to better serve customers requires __________ front-line employees.

 

_________ is the term used to describe those functions that a firm can do as well or better than others. It performs these functions in-house, rather than outsourcing.

 

In today's competitive environment, cost containment is extremely important to survival. Which of the following increases efficiency in the production and distribution of goods?

 

Which of the following statements best describes the evolution of organization design?

 

Companies benefit today from interfirm cooperation. One of the ways they cooperate is through networking. Another way is by seeking technological knowledge and learning new processes from exemplary firms sometimes outside their own industries. We call this:

 

One of the most difficult management challenges today is managing change. This is because:

 

In an inverted organization, the job of management is to:

 

For an inverted organization to be effective, it requires:

 

According to the Spotlight on Small Business box titled "Cutting Back While Cutting Costs," overseas outsourcing is ________________.

 

Independence Electronics prides itself as a world-class producer of components used in CD and DVD players. The outstanding performance of the production department indicates that this activity is one of the firm's:

 

Excite Enterprises, a corporation of amusement parks, uses an accounting firm to handle the payroll and tax functions for the company. Using the services of another firm in this manner is an example of:

 

Global Cash Solutions hired 500 workers to build ATM machines and self-service check-out counters at a plant in Columbus, GA, with plans to hire several hundred more employees by 2018. In the past, these machines were built in Hungary, China, and Brazil. Both shipping costs and quality control were cited as the reasons these companies have elected to change production strategy to ____________.

 

Bull's-Eye, a regional discount retailer, carefully watches and compares its operations with the operations of its closest rivals. This firm does:

 

HairTrend, a cosmetology trade publication, utilizes the resources of other organizations as needed. Business relationships are temporary and flexible. HairTrend is a networked organization made up of replaceable firms that join the network and leave it as needed. This unique organization is an example of:

 

Whirlpond, a manufacturer of home appliances, has historically produced the components for their products. However, Whirlpond now contracts with other firms to produce these components. This strategy of __________ is a current trend among U.S. manufacturers.

 

Heather works as a sales representative for the Westerly Company. She really enjoys working for Westerly, because the company treats her and other sales representatives as highly valued employees. Sales reps at Westerly are given freedom and flexibility in their relationships with customers. While there are only a few layers of management at Westerly, Heather has found that these managers try their best to support and assist her efforts. Based on Heather's experience, it appears that Westerly is a(n):

 

The widely shared values within an organization that provide unity and cooperation to achieve common goals are together known as the:

 

The ____________ of a business firm is the system that details lines of authority, responsibility, and position, similar to the structure on organization charts.

 

All organizations have two organizational systems:

 

The __________ is the system of relationships that develop spontaneously as employees meet and form power centers.

 

In open organizations the informal organization can be:

 

The ___________ is the nerve center of the informal organization.

 

The informal organization of a business is probably best suited to:

 

A firm's formal organization would be better suited than its informal organization to:

 

Zach recently got his Ph.D. in analytical chemistry and was fortunate to be asked to join a lab at a prestigious eastern university. After a month on the job, he remarked to another graduate student at his former university that the spirit of help and cooperation at the lab was remarkable. He enjoyed going to work each day and sometimes exchanged calls with other lab partners in the evening with ideas to improve each other's experiments. Zach remarked, "Now I know why this lab is considered one of the best in the nation!" Zach is referring to:

 

Realizing that it was time to invest in an updated information system, a young CEO made the following announcement in his weekly broadcast: "We are going to shake things up around here. We need to break apart our information system, and start over." Unfortunately, the message translated poorly in the minds of employees. A total shake-up such as this could impact employee morale. Progressive companies today incorporate strategies that continuously embrace:

 

Gary was a politically savvy employee who had worked for his company for several years. After many promotions, he emerged as the new president of the company. Grace, a colleague of Gary's who had reported to him when he was a first-line supervisor, understood how the human side of the organization worked and made certain that she maintained a direct line of communication with Gary at all times. On the company's organization chart, Grace maintained a lower-level position; however, due to her open line of communication with President Gary, she seemed to successfully push her agenda. The human side of the organization is synonymous with the _______________.

 

Ashley experienced frustration with her new job at Walnut Securities, until she befriended a secretary from another department. Over lunch in the cafeteria, her new friend shared with Ashley the way things really work at Walnut Securities. Ashley quickly learned that:

 

Carlos is the person to see in the welding department if you are a new employee. While he is not a manager, he is the person that most of the others in the department look to for advice and assistance. Carlos is an important member of the firm's:

 

One of Javier's coworkers was recently promoted to a middle management position at their company. He seems to have quickly distanced himself from Javier and their other coworker, Carlos. In fact, yesterday Carlos described the situation by saying, "He's gone to the dark side." Javier understands what Carlos means because management keeps themselves removed from other employees, and seldom seriously solicits ideas for improvements or change from those in the trenches. The disadvantage in continuing this type of organizational culture is:

 

Angelica Canizales is the CEO of Mucho Dinero Enterprises. Sales have declined for four consecutive years and the firm's accountants have reported net losses in each of the last two years. Employees appear demoralized and frustrated. Recently, Angelica met with managers from marketing, production, and finance to listen to their views regarding the company's problems. The managers unanimously agreed that the main problem was a lack of communication among the several functional areas of the business. Each manager felt that the firm could increase quality and customer satisfaction with better interdepartmental communication. Angelica also met with marketing and production employees to get their respective opinions on the problems of the firm. One employee from the production department observed, "We have so many layers of management that it takes forever to make decisions." An employee from marketing complained, "This place is so bogged down with

rules and regulations that there is no opportunity to be creative." Several employees shared their opinions regarding their bosses. Specifically, one employee said, "My boss never pays attention to my ideas. He just issues orders and expects me to obey them." Angelica decided, after listening to many comments from managers and employees and also suppliers and customers, that the only way to end Mucho Dinero's slide was to completely rethink the firm's structure and to make radical changes in its organization. She presented her ideas to the board of directors, promising to voluntarily resign if her efforts to reorganize did not return the firm to profitability.

 

Employee complaints that there are too many layers of management and too many rules and regulations suggest that Mucho Dinero is a(n):

 

Angelica's decision to completely redesign Mucho Dinero's organization indicates that she believes the best approach to her firm's problems is:

 

Currently, Mucho Dinero is organized into specialized departments such as marketing, finance, production and personnel. These departments are designed to allow people with similar skills and expertise to work together. This approach is known as ___________ departmentalization.

 

In order to encourage more interdepartmental communication and cooperation, Angelica is thinking about setting up groups of workers from different departments to work together on a long-term basis. She is even thinking about asking people from some of Mucho Dinero's suppliers, customers, and distributors to join these groups. The type of group that Angelica is considering is known as a(n):

 

From her discussions with employees, Angelica learned quickly that production workers put their trust in 20-year veteran Willie McClaren. Many people told her that if you wanted something done, Willie was the person to see. Willie appears to be an important part of the:

 

Currently, manufacturing accounts for only around 70% of U.S. GDP.

 

The recent recession greatly affected the state of manufacturing in the U.S., resulting in a slowdown in production and the loss of jobs.

 

Today, manufacturers in the U.S. have become so efficient, they require fewer workers to produce the same amount of output.

 

One key to the resurgence of U.S. firms as world-class competitors has been the implementation of a focus on quality.

 

Evidence suggests that U.S. manufacturing firms can no longer compete against the best firms in the rest of the world.

 

American manufacturers have emphasized continuous improvement as one strategy for regaining a competitive advantage in the manufacturing sector.

 

In order to be more competitive globally, production techniques such as enterprise resource planning and lean manufacturing are being used by American manufacturers.

 

To strengthen its manufacturing base, the U.S. will need to continue to innovate.

 

The U.S. is still manufacturing intensive. Only 25% of U.S. jobs come from the service sector.

 

The Seeking Sustainability box states that there is no way to redesign the global food system for locally grown food to be available year-round.

 

The Reaching Across Our Borders box asserts that Germany is the most powerful and respected economy in the European Union.

 

Since U.S. manufacturing competes on price throughout the world, innovation plays a very small part in the U.S. economy.

 

U.S. businesses are known for their creativity and their ability to implement change.

 

The main reason for the recent resurgence of American manufacturing firms has been the quotas and tariffs imposed by the U.S. government in an attempt to protect domestic firms from cheap imports.

 

As the service industries became a larger part of U.S. GDP, companies have become more concerned about measuring productivity in the service sector.

 

U.S. manufacturers are focusing on quality as a way to become more competitive globally, assuming that cost is not an issue.

 

Companies such as IBM prefer to stay the course and continue to compete by selling products instead of services.

 

In the past, production management was about using the factors of production to create finished goods.

 

Operations management converts resources into goods and services.

 

In the process of operations management, a firm transforms resources such as raw materials, supplies, and even human resources into goods and services.

 

Firms that specialize in accounting, finance, and management consulting are all part of the service sector.

 

Operations management involves inventory management, quality control, and production scheduling.

 

Manufacturing firms focus exclusively on the production of goods and allow other firms to provide services.

 

In recent years, operations management has become more focused on providing services, because that is where the growth and profit potential is greatest.

 

Operations management in service industries is about creating a good experience for the customer.

 

Operations management moves from knowing the needs of consumers to actually satisfying those needs.

 

In service industries such as hotels, quality management training is important to ensure that all employees are certified in their positions.

 

Education and training are less important to workers in the service sector than to workers who have jobs in the manufacturing sector.

 

The quality standard for service industries such as luxury hotels is meeting the customers' requests.

 

Service businesses know that in order to delight customers they must be able to anticipate their needs.

 

One important issue with respect to managing the operation of a business is to make certain that customers leave feeling as though they had a good experience with your service and with your company in general.

 

Manufacturing companies are concerned with production management, while service companies are concerned with operations management.

 

An important strategy in operations management is using technology to anticipate customer needs. In the hotel industry, this is known as guest-recognition services.

 

Operations management transforms resources into goods and services, such as a landscape company that utilizes equipment, labor, and materials to develop a landscape. Managing this operation may also involve maintenance services.

 

Jason recently graduated with a degree in operations management from a respected university. The knowledge he gained and skills he developed while obtaining this degree could make him an attractive employee for either a manufacturing firm or a service firm.

 

Justin Tyme is a manager at Elastic Plastic, Inc. His duties include production scheduling and keeping tabs on the company's inventory. These activities suggest that Justin is involved in promotions management.

 

While going through the line at the local grocery store, the clerk asks you if you found everything you needed, as she continues to scan the goods you are planning to purchase. At the end of the scan, a coupon emerges that you can use on future purchases of a product you have just purchased. In reviewing the key concepts from Chapter 9, you would consider this action to be the store's management of its labor.

 

Marci Costas is majoring in operations management at Brunau University. Unfortunately, the evolution of the U.S. from a manufacturing-oriented to a service-oriented economy means that Marci will probably find few job openings in her field of study.

 

When firms successfully produce products, they create form utility.

 

Only firms in the manufacturing sector can create true form utility.

 

The three basic requirements of production are: (1) creating a finished good, (2) making sure you created it at the lowest cost possible, and (3) selling it.

 

The value added by the creation of finished goods and services from inputs is called ownership utility.

 

Process manufacturing refers to combining components and raw materials to make a product.

 

Process manufacturing physically or chemically alters materials to create finished goods.

 

An assembly process involves physically or chemically manipulating raw materials to create a product.

 

A continuous production process is characterized by long production runs that turn out finished goods over time.

 

Intermittent production processes are characterized by short production runs and frequent changes of machinery in order to produce different products like customized furniture.

 

Contemporary manufacturers in the U.S. lack the flexibility to use intermittent production processes.

 

One drawback of intermittent production processes is that they tend to be much slower than continuous processes.

 

The production process requires inputs, controls, and outputs.

 

Mass production techniques allowed firms to respond quickly to the individual needs of consumers.

 

One of the reasons mass production techniques lost favor is that, despite their ability to keep costs relatively low, mass production lacks flexibility.

 

The ability to integrate computers into the design and manufacture of products has had the greatest impact on production techniques in recent years.

 

CAD/CAM has made it possible to custom-design products to meet the tastes of small markets with very little increase in costs.

 

CAD systems allow designers to work in three dimensions.

 

Despite its early promise, computer-aided design has not met with much success in increasing productivity.

 

The purpose of computer-integrated manufacturing (CIM) is to unite computer-aided design with computer-aided manufacturing.

 

The advantage of computer-integrated manufacturing software is that it allows computer-aided design machines to communicate directly with computer-aided manufacturing machines.

 

So far, the high cost of CAD/CAM techniques has limited their use to large, expensive manufactured goods such as automobiles.

 

Flexible manufacturing systems use machines that are designed to do a multitude of tasks so that they can produce a variety of goods.

 

A disadvantage of flexible manufacturing systems is that they usually require a great deal of labor because machines are rarely capable of handling a wide variety of tasks.

 

One way to compete with cheap labor is to use robots.

 

Lean manufacturing is a strategy of producing standardized products that have no frills or extra features in order to keep prices low.

 

Companies that achieve lean manufacturing use less of everything (raw materials, labor, etc.) to produce the same amount of products.

 

Technological improvements are largely responsible for the increase in productivity and efficiency of U.S. plants.

 

The higher productivity of U.S. plants makes it possible to pay higher wages.

 

Mass customization is tailoring products to meet the needs of individual customers.

 

Mass customization is a strategy of convincing customers to choose from a relatively small number of alternatives in order to achieve the efficiencies of mass production.

 

While mass customization works well for producers it is not used in the service sector.

 

Actually, it is much easier to custom-design service programs than it is to custom-make goods.

 

Speeding up the process of responding to consumer wants and needs is a key to global competitiveness.

 

Nanomanufacturing is when materials can be manipulated on a molecular or even atomic level.

 

Companies that employ lean manufacturing and flexible manufacturing produce better quality products, but have costlier production lines.

 

When a company has the ability to produce the same amount of goods with only half the floor space and half the labor that it used in the past, the firm is practicing flexible manufacturing.

 

Improvements in technology have significantly increased the quality of products, as well as helped reduce costs.

 

Manufacturers use CAM (computer-aided manufacturing) to create three-dimensional designs of products before they are built.

 

Mass customization is not exclusive to product-intensive businesses. Service businesses have learned how to use mass customization to serve their customers.

 

Businesses that provide services typically cannot use mass customization because services are not tangible products that can be customized.

 

Process manufacturing involves taking raw materials and physically or chemically changing them into another form, while the assembly process takes the newly changed form and turns it back into the original form.

 

The main difference between process manufacturing and an assembly process is that process manufacturing uses sophisticated robots and automated machinery to produce a good or service, while an assembly process uses labor and simple tools to make a product.

 

Land, labor, capital, and knowledge are inputs into the production process.

 

Although lean manufacturing attempts to reduce the amount of labor used in the manufacturing process, it typically does so by increasing the amount of most of the other resources used in the production process.

 

Chinese companies use so many robots in its manufacturing sector that it may soon become the world's largest robot market.

 

The Cooldaze Ice Company compresses carbon dioxide and cools it to a very low temperature to make dry ice. The method used by Cooldaze is an example of process manufacturing.

 

Featured Furnishings is a company that specializes in producing custom-made furniture. A continuous production process would be the most efficient way for Featured Furnishings to produce its products.

 

J&R Industries typically produces very large batches of standardized products used by plumbers, such as pipefittings and valves that must be produced in standard sizes. A continuous production process would work well for J&R.

 

Frolichstein Fabrics promotes itself as a specialty manufacturer that will produce according to customer specifications. This firm will probably be best served by using an intermittent process in production.

 

Computers and robots are only useful in continuous production processes where the same type of product is produced many times.

 

Trace and Tim own a company that rehabs old houses. Prior to buying a house, they use software to create and design the renovation of each room. The program provides them with an estimation of how much of each kind of material is needed, and the orderly progression of tasks that need to be completed. Trace and Tim use computer-aided design.

 

SeatBelts Unlimited, Inc., is located about 8 miles from two major auto assembly plants. The firm delivers seatbelts about every two hours to each of the plants. The assembly plants only accept the number of seatbelts that they will assemble into cars during the next two hours after delivery. The auto plants embrace lean manufacturing.

 

Alice's Cookie Company makes a variety of cookies for corporate accounts and restaurants. On a good day, the orders can range from 600 to 800 cookies, with a variety of uniqueness, although the company is known for delicate shortbread and butter cookies. Some cookies have round shapes, but others are elongated rectangles, and yet others are triangles. The bakers can quickly change the cookie cutting machine to reflect the orders for the day, while computers program the ovens to make those cookies the light golden color they are known for across town. Refrigeration is also computer controlled. Alice's Cookie Company embraces flexible manufacturing and mass customization.

 

Facility location is the process of selecting a geographic location for a company's operations.

 

When considering the issue of facility location, it is important to find an isolated location so that work can get done without interruption from customers.

 

Operations management planning is concerned with finding the ideal location for a business and also with materials requirement planning. It leaves decisions about purchasing and inventory control to marketing.

 

When it comes to location decisions, labor costs are no longer an important consideration for most manufacturing firms.

 

The Internet is a very popular place to locate your business today.

 

Manufacturing firms that want to minimize time-to-market are likely to choose facility sites that give them easy access to their preferred modes of transportation.

 

Some companies will locate their production facilities near their suppliers.

 

Many state and local governments offer tax incentives and government services to attract businesses.

 

In making a location decision, businesses seldom consider "quality of life" in various locations, because factors that influence quality of life have little or no impact on profits.

 

According to the Making Ethical Decisions box titled "Do We Stay or Do We Go?" by law a firm must give employees 60 days' notice of a facility or plant closing.

 

Internet-focused strategies don't affect operations managers since it is not progressive for operations managers to negotiate in an interfirm environment.

 

For many firms, operations management has become an interfirm process.

 

Facility layout is the function of operations management that considers the physical arrangement of resources (including people) in the production process.

 

For service-intensive businesses, facility layout is usually designed to centralize the decision-making process.

 

Telecommuting has diminished in popularity as a strategy for linking employees with work.

 

The production of a bridge, ship, or large airplane usually involves a variable-position facility layout.

 

The process layout simplifies production by using the same sequence of processes regardless of the design of the item being produced.

 

In an assembly-line manufacturing layout workers do only a few tasks at a time.

 

In a modular manufacturing layout teams of workers combine to produce more complex units.

 

A process manufacturing layout is frequently used in operations that serve different customers' different needs.

 

Facilities layout will depend upon the processes that are to be accomplished in the firm's operation.

 

Materials requirement planning (MRP) enables a firm to make sure that the right amount of each material or component is available at the right time to satisfy its production needs.

 

Materials requirement planning relies on the firm's balance sheet to make sure that the right quantities of finished goods are produced.

 

One limitation of materials requirement planning (MRP) is that it is not a computer-based approach.

 

Enterprise resource planning (ERP) is simpler and less sophisticated than manufacturing resource planning (MRP).

 

Enterprise resource planning (ERP) software combines all functional units of a firm into the production of goods and services, and may even include subsidiaries and other firms.

 

ERP software enables multiple firms to manage all of their operations on the basis of a single, integrated set of corporate data.

 

The purchasing function involves searching for quality resources and finding the best suppliers as well as negotiating the best price for the needed items.

 

Over the past few years, Internet-based companies have emerged to help businesses find the best supplies at the best prices.

 

Modern companies tend to deal with many different suppliers in order to avoid problems that can arise when one supplier is unable to provide needed parts or materials.

 

Today, rather than purchase goods and services from a large number of firms, manufacturers often try to develop a close relationship with one or two key suppliers.

 

The purchasing function of operations management seldom uses the Internet to make purchasing decisions.

 

The primary characteristic of a just-in-time inventory system is that suppliers deliver parts and materials right at the time that the buyer is going to use them in the production process.

 

The concept "Just-In-Time" (JIT) works well if a company works with lots of suppliers. It also helps avoid the breakdowns that occur when operating with an enterprise resource planning system.

 

In a just-in-time inventory system, the producer holds large quantities of the materials and components used in the production process in its inventory to ensure that it always has enough on hand.

 

Overall, American firms that have tried to use just-in-time inventory systems generally report disappointment with the results.

 

In JIT inventory systems a manufacturer normally communicates its production plans to suppliers so that they can deliver needed parts and materials just in time for the manufacturer to use them.

 

Quality control is a continual process of checking to make certain that there is consistency in the quality of products being produced.

 

Six Sigma is a benchmark of quality standards that many product and service industries try to achieve.

 

Under the Six Sigma quality standard the idea is to detect potential problems, in order to prevent their occurrence.

 

Six Sigma is a quality measure that allows only 3.4 defects per million opportunities.

 

A key element of the statistical quality control (SQC) process is the reliance on quality control experts to inspect at the end of the production line to make sure that no defective products are shipped to final customers.

 

Statistical quality control (SQC) is the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning of the production process.

 

Statistical process control (SPC) is the process of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards.

 

The Deming Cycle is designed to catch errors before they happen.

 

The Deming Cycle approach to quality control consists of: Plan, Do, Check, Act.

 

Service organizations find it difficult to provide outstanding service every time because the process is so labor intensive.

 

If a company achieves Six Sigma quality standards, they automatically win the Malcolm Baldrige award.

 

The Baldrige standards measure a firm's quality in several key areas including planning, leadership, and customer and market focus.

 

ISO is a worldwide, nongovernmental federation that sets global measures of quality.

 

The International Organization for Standardization continually updates acceptable international requirements in the areas of process control, product testing, storage, and delivery.

 

ISO 9000 refers to a set of international standards for quality management and assurance.

 

ISO 14000 is a new set of product quality standards that has replaced the old ISO 9000 standards.

 

The European Union demands that all firms that want to do business with its member nations must satisfy ISO 9000 standards.

 

ISO 14000 is a collection of the best practices for managing an organization's impact on the environment.

 

Firms that satisfy the ISO 9000 and ISO 14000 standards have demonstrated a world-class management system in both quality and environmental standards.

 

One valid criticism of modern production planning methods such as ERP and MRP is that there is no way to use recent advances in information technology (IT) with these systems.

 

Recent developments in information technology will discourage companies from allowing employees to telecommute.

 

Areas with higher than average labor costs are almost always at a major disadvantage when trying to attract new businesses.

 

Retailing is one area where technology is unlikely to make a big difference in how services are provided.

 

The decreased use of enterprise resource planning (ERP) reflects the fact that firms are not interested in combining the computerized functions of all divisions and subsidiaries of a firm.

 

A major advantage of a just-in-time inventory system is that it reduces costs and the effort for both the producer and its suppliers.

 

Recent research suggests that the best way to maintain consistently high quality in the production process is to give a group of specialists in a separate quality control department the authority to inspect each product at the end of the production process.

 

Operations managers have learned that quality control is not a never-ending process. Just before you add packaging to the finished product, official company inspectors do a random spot-check. All inspections have to occur at the end of a production run because only then can the inspector see the total finished product in order to determine if quality is jeopardized.

 

Jamal, an operations manager for a product manufacturer, accepted an operations position with a company that produces a service. Jamal will find that operations management at the new job is significantly different from operations management at the old firm.

 

Andre is an outdoorsman whose love of hunting and fishing led him to start an e-tail company specializing in hunting and fishing gear. He decided to locate his business near the Ozarks in southwestern Missouri, partly because of low labor costs, but mainly because the area offered excellent fishing and hunting opportunities, a low crime rate, and a pleasant climate. Ken's location decision was strongly influenced by quality of life considerations.

 

Amalia is an operations manager at a medium-sized service firm. Amalia is recommending that her firm use the Internet to make its services more readily available to its customers. Amalia's recommendation reflects a growing trend in service-sector firms.

 

Solarsys Aeronautics was awarded a contract to build a large lab module that will be attached to a new space station. The module is approximately 48 feet long, 17 feet in diameter, and weighs over 60 tons. Solarsys should use an assembly-line plant layout to produce this module.

 

Millwell Manufacturing redesigned its facility layout to group similar equipment and functions together, and to allow flexibility in the sequence in which products are produced using these functions. Millwell's new layout is an example of the fixed-position layout.

 

Impact Computers wants to set up a planning system that enables it to integrate its production and operations system with those of its suppliers. As its operations management consultant, you explain that it needs a Material Requirement Planning (MRP) system.

 

Rysler Motors currently uses an ERP system to manage all of its production operations and coordinate them with the other operations of the company. The company also wants to implement a just-in-time (JIT) inventory system. Unfortunately for Rysler, ERP is incompatible with JIT, so if it adopts the new inventory system it will have to abandon ERP.

 

Mypartz, Inc., is a major supplier of components used by Idle Time Gaming Systems. Idle Time Gaming wants to implement a just-in-time inventory system. Mypartz should benefit from this approach, since JIT systems greatly simplify the task of suppliers.

 

In an effort to improve the quality control process at the Southern Peanut Corporation, management is introducing the importance of the Deming Cycle to employees. This suggests that managers are aware of the need to find potential problems before they occur.

 

Northern States Electric is in the process of trying to achieve ISO 14000 certification. Although the criteria for certification involve several milestones, we can be assured they will be evaluated on the regularity and thoroughness of their environmental audits, and how well top management reviews the firm's adherence to policies that are environmentally friendly.

 

Star Performance, Inc., a sporting good company, and Fairview Community College are interested in following the lead of other companies and implementing criteria that will lead toward receiving the Baldrige Award. As their advisor, you emphasize that focusing on the measurement of customer satisfaction is one important area where both will need to excel.

 

Antoine's Creamery, an eastern seaboard ice cream producer, wants to license firms in Europe to produce and sell its products. We can conclude that this is good strategy if it wants to save the money it would cost to be ISO 9000 certified because the EU (European Union), unlike U.S. firms, has not yet adopted these standards.

 

IMPUZZLED! Corporation produces jigsaw puzzles. The quality of its materials and the calibration of machines that cut and fit pieces of a puzzle are extremely important if it is to eliminate defects and meet customer specifications. If the company meets or exceeds Six Sigma criteria, it will have no more than 60 defects per million puzzles.

 

A major purpose of the program evaluation and review technique (PERT) is to identify the minimum time needed to complete a project.

 

The end result of PERT analysis is an estimate of the total cost of completing a project.

 

The critical path identified by PERT analysis is the sequence of tasks that can be completed in the shortest amount of time.

 

PERT is a popular technique for analyzing the tasks involved to complete a given project, estimating the time required to complete each task, and identifying the minimum time needed to complete the project.

 

An advantage of PERT diagrams is that they are usually so simple to draw that a computer is not needed.

 

In a PERT network, a critical path is the sequence of tasks that takes the longest time to complete.

 

Compared to PERT networks, Gantt charts provide a more basic way to track progress on a given project.

 

A Gantt chart is a bar graph showing production managers what projects are being worked on and the stage of development at any given time.

 

The significance of the critical path on a PERT chart is that it identifies the least costly method of producing a given product.

 

The first step in the PERT method is to assign a cost to each activity.

 

The PERT network provides a project manager with a plan that puts all the activities of a project in the correct order that they must be accomplished, shows which activities can be accomplished simultaneously, and, also gives the manager a good estimate of how long each activity will take to complete.

 

Gantt charts will show the production manager if certain activities in the production process are lagging behind their acceptable time of completion.

 

Brian is a construction manager who wants to determine how long a new project will take to complete and which tasks in the project have the greatest potential for delaying the project. The PERT Network model will help Brian answer these questions.

 

Casper is in charge of a complex project. He wants to see how all the different activities involved in completing the project are related to each other. One way to illustrate these relationships would be to construct a PERT chart.

 

In order to determine overall progress on her current project, production manager Michelle often refers to a bar graph that shows what activities are being worked on, and how much of each task has been completed on a daily basis. Michelle is using a Gantt chart.

 

Review the PERT Network below: If it takes 2 weeks for each activity (represented by a box) to be completed, it can be determined that the boxes labeled with No.1 create the critical path because this path of activities takes the shortest time to complete.

 

In recent years, the service sector of the U.S. economy has:

 

Manufacturing output in the U.S. continues to increase. The high unemployment of skilled workers who previously worked in the manufacturing sector _______________________.

 

One strategy U.S. manufacturers have employed in order to become more competitive is:

 

To strengthen its manufacturing base in the future, U.S. will have to:

 

The resurgence of U.S. manufacturing firms in recent years can be credited to:

 

Production management is the traditional term used to describe all the activities managers do to help their firms create:

 

Operations management is a specialized area in management that converts resources into:

 

__________ is the specialized area of management that converts or transforms resources into goods and services.

 

__________ is the creation of goods and services using land, labor, capital, entrepreneurship, and knowledge.

 

The U.S. economy is now dominated by the _________ sector.

 

Operations management in the service sector is focused on creating:

 

Experts in operations management for service industry businesses stress:

 

The basic reason the term production management has been replaced by the term operations management is that:

 

Which of the following statements best describes the distinction between production management and operations management? Production management involves:

 

Which of the following statements about operations management in the service sector is most accurate? Operations management in the service sector:

 

For most service businesses the quality standard has become:

 

Aaron is a freshman in college who has not yet decided on his major. He is thinking about majoring in operations management and is exploring job opportunities in this field. Which of the following statements about jobs for operations management majors is most accurate? If he majors in operations management, Aaron will:

 

The Ritz-Carlton hotel offers restaurants with the finest service, elevators that run smoothly, and a front desk that processes people quickly. Many times fresh-cut flowers are in the lobbies and dishes of fruit are in each room. __________ is responsible for implementing these customer benefits.

 

Each day the general manager at the New Life Grocery Store reviews employee work schedules, including the late night stock crew, the checkers, the baggers, the deli, produce, and meat department crews, and the office personnel. He coordinates work schedules with shipments, as well as the information he collects from registers that indicates the busiest hours at the store, and then he communicates any exceptions to his department managers. These daily tasks are part of ____________.

 

Upon their return from a recent scuba diving and snorkeling trip on the island of Cozumel, Mexico, Tyler and Diana highly recommended the resort where they stayed. Guest services were extremely prompt in assisting with diving excursions. All resort employees were trained to greet every guest each time they encountered them, whether it was on a pathway to the pools and beaches, or in the restaurants. Many times, the employees even referred to each guest by name. _____________ in the service sector is about creating a good experience for customers.

 

Production creates:

 

___________ utility is the value added by the creation of finished goods and services using raw materials, components, and other inputs.

 

In __________, materials are physically or chemically changed to produce a product.

 

A(n) __________ puts together components to make a product.

 

A production process characterized by long production runs to turn out finished goods over time is known as a(n):

 

A production process characterized by a short production run and frequent adjustments to machines so that different products can be produced is known as a(n):

 

Most new manufacturing facilities use:

 

In the past, the idea behind mass production was to:

 

____________ uses computers to help design products.

 

__________ involves computers directly in the production process.

 

CAD/CAM makes it possible to custom-design products to meet the needs of __________ with ________.

 

CAD has __________ productivity in many firms.

 

Sophisticated software that enables computer-aided design machines to communicate with computeraided manufacturing machines is called:

 

In ________, machines are designed to do multiple tasks so that they can produce a variety of products.

 

In manufacturing, one way to compete with cheap labor is to:

 

The goal of lean manufacturing is to:

 

______________ means tailoring products to meet the needs of a large number of individual customers.

 

Which of the following statements describes past processes that existed in manufacturing that negatively affected a firm's competitive advantage?

 

Which of the following statements about the impact of CAD/CAM on manufacturing is most accurate? CAD/CAM:

 

A big advantage of computer-integrated manufacturing software is that it:

 

A basic characteristic of flexible manufacturing is that it:

 

A company becomes lean by _________ its capacity to produce high-quality goods, while ___________ its need for resources.

 

Lean manufacturing ___________ productivity.

 

The main objective of lean manufacturing is to:

 

A benefit of CAD is:

 

SitRite Furniture Company uses labor and machinery to transform wood, plastic, metal and cloth into comfortable chairs, sofas, and love seats. This process creates:

 

Wild Bill's Cap Emporium offers to produce hats and caps according to customers' requests. Wild Bill's utilizes a(n):

 

The National Bicycle Company of Japan makes 18 bicycle models in more than 2 million combinations, with each combination designed to fit the needs of a specific customer. The customer chooses the model, size, color, and design. An analysis of this company's operation would indicate that it uses:

 

Marilyn's Travel Inc. is a medium-sized travel agency that specializes in vacation packages. It has packages available around the globe—everything from cruises, to beach resort vacations, to historical tours. The customer chooses the amount they would like to pay, the area of the world they would like to visit and what they would like to do. Based on this information Marilyn's Travel uses __________ to delight the customers.

 

To create their Deluxe Beef Sandwiches, Robbie's Roast Beef finely slices prime roast beef, stacks it on a sesame bun, adds special seasonings, cheese, onions, and mushrooms. The value added by Robbie's when it combines these ingredients to make a sandwich is known as:

 

Operations managers at Alumax Corporation have found that they can achieve efficient production only by producing very large quantities of aluminum without shutting down the production process. This indicates that Alumax should use a(n) ___________ production process.

 

Cooltreet, Inc., combines sugar, cream, eggs, and flavorings, then churns and cools the resulting mixture to a very low temperature until it freezes, creating ice cream. The method Cooltreet uses is an example of:

 

Megatronics, Inc., obtains computer components from a variety of suppliers and puts them together according to customer specifications to create custom-made computers. This process is an example of:

 

Transformation, Inc., builds machinery and robots that can assemble a variety of autos and trucks including light pick-up trucks, two-seater sports cars, luxury sedans, full-size vans, and SUVs. Transformation sells products to companies that require _________.

 

Justin is a project manager for a large defense systems company. Each contract for sophisticated weaponry requires the cooperation of several firms. Each time Justin begins a new project, he reviews what it takes to successfully complete a project. Which of the following would not constitute one of his goals?

 

Alex is a production manager who believes his firm uses more of all types of resources than is necessary to produce its products. He would like to find a way to cut back on labor, and reduce the firm's investment in tools and space as well. It seems that Edwin would like to adopt:

 

The EZee Office Furniture Company makes high-quality desks and chairs for executive offices. The company is about to make a radical change in its production process. It will take measurements from customers, have them select from a variety of fabric patterns and answer some basic questions about the furniture styles they like, then design a chair and desk that is ergonomically designed for maximum comfort for its users. The new method EZee Office will use is an example of:

 

You can now put your own photo on a credit card. You can design your own jeans online and have them sent to you in a few days. Dr. Scholl's now features kiosks where you can create your own orthotics to fit inside your shoes. These are examples of the trend toward ______.

 

Dewey Dare is a production and operations manager with a clothing manufacturer. He has been looking into a system that will enable his company to take measurements from a customer and program machines to design and produce custom-cut clothes at little additional cost. This type of system is an example of the benefits of:

 

HandZone, a manufacturer of high-quality gloves and a variety of accessories, already has both computer-aided design and computer-aided manufacturing. Unfortunately, the two systems cannot communicate with each other. David Warmdigit, a production manager at HandZone, has heard about some software that allows CAD and CAM to work together, and wants to learn more about it. David is interested in:

 

Sarah works for an architectural firm. The partners in the firm have always drawn the plans for projects by hand. While Sarah learned how to draw by hand in college, she also became skilled on computer programs that permitted her to create designs in three dimensions. She plans to demonstrate the effectiveness of such programs to the firm's partners. The computer program she will recommend to the partners is:

 

__________ is the process of selecting a geographic location for a company's operations.

 

Which of the following is a likely reason that a company would move its facility from one location to another?

 

Operations management planning does not include decisions about:

 

Firms that have a goal of ____________ tend to locate facilities near major highways, ports, rail lines and airports.

 

Contemporary producers and their suppliers:

 

According to the Making Ethical Decisions box "Do We Stay or Do We Go?" a firm must give its employees _______________ before closing and/or moving to another location.

 

A major trend in business is _________, where employees work at least part time at home using a computer and modem.

 

Operations management becomes a(n) ____________ when companies outsource several processes and create a network of firms that cooperatively produce products and services.

 

__________ is the physical arrangement of resources in the production process.

 

Modular facilities layouts consist of:

 

Firms often use a(n) _____________ when working on a major project involving the production of a large item such as an airplane, ship, or bridge.

 

Unlike an assembly line where workers perform only a few tasks, in a _________ layout, teams of workers combine to perform a variety of tasks needed to produce more complex units of a final product.

 

In manufacturing, a(n) __________ is used to produce large quantities of a few types of products.

 

In manufacturing, a(n) __________ is frequently used in operations that serve different customers' different needs.

 

An example of a(n) __________ is building a new home on a lot.

 

The operations planning practice of inputting sales forecasts into computer software that accurately predicts the amount and timing of materials needed to complete products and projects is ______________.

 

MRP is a technique that helps managers:

 

MRP is the acronym for:

 

ERP is the acronym for:

 

___________ is a computer application that enables a firm to combine computerized functions of all divisions and subsidiaries of the firm into a single, integrated software program that uses a single database.

 

__________ is the operations management planning function that searches for quality material resources, finds the best suppliers, and negotiates the best price.

 

__________ has transformed the purchasing function in recent years by helping firms find the best suppliers and the best prices.

 

Today manufacturers are relying more heavily on:

 

With the __________ inventory control system, producers hold only the amount of materials and parts that they need for a short period of time, sometimes just a few hours.

 

To reduce the cost of holding too much inventory, many companies have implemented:

 

Maintaining ___________ involves producing what the customer wants while reducing errors before and after delivery to the customer.

 

In today's quality control programs, emphasis is placed on:

 

The Six Sigma approach to quality control:

 

____________ examines statistical samples of product components at each stage of the production process and plots the results on a graph in order to spot and correct any variances from desired quality levels.

 

The Deming Cycle is:

 

The ___________ National Quality Award is given to firms that achieve an outstanding level of overall quality based on performance in seven key areas.

 

___________ is a set of international standards for quality management and quality assurance.

 

____________ standards are concerned with the best practices for managing an organization's environmental impacts.

 

Which of the following is an important part of operations management?

 

Which of the following statements best describes the impact of recent advances in information technology on business location decisions?

 

Which of the following statements about facility location is most accurate?

 

Which of the following statements best reflects the approach state and local governments take to influence the location decisions of businesses? State and local governments:

 

Which of the following statements is most accurate?

 

New developments in information technology have:

 

Contemporary operations management planning is an interfirm process. This means:

 

The main idea in the Making Ethical Decisions box "Do We Stay or Do We Go?" indicates:

 

Enterprise resource planning (ERP) goes beyond the capabilities of MRP because it:

 

A just-in-time inventory system usually reduces costs for:

 

In a just-in-time inventory system, suppliers:

 

A firm would be most likely to employ statistical process control (SPC) if it wanted to:

 

A firm that is certified as meeting both ISO 9000 and ISO 14000 standards has demonstrated:

 

A small hospital in a suburb of a large metropolitan area wants to further develop its operations and services in order to compete with other hospitals in the region. In analyzing the criteria for making this happen, location is a primary concern. If it constructs additional floors, it could increase the quality of a few services in its present location, but city regulations would require more parking. As it looks for new property, which of the following criteria would not be an important consideration for this facility?

 

As businesses strive for market expansion, companies add to their sales force, but opt to eliminate sales offices across the nation and internationally. How are these firms able to remotely operate a sales force that contributes toward increasing the bottom line?

 

Millennium, Inc., a leading producer of environmentally friendly cleaning agents, is looking for a site for a new production facility. The company is mainly focusing on sites that are close to major highways and rail hubs and are not too far from some major population centers. This suggests that an important location consideration for Millennium is:

 

X-Sport Industries is a U.S.-based manufacturer of sporting goods. Recently, it has decided to make a major push to sell its products in the European Union. In order to succeed in this new market X-Sport will need to:

 

At Stevens Manufacturing workers are organized in teams that combine their efforts to produce complex units of a final product. Stevens is using a facility layout known as a(n):

 

For the past two years, Mountain High Bike Company used suppliers from India, Japan, and Malaysia to provide them with precision parts for its custom bikes. There was only one problem: the quality of the parts from all locations lacked precision and consistency. Skilled technicians complained that as many as three out of five parts had to be discarded due to imperfections. The quality control manager convinced the owners to partner with a slightly higher-priced company in Omaha, Nebraska, which utilized _________________ to test samples of product components for deviations in quality and precision, prior to sending them to Mountain High Bike Company. The bike company realized savings in both time and money.

 

Production manager Ryan McNealy wants to link all the divisions and subsidiaries of his firm's computerized functions into a single, integrated software program that uses a single database. In order to achieve this goal, Ryan could make use of:

 

Superior Supplies' largest customer recently implemented a just-in-time inventory system. As a supplier of materials to this customer, Superior Supplies will:

 

Last week John got a call from his contact Eric at Alpine Telecomm in Switzerland, one of his company's largest international customers. As Eric put it, "This is a heads-up! Top management is asking operations to review our vendors for ISO 14000 compliance." John's company should prepare to demonstrate:

 

___________ is a technique to analyze and sequence tasks involved in completing a project, to estimate the time needed to complete each task, and to determine the minimum amount of time needed to complete each project.

 

In a PERT network, the sequence of tasks that takes the longest to complete is called the:

 

The purpose of a PERT network is:

 

A bar graph that shows what projects or tasks are in process and how much of each is completed is called a(n):

 

Which of the following would be most helpful to a production manager who wanted to determine the minimum time required to complete a proposed project?

 

The first step in the development of a PERT chart is:

 

The purpose of determining the critical path on a PERT network is to:

 

Both PERT diagrams and Gantt charts are useful to managers concerned with:

 

Becca works as a new-product development engineer for a company that makes solar panels for residential and commercial purposes. Her company uses PERT network software for all development projects. As she nears the final month of her timeline for completing a new panel, Becca will focus on those activities that are:

 

A PERT network consists of activities linked by arrows. Suppose two of the activities on the network are labeled "A" and "B." An arrow from "A" to "B" indicates that:

 

Courtney was planning a new product launch. She knew that the art department was ready to work on the promotional pieces now, but they couldn't start until the strategy group established the price point and the purchasing group obtained the paper needed to make the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Assuming things go as planned and based on this information, when will the art department be able to begin work on the promotional pieces?

 

Joel was planning a new product launch. He knew that the art department was ready to work on the promotional pieces now, but they couldn't start until the marketing strategy group established the price point and the purchasing department obtained the paper needed to design the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the marketing strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Assuming things go as planned and based on this information, which of the following tasks could be as much as a week late without jeopardizing the deadline for the entire project?

 

Review the PERT Network below: If it takes 1, 2, or 3 weeks for each activity (represented by a box) to be completed, the critical path is represented by:

 

Manny is a production and operations manager who likes to keep track of how various projects are progressing. One of Manny's favorite tools is a bar graph that shows how much work has been completed on the projects that are currently under way and which processes are behind schedule. Manny likes to use a(n):

 

"These are exciting times for our company. We've made a lot of changes over the past two years that have really improved our operations and lowered our costs. Now we are ready to expand into new markets. Minimotors is on its way to becoming a global player." The speaker was Sparky Weyer, president and CEO of Minimotors, Inc., a growing manufacturer of small (some of them downright tiny) electric motors used in a variety of power tools and appliances. Sparky was meeting with potential financial backers in an effort to obtain funding for some expensive new machinery he wanted to purchase. "You may have heard about some of the ways we've cut costs," Sparky continued. "We've developed a new arrangement with several of our biggest suppliers. They've agreed to make more frequent deliveries tied directly to our production schedules. This will help us reduce our inventory costs dramatically. We've also greatly reduced the number of defective motors we produce by carefully keeping tabs on all of our manufacturing processes. In fact, we have set a goal of reducing our defects to 3.4 parts per million. The main purpose of my meeting with you today is because we want to install some sophisticated new machinery and software that will allow us to quickly design and produce motors to the exact specifications of our customers. The machinery is computercontrolled and can produce custom-designed products at very little increase in cost compared to our mass-produced motors. We feel this flexibility and quick response time will give us a tremendous competitive advantage and help us attract new customers. Installing the new equipment and training our workers to use it properly will be a complex project, but I'm confident that once we get everything up and running we'll be able to strengthen our position as the leading maker of high-quality electric motors."

 

One of Sparky's goals is to expand globally. He is most interested in doing business with the nations of the European Union. In order to do business with the European Union, Sparky's company should:

 

The arrangements Minimotors has worked out with its suppliers to reduce the amount of inventory the company holds at any one time shows that it is committed to a(n) ___________.

 

The equipment and software Sparky wants to acquire will allow the computers used to design motors to be linked directly to the computer-aided equipment on the factory floor. Sparky is proposing to set up a(n):

 

In order to schedule deliveries, Minimotors's suppliers need detailed information about when parts are needed. Minimotors will purchase a sophisticated computer application that will link its operation to sales forecasts to make sure needed parts and supplies are available at the right time to meet customer demands. This planning system is known as:

 

Sparky sees quality control in terms of detecting potential problems to prevent their occurrence and thus save Minimotors money. The quality control process that is most closely linked to Sparky's goal is known as:

 

Sparky knows that installing the new equipment and training workers to use it efficiently will be a long and complex process consisting of many different tasks. Which of the following methods would help him determine how long this project is likely to take?

 

While Minimotors has focused on improving production efficiencies, global customers are inquiring about its environmental policies. In light of its strategy to serve European customers, Sparky has requested two of its lead engineers to investigate what it would take to meet the environmental standards of its socially responsible customers. The engineers should investigate ___________ as best practices for managing a firm's impact on its environment.