Chapter 9: Strategy Review, Evaluation, and Control

CHAPTER 9
Strategy Review, Evaluation, and Control

True/False
The Nature of Strategy Evaluation

1. Most strategists believe that an organization’s well being depends on evaluation

of the strategic-management process.

(t; easy; p. 298)

2. Adequate, timely feedback is important to effective strategy evaluation.

(t; easy; p. 298)

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

counterproductive.

(t; medium; p. 298)

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

(f; medium; p. 299)

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

external assessment.

(f; medium; p. 299)

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

internal assessment.

(t; medium; p. 299)

7. Consistency, distinctiveness, advantage and feasibility are Richard Rumelt’s four

criteria for evaluating a strategy.

(f; medium; p. 299)

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 Chapter 9: Strategy Review, Evaluation, and Control

8. Strategy evaluation is becoming increasingly easier with the passage of time,

given the technological advances.

(f; difficult; p. 300; AACSB: Reflective thinking skills)

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

(t; medium; p. 300; AACSB: Reflective thinking skills)

10. Strategies may be inconsistent if policy problems and issues continue to be

brought to the top for resolution.

(t; easy; p. 300)

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

(f; medium; p. 300; AACSB: Reflective thinking skills)

12. Regardless of the size of the organization, a certain amount of management by

wandering around at all levels is essential to effective strategy evaluation.

(t; medium; p. 301)

13. Because large companies have more at stake, it is more important for large
organizations to conduct strategy evaluation than small companies.

(f; easy; p. 301)

14. The end of the fiscal year is the best time to do strategy evaluation.

(f; medium; p. 301; AACSB: Reflective thinking skills)

A Strategy-Evaluation Framework

15. Changes in the organization’s management, marketing, finance, R&D and CIS
strengths and weaknesses should all be the focus of a revised EFE matrix in
strategy evaluation.

(f; medium; p. 300; AACSB: Analytic skills)

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

(f; medium; p. 302; AACSB: Reflective thinking skills)

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Chapter 9: Strategy Review, Evaluation, and Control

17. Strengths, weaknesses, opportunities and threats should continually be monitored

for change because it is not really a question of whether these factors will change
but rather when they will change and in what ways.

(t; medium; p. 302)

18. When taking corrective action, you need to compare expected results to actual
results.

(f; easy; p. 302)

19. Criteria for evaluating strategies should be measurable and easily verifiable.

(t; easy; p. 302)

20. Specific financial ratios are rarely used criteria to evaluate strategies.

(f; medium; p. 302)

21. Measuring organizational performance includes comparing expected results to

actual results, investigating deviations from plans, evaluating individual
performance and examining progress being made toward meeting stated
objectives.

(t; medium; p. 304; AACSB: Reflective thinking skills)

22. Intuitive judgments are almost always involved in deriving quantitative criteria.

(t; medium; p. 304)

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

(f; medium; p. 304; AACSB: Analytic skills)

24. Measuring organizational performance requires making changes to reposition a

firm competitively for the future.

(f; medium; p. 304)

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

(t; medium; p. 305)

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 Chapter 9: Strategy Review, Evaluation, and Control

26. Corrective action in strategy evaluation is necessary to keep an organization on

track toward achieving stated objectives.

(t; easy; p. 305)

27. Alvin Toffler argues that environments are becoming so dynamic and complex
that they threaten people and organizations with future shock in his thought-
provoking books entitled Future Shock and The Third Wave.

(t; medium; p. 305; AACSB: Reflective thinking skills)

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

(t; medium; p. 305)

29. According to research, participation in strategy-evaluation activities is one of the

best ways to overcome individuals’ resistance to change.

(t; medium; p. 305)

The Balanced Scorecard

30. The basic form of a Balanced Scorecard is the same for all organizations and
industries.

(f; easy; p. 306)

31. The Balanced Scorecard Approach deals with the question, “How satisfied are the
firm’s customers.”

(t; medium; p. 306)

Published Sources of Strategy-Evaluation Information

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

(t; medium; p. 306)

33. The most admired company in the world in 2007 was Apple.

(f; medium; p. 308)

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Chapter 9: Strategy Review, Evaluation, and Control

Characteristics of an Effective Evaluation System

34. Strategy-evaluation activities must be meaningful, i.e., they should specifically

relate to a firm’s objectives.

(t; medium; p. 308)

35. Timely approximate information is generally more desirable as a basis for

strategy evaluation than accurate information that does not depict the present.

(t; easy; p. 308)

36. The test of an effective evaluation system is its usefulness and complexity.

(f; medium; p. 308)

37. Small organizations require a more elaborate and detailed strategy-evaluation

system because they are still evolving.

(f; medium; p. 308; AACSB: Reflective thinking skills)

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

(t; easy; p. 309)

Contingency Planning

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

(t; medium; p. 309)

40. Organizations should prepare contingency plans just for unfavorable events.

(f; difficult; p. 309)

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

(f; medium; p. 309)

42. Contingency plans should be as simple as possible.

(t; easy; p. 309)

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 Chapter 9: Strategy Review, Evaluation, and Control

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

(f; medium; p. 298; AACSB: Reflective thinking skills)

44. Identifying both beneficial and unfavorable events that could possibly derail the
strategy or strategies is the first step of effective contingency planning.

(t; medium; p. 311)

Auditing

45. Independent auditors, government auditors and IRS auditors are the three groups
of people who perform audits.

(f; medium; p. 311)

46. Independent auditors are basically CPAs who provide their services to
organizations for a fee.

(t; easy; p. 311)

47. Public accounting firms usually avoid strategy evaluation services.

(f; medium; p. 312)

48. China is home to 16 of the world’s 20 most polluted cities.

(t; easy; p. 312; AACSB: Multicultural and diversity understanding)

49. Over 90 percent of China’s energy is derived from solar and nuclear power.

(t; medium; p. 313; AACSB: Multicultural and diversity understanding)

50. Two government agencies—IRS and GAO—employ government auditors

responsible for making sure organizations comply with federal laws, statutes and
policies.

(t; medium; p. 312)

51. Moving environmental affairs from the line side of the organization to the staff
side is required when instituting an environmental audit.

(f; difficult; p. 312; AACSB: Ethical understanding and reasoning abilities)

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Chapter 9: Strategy Review, Evaluation, and Control

52. The strategic management process should be completely open because

participation and openness enhance understanding, commitment, and
communication within the firm.

(t; easy; p. 314)

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

(f; medium; p. 315; AACSB: Multicultural and diversity understanding)

Multiple Choice
The Nature of Strategy Evaluation

54. Which of these is/are a basic activity of strategy evaluation?

a. Reviewing the underlying internal and external factors that represent the
bases of current strategies
b. Measuring organizational performance
c. Taking corrective actions
d. all of the above
e. both B and C

(d; easy; p. 298)

55. The purpose of strategy evaluation is to

a. increase the budget annually.
b. alert management to problems or potential problems.
c. make budget changes.
d. evaluate employees’ performance.
e. improve R&D programs.

(b; medium; p. 298)

56. What is the cornerstone of effective strategy evaluation?

a. Adequate and timely feedback
b. Quality and quantity of managers
c. Smaller ratio of top- to lower-level management
d. Evaluation preceding implementation stage
e. Taking corrective actions

(a; difficult; p. 298)

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 Chapter 9: Strategy Review, Evaluation, and Control

57. All of these are Richard Rumelt’s criteria to evaluate a strategy except:
a. advantage.
b. consistency.
c. feasibility.
d. distinctiveness.
e. consonance.

(d; medium; p. 299)

58. What is happening to strategy evaluation with the passage of time?

a. increasingly difficult
b. much simpler
c. very convenient
d. an unnecessary activity
e. less important

(a; medium; p. 300)

59. All of the following are reasons strategy evaluation is more difficult today except:
a. a dramatic increase in the environment’s complexity.
b. the increasing number of variables.
c. the increase in the number of both domestic and world events affecting
organizations.
d. the decreasing difficulty of predicting the future with accuracy.
e. the rapid rate of obsolescence of even the best plans.

(d; easy; p. 300)

60. Which of the following is not a reason for the increasing difficulty of evaluating
strategies?
a. Product life cycles are longer today than ever.
b. Domestic and world economies are less stable than ever.
c. Product development cycles are longer than ever.
d. Technological advancement is more rapid.
e. Change is occurring more frequently than ever.

(a; medium; p. 300)

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Chapter 9: Strategy Review, Evaluation, and Control

61. What is important because organizations face dynamic environments in which key
external and internal factors often change quickly and dramatically?
a. Strategy formulation
b. Strategy evaluation
c. Strategy simplification
d. Strategy modification
e. Strategy implementation

(b; medium; p. 299; AACSB: Reflective thinking skills)

62. A final broad test of strategy is its

a. advantage.
b. feasibility.
c. consonance.
d. consistency.
e. distinctiveness.

(b; medium; p. 299)

63. Competitive advantage normally is the result of superiority in resources, skills and
a. employees.
b. position.
c. consistency.
d. feasibility.
e. governance.

(b; easy; p. 299)

64. What term refers to the need for strategists to examine sets of trends, as well as
individual trends in evaluating strategies?
a. Consistency
b. Consonance
c. Synergy
d. Feasibility
e. Advantage

(b; medium; p. 299)

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 Chapter 9: Strategy Review, Evaluation, and Control

65. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies,
refers to the need for strategists to examine sets of trends?
a. consistency
b. consonance
c. feasibility
d. advantage
e. empowerment

(b; medium; p. 299; AACSB: Reflective thinking skills)

66. If success for one organizational department means failure for another
department, then strategies may be
a. synergistic.
b. advantageous.
c. inconsonant
d. failures.
e. inconsistent.

(e; easy; p. 301)

67. When empowered employees are held accountable for and pressured to achieve
specific goals and are given wide latitude in their actions to achieve them, there
can be
a. increased productivity.
b. dysfunctional behavior.
c. decreased number of complaints.
d. decreased turnover.
e. increased number of litigations.

(b; medium; p. 301)

68. Strategy-evaluation activities should be performed

a. on a periodic basis.
b. at the onset of a problem.
c. on a continuous basis.
d. upon completion of major projects.
e. every two years.

(c; easy; p. 301)

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Chapter 9: Strategy Review, Evaluation, and Control

A Strategy-Evaluation Framework

69. Corrective actions are not needed when

a. changes have occurred in the firm’s internal strategic position.
b. external and internal factors have not significantly changed.
c. the firm is not progressing satisfactorily toward achieving stated
objectives.
d. competitive factors are on the rise.
e. the industry is slowing down.

(b; medium; p. 302)

70. When you discover major changes have occurred in the firm’s internal strategic
position while conducting strategy evaluation, you should
a. continue on the present strategic course.
b. immediately discontinue all aspects of the present strategic course.
c. take corrective actions.
d. add additional funds to the present strategic plan.
e. copy the actions of major competitors.

(c; difficult; p. 302; AACSB: Reflective thinking skills)

71. Changes in the organization’s management, marketing, finance/accounting, R&D

and CIS strengths and weaknesses should be the focus of a revised
a. mission.
b. IFE matrix.
c. vision.
d. EFE matrix.
e. EPM matrix.

(b; medium; p. 302; AACSB: Reflective thinking skills)

72. A revised __________ should indicate how effective a firm’s strategies have been
in response to key opportunities and threats.
a. IFE matrix
b. mission
c. EFE matrix
d. vision
e. CPM matrix

(c; medium; p. 302)

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 Chapter 9: Strategy Review, Evaluation, and Control

73. Which of the following is not included in measuring organizational performance?

a. Comparing results to competitors’ expectations.
b. Examining progress being made toward meeting stated objectives.
c. Investigating deviations from plans.
d. Evaluating individual performance.
e. Comparing expected results to actual results.

(a; medium; p. 304)

74. Ineffectiveness and/or inefficiencies indicate the need for

a. layoffs.
b. consultants.
c. some form of correction action.
d. reductions in pay.
e. more synergy.

(c; medium; p. 304)

75. What is the basis for quantitative financial evaluation?

a. Reduction in costs
b. The EPS/EBIT Analysis
c. Capital Asset Pricing Model
d. Financial ratios
e. Present value analysis

(d; medium; p. 304; AACSB: Analytic skills)

76. Which of these is not a key financial ratio?

a. Market share
b. Production quality
c. Earnings per share
d. Asset growth
e. Return on equity

(b; medium; p. 304; AACSB: Analytic skills)

77. Strategy evaluation is based on

a. empirical data.
b. qualitative criteria.
c. objective data.
d. qualitative and quantitative criteria.
e. intuition.

(d; medium; p. 304)

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Chapter 9: Strategy Review, Evaluation, and Control

78. Financial ratios are used to compare a firm’s performance over different time
periods, compare the firm’s performance to industry averages, and compare a
firm’s performance with
a. overall business standards.
b. the performance of international firms.
c. the performance of suppliers.
d. non-financial ratios.
e. the performance of competitors.

(e; difficult; p. 304; AACSB: Analytic skills)

79. Most quantitative criteria are geared to objectives rather than

objectives.
a. top-management; employee
b. short-term; annual
c. annual; long-term
d. environmental; community
e. profit; social

(c; medium; p. 304)

80. What corrective actions should a firm take during strategy evaluation?
a. Revising the business mission
b. Issuing stock
c. Revising objectives
d. Selling a division
e. all of the above

(e; medium; p. 305)

81. What occurs when the nature, types and speed of changes overpower an
individual’s or organization’s ability and capacity to adapt?
a. Corporate downfall
b. Corrective actions
c. Future shock
d. Corporate agility
e. Measuring performance

(c; medium; p. 305; AACSB: Reflective thinking skills)

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 Chapter 9: Strategy Review, Evaluation, and Control

82. Corrective actions should

a. strengthen an organization’s competitive position in its industry.
b. streamline asset holdings.
c. reduce the staff size.
d. involve abandoning existing strategies.
e. all of the above

(a; medium; p. 305)

83. What is the best way to overcome individuals’ resistance to change in strategy
evaluation?
a. Participation
b. Command-and-control
c. Laissez-faire system
d. Rational argument
e. Emotional reactions

(a; medium; p. 305)

84. An organization’s ability to adapt successfully to changing circumstances refers to

its
a. corporate agility.
b. future shock.
c. dynamism.
d. revision power.
e. liquidity.

(a; easy; p. 305)

85. Corrective action should do all of the following except:

a. capitalize upon internal strengths.
b. avoid external opportunities.
c. avoid external threats.
d. improve internal weaknesses.
e. strengthen an organization’s competitive position.

(b; medium; p. 305)

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Chapter 9: Strategy Review, Evaluation, and Control

The Balanced Scorecard

86. Which of the following is not a component of the Balanced Scorecard?

a. Social responsibility
b. Financial performance
c. Customer knowledge
d. Internal business processes
e. Learning and growth

(a; medium; p. 306)

87. What aims to balance long term with short term concerns, financial with non-
financial concerns, and internal with external concerns.
a. Contingency planning
b. The Balanced Scorecard approach
c. Taking corrective action
d. Measuring performance
e. reviewing Bases of Strategy

(b; medium; p. 306)

Published Sources of Strategy-Evaluation Information

88. In the important publication used to evaluate a firm’s strategy, the Fortune 50
includes all of the following except:
a. the top retailers.
b. the top transportation companies.
c. the top utilities.
d. the top banks.
e. the top hospitals.

(e; medium; p. 306)

89. Which of these is not a key attribute in Fortune’s strategy evaluation research on
“America’s Most Admired Companies”?
a. People management
b. Innovativeness
c. Financial soundness
d. Amount of physical resources
e. Use of corporate assets

(d; easy; p. 306)

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 Chapter 9: Strategy Review, Evaluation, and Control

Characteristics of an Effective Evaluation System

90. What is not a characteristic of an effective evaluation system?

a. Economical
b. Timely
c. Information-oriented
d. Meaningful
e. Provide a true picture of what is happening

(c; medium; p. 308)

91. Controls need to be _________ rather than__________.

a. action oriented; information oriented
b. cultural; political
c. qualitative; quantitative
d. measurable; timely
e. universal; diverse

(a; medium; p. 308)

92. The strategy-evaluation process should foster

a. mutual understanding.
b. implementation.
c. corporate culture.
d. profit centers.
e. contingency plans.

(a; medium; p. 308)

93. What factor determines the final design of a firm’s strategy-evaluation and control
system?
a. Opportunities
b. Threats
c. External characteristics
d. The organization’s characteristics
e. The competition’s characteristics

(d; easy; p. 308)

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Chapter 9: Strategy Review, Evaluation, and Control

94. Familiarity with local environments usually makes gathering and evaluating
information much easier for organizations than for ones.
a. non-profit; for-profit
b. for-profit; non-profit
c. large; small
d. small; large
e. foreign; domestic

(d; medium; p. 308)

Contingency Planning

95. What activity is defined as having alternative plans that can be put into effect if
certain key events do not occur as expected?
a. Corporate agility
b. Scenario planning
c. Strategy evaluation
d. Contingency planning
e. Forecasting

(d; easy; p. 309)

96. Which of the following statements about contingency plans is not true?
a. Contingency plans should be as simple as possible.
b. Only high-priority areas require the insurance of contingency plans.
c. Contingency plans should be developed for favorable and unfavorable
events.
d. Develop contingency plans for all contingent events.
e. Contingency plans minimize the impact of potential threats.

(d; medium; p. 309)

97. What permits quick response to change, prevents panic in crisis situations, and
makes managers more adaptable.
a. Auditing
b. Implementing a balanced scorecard
c. Contingency planning
d. Taking corrective actions
e. Measuring performance

(c; medium; p. 311; AACSB: Reflective thinking skills)

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 Chapter 9: Strategy Review, Evaluation, and Control

Auditing

98. What term refers to a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between these assertions and established criteria, and
communicating the results to interested users?
a. Auditing
b. Innovation
c. R&D
d. Strategic Management
e. Accounting

(a; easy; p. 311)

99. What county has the largest percentage of the worlds most polluted cities?
a. Japan
b. U.S.
c. Mexico
d. Brazil
e. China

(e; medium; p. 310; AACSB: Multicultural and diversity understanding)

100. What percent of cities in China lack sewer treatment facilities?

a. 0 percent
b. 5 percent
c. 20 percent
d. 30 percent
e. 40 percent

(e; medium; p. 310; AACSB: Multicultural and diversity understanding)

101. What percent of China’s population lack access to clean drinking water?
a. 5 percent
b. 16 percent
c. 20 percent
d. 26 percent
e. 35 percent

(d; medium; p. 310; AACSB: Multicultural and diversity understanding)

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Chapter 9: Strategy Review, Evaluation, and Control

102. Which type of auditors are specifically responsible for safeguarding the assets of a
company?
a. Independent auditors
b. Government auditors
c. Internal auditors
d. External auditors
e. Research auditors

(c; medium; p. 312)

The Environmental Audit

103. Product design, manufacturing, transportation, customer use, packaging, product

disposal and corporate rewards should reflect considerations to
develop constructive relations with employees, consumers, suppliers and
distributors.
a. profit
b. union
c. top-management
d. environmental
e. customer

(d; medium; p. 298; AACSB: Ethical understanding and reasoning ability)

Twenty-First-Century Challenges in Strategic Management

104. Most strategy literature advocates that strategic management is

a. more of a science than an art.
b. more of an art than a science.
c. based on analysis rather than research.
d. based on intuition rather than analysis.
e. based on creativity rather than intuition.

(a; medium; p. 312)

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 Chapter 9: Strategy Review, Evaluation, and Control

105. All of the following are reasons to be completely open with the strategy process
except:
a. managers, employees and other stakeholders can readily contribute to the
process.
b. investors, creditors and other stakeholders have greater basis for
supporting a firm that is open.
c. visibility promotes democracy whereas secrecy promotes autocracy.
d. participation and openness enhances understanding, commitment and
communication within the firm.
e. openness limits rival firms from imitating or duplicating the firm’s
strategies.

(e; difficult; p. 314)

106. Which of the following is not a reason why some firms prefer to conduct
strategic-planning in secret?
a. Dissemination of a firm’s strategies may translate into competitive
intelligence for rival firms.
b. It enhances understanding, commitment and communication within the
firm.
c. It limits criticism, second-guessing and hindsight.
d. Participants in a visible strategy process become more attractive to rival
firms, who may lure them away.
e. Secrecy limits rival firms from imitating or duplicating the firm’s
strategies.

(b; medium; p. 314)

Essay Questions
107. Explain why strategy evaluation can be a complex and sensitive undertaking.

Strategy can be a complex and sensitive undertaking because too much emphasis
on evaluating strategies may be expensive and counterproductive. No one likes to
be evaluated too closely! The more managers attempt to evaluate the behavior of
others, the less control they have. Yet too little or no evaluation can create even
worse problems. Strategy evaluation is essential to ensure stated objectives are
being achieved.

Page: 298

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Chapter 9: Strategy Review, Evaluation, and Control

108. Discuss some of the reasons why strategy evaluation is becoming increasingly
difficult with the passage of time.

Possible answers include: Domestic and world economies were more stable in
years past; Product life cycles were longer; product development cycles were
longer; technological advancement was slower; change occurred less frequently;
there were fewer competitors; foreign companies were weak; and there were more
regulated industries. Other reasons include: 1) A dramatic increase in the
environment’s complexity; 2) The increasing difficulty of predicting the future
with accuracy; 3) The increasing number of variables; 4) The rapid rate of
obsolescence of even the best plans; 5) The increase in the number of both
domestic and world events affecting organizations; and 6) The decreasing time
span for which planning can be done with any degree of certainty.

Page: 300

109. Compare and contrast two of Rumelt’s four criteria for evaluating strategies.

Rumelt’s four criteria for evaluating strategies are consistency, consonance,

feasibility and advantage. Students should take their answers from Table 9-1 on
page 299, which provides descriptions of each.

Page: 299

110. Describe each of the activities that comprise strategy evaluation.

The activities that comprise strategy evaluation are: (1) reviewing bases of an
organization’s strategy, (2) measuring organizational performance and (3) taking
corrective actions. Please refer to pages 302-305 for descriptions of each activity.

Page: 302-305

111. What are the most commonly used quantitative criteria to evaluate strategies?
Give several examples of these criteria.

Quantitative criteria commonly used to evaluate strategies are financial ratios,

which strategists use to make three critical comparisons: (1) comparing the firm’s
performance over different time periods, (2) comparing the firm’s performance to
that of competitors’ and (3) comparing the firm’s performance to industry
averages. Some particularly useful key financial ratios used as criteria for strategy
evaluation are: (1) ROI, (2) ROE, (3) profit margin, (4) market share, (5) debt to
equity, (6) earnings per share, (7) sales growth and (8) asset growth.

Page: 304

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 Chapter 9: Strategy Review, Evaluation, and Control

112. Discuss the different perspectives and concerns of the Balanced Scorecard.

The Balanced Scorecard is a process that allows firms to evaluate strategies from
four perspectives: financial performance, customer knowledge, internal business
processes, and learning and growth. It aims to balance long-term concerns with
short-term concerns, financial with non-financial concerns, and internal with
external concerns.

Page: 306

113. Identify some important guidelines for effective strategic management, as

presented in the chapter.

Please refer to the entire discussion on pages 307 under Characteristics of an

Effective Evaluation System.

Page: 307

114. Describe the seven-step process of effective contingency planning in strategy

evaluation.

The suggested seven-step process of effective contingency planning is as follows:

(1) Identify both beneficial and unfavorable events that could possibly derail the
strategy or strategies; (2) specify trigger points and calculate about when
contingent events are likely to occur; (3) assess the impact of each contingent
event; (4) develop contingency plans; (5) assess the counter impact of each
contingency plan; (6) determine early warning signals for key contingent events
and monitor them; and (7) for contingent events with reliable early warning
signals, develop advance action plans to take advantage of the available lead time.

Page: 311

115. Individuals who perform audits can be divided into three groups. Identify these
three groups and give an example of each.

People who perform audits can be divided into three groups: independent
auditors, government auditors and internal auditors. An example of an
independent auditor is the CPAs at Arthur Andersen public accounting firm. The
GAO and IRS are examples of government auditors. Employees within an
organization who are responsible for safeguarding company assets, for assessing
the efficiency of company operations and for ensuring the generally accepted
business procedures are examples of internal auditors.

Page: 311-312

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Chapter 9: Strategy Review, Evaluation, and Control

116. Discuss the extent of the environmental problems facing China.

China is today home to 16 of the world’s 20 most polluted cities, and it battles
soil erosion, spreading deserts, polluted water, and smog everywhere. About 40
percent of Chinese cities lack sewage treatment facilities. All of China’s major
rivers are dangerously polluted, and two-thirds of the country’s rivers and lakes
are severely polluted. Data indicate that 340 million of the 1.3 billion Chinese (26
percent) lack access to clean drinking water, and 10 percent of China’s farmland
is polluted.

In 2006, China had 161 serious environmental accidents, the most ever, according
to Pan Yue, deputy director of China’s EPA. Mr. Pan also says “the year 2006
was the most grim year ever for China’s environmental situation.” Rising sea
levels now threaten the deltas of the Yellow, Yangtze, and Pearl rivers—home to
the bulk of China’s manufacturing and export business.

Page 313

117. Discuss the three challenges that strategists face today.

The three challenges that strategists face today are 1) deciding whether the
process of strategic management should be more of an art or a science; 2)
deciding whether strategies should be visible or hidden from stakeholders; or 3)
deciding whether the process should be more top-down or bottom-up in the firm.

Page: 312-315

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