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Chapter 06 - The Nature of Management
M Business 5th Edition Ferrell

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Chapter 06
The Nature of Management
True / False Questions
6-1
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
1. Management takes place only in business settings.
FALSE
Management is universal. It takes place not only in business, but also in government, the
military, labor unions, hospitals, schools, and religious groups—any organization requiring
the coordination of resources.
AACSB: Analytic
Accessibility: Keyboard Navigation
Bloom's: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Define management and explain its role in the achievement of organizational objectives.
Topic: Definition of Management
2. For any company, owners and shareholders are the only sources of primary funding.
FALSE
Primary funding for any company comes from owners and shareholders, as well as banks and
other financial institutions. All these resources and activities must be coordinated and
controlled if the company is to earn a profit.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
Topic: Functions of Management
6-2
3. Planning involves forecasting events and determining the best course of action from a set of
options or choices.
TRUE
Planning is a crucial activity, for it designs the map that lays the groundwork for the other
functions. It involves forecasting events and determining the best course of action from a set
of options or choices.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
Learning Objective: 06-02 Describe the major functions of management.
Topic: The Importance of Planning
4. Top-level managers make an organization's strategic decisions that focus on a key idea for
using resources in order to take advantage of opportunities.
TRUE
Top-level managers make an organization's strategic decisions, decisions that focus on an

overall scheme or key idea for using resources to take advantage of opportunities. They
decide whether to add products, acquire companies, sell unprofitable business segments, and
move into foreign markets.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Distinguish among three levels of management and the concerns of managers at each level.
Topic: Types of Managers and Leadership Styles
6-3
5. The first step in decision-making process is developing options directly.

FALSE
The six steps in the decision-making process are: (1) recognizing and defining the decision
situation, (2) developing options to resolve the situation, (3) analyzing the options, (4)
selecting the best option, (5) implementing the decision, and (6) monitoring the consequences
of the decision.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
Learning Objective: 06-06 Summarize the systematic approach to decision making used by many business managers.
Multiple Choice Questions
6. _____ make decisions about the use of an organization's resources and are concerned with
planning, organizing, staffing, directing, and controlling the organization's activities.
A. Managers
B. Shareholders
C. Creditors
D. Consumers
E. Suppliers
Managers make decisions about the use of an organization's resources and are concerned with
planning, organizing, leading, and controlling the organization's activities. The decision to
introduce new products in order to reach objectives is often a key management duty.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-4
7. If a manager is concerned about doing the work in such a manner that it yields the desired
result, then his or her primary managerial concern is:
A. efficiency.
B. effectiveness.
C. standardization.
D. innovation.
E. expertise.
Management is a process designed to achieve an organization's objectives by using its

resources effectively and efficiently in a changing environment. Effectively means having the
intended result; efficiently means accomplishing the objectives with a minimum of resources.
AACSB: Analytic
Bloom's: Understand
Difficulty: 2 Medium
8. If a manager is concerned about doing the work with the least cost and waste possible, then
his or her primary managerial concern is:
A. efficiency.
B. effectiveness.
C. delegation.
D. hiring.
E. expertise.
Management is a process designed to achieve an organization's objectives by using its

resources effectively and efficiently in a changing environment. Managing efficiently means
accomplishing the objectives with a minimum of resources.
AACSB: Analytic
Bloom's: Understand
6-5
9. Lara was less educationally qualified and experienced than her colleagues when she joined
Aurora Systems Inc. However, due to her ability to negotiate effectively with clients,
convince her team members to work harder, and understand their needs, she is a senior-level
manager today. Which of the following skills can be most attributed to Lara's success in this
scenario?
A. Technical skills
B. Cognitive skills
C. Human relations skills
D. Critical thinking skills
E. Psychomotor skills
Human relations skills can be most attributed to Lara's success in this scenario. People skills,
or human relations skills, are the ability to deal with people, both inside and outside an
organization. Those who can relate to others, communicate well with others, understand the
needs of others, and show a true appreciation for others are generally more successful than
managers who lack such skills.
AACSB: Reflective Thinking

Bloom's: Apply
Learning Objective: 06-04 Specify the skills managers must have to be successful.
10. Managers need adequate _____ to pay for essential activities.

A. human resources
B. intangible resources
C. financial resources
D. non-renewable resources
E. biological resources
Every organization must acquire resources (people, raw materials and equipment, money, and
information) to effectively pursue its objectives and coordinate their use to turn out a final
good or service. A manager needs adequate financial resources to pay for essential activities.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-6
11. Jason is an operations manager in an automobile company. Which of the following is

most likely to be his primary management function in the firm?
A. Administering production activities
B. Arranging finance
C. Creating advertisements
D. Recruiting employees
E. Promoting products and services
Jason's primary management function in the firm is most likely to be administering

production activities. Production and operations managers develop and administer the
activities involved in transforming resources into goods, services, and ideas ready for the
marketplace. Acquiring suppliers is not an important part of managing resources in an
organization.

Bloom's: Apply
12. If a manager is analyzing several methods for obtaining primary funding to expand
operations, he or she is concerned about the _____ of the company.
A. financial resources
B. intangible resources
C. human resources
D. natural resources
E. structural resources
A manager needs adequate financial resources to pay for essential activities. Primary funding
comes from owners and shareholders, as well as banks and other financial institutions.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-7
13. Determining an organization's objectives and deciding how to accomplish them, a

management function, is known as:
A. planning.
B. nearshoring.
C. staffing.
D. crowdsourcing.
E. factoring.
Planning, the process of determining the organization's objectives and deciding how to
accomplish them, is the first function of management. Planning involves forecasting events
and determining the best course of action from a set of options or choices in order to attain
organizational objectives. The plan itself specifies what should be done, by whom, where,
when, and how.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
14. Melanie is one of the senior managers in the consumer electronics department of a large
company. She is part of a team that determines the objectives of the department based on
future trends in the industry and decides how to accomplish them. Melanie is involved in the
management function of:
A. staffing.
B. recruiting.
C. planning.
D. crowdsourcing.
E. factoring.
Melanie is involved in the management function of planning. Planning involves forecasting

events and determining the best course of action from a set of options or choices in order to
attain organizational objectives.

Bloom's: Apply
6-8
15. Which of the following is the first function of management?

A. Planning
B. Crowdsourcing
C. Staffing
D. Factoring
E. Directing
Planning, the process of determining an organization's objectives and deciding how to

accomplish them, is the first function of management. Planning is a crucial activity, for it
designs the map that lays the groundwork for the other functions.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
16. Planning is a crucial management activity because:

A. it designs the map that lays the groundwork for the other functions.
B. the process of managing an organization ends with planning.
C. it eliminates other management functions like organizing and controlling.
D. it can never go wrong or fail.
E. what an organization wants to achieve is based on a planned course of action.
Planning is a crucial activity, for it designs the map that lays the groundwork for the other
functions. It involves forecasting events and determining the best course of action from a set
of options or choices.
AACSB: Analytic
Bloom's: Understand
6-9
17. Forecasting is a part of the management function of:

A. planning.
B. crowdsourcing.
C. nearshoring.
D. factoring.
E. retailing.
Planning involves forecasting events and determining the best course of action from a set of
options or choices. Planning, the process of determining the organization's objectives and
deciding how to accomplish them, is the first function of management.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
18. Before an organization can plan a course of action, it must first:

A. take corrective action.
B. develop a blueprint of the plan.
C. decide on the people to be involved in the plan.
D. determine what it wants to achieve.
E. allocate and organize the required resources.
All businesses—from the smallest restaurant to the largest multinational corporation—need to

develop plans for achieving success. But before an organization can plan a course of action, it
must first determine what it wants to achieve.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-10
19. A declaration of an organization's fundamental purpose and basic philosophy is known as

a(n):
A. protocol.
B. mission.
C. referendum.
D. agenda.
E. target.
A mission, or mission statement, is a declaration of an organization's fundamental purpose

and basic philosophy. Good mission statements are clear and concise statements that explain
the organization's reason for existence.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
20. Carrie starts her own catering business. She creates a website for her business and
mentions the fundamental purpose and basic philosophy of her business on the website. This
declaration can be regarded as the _____ of her business.
A. protocol
B. mission
C. referendum
D. agenda
E. target
This declaration can be regarded as the mission of Carrie's business. A mission, or mission
statement, is a declaration of an organization's fundamental purpose and basic philosophy.

Bloom's: Apply
6-11
21. Which of the following explains an organization's reason for existence?

A. The organization's balance sheet
B. The organization's code of conduct
C. The organization's article of incorporation
D. The organization's mission statement
E. The organization's tactical plan
Good mission statements are clear and concise statements that explain an organization's
reason for existence. A mission, or mission statement, is a declaration of an organization's
fundamental purpose and basic philosophy.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
22. Which of the following questions does the mission statement of an organization seek to
answer?
A. What business are we in?
B. How do we expand our business?
C. What are our staffing requirements?
D. Why are we not cost effective?
E. How do we meet the annual sales target?
A mission, or mission statement, is a declaration of an organization's fundamental purpose

and basic philosophy. It seeks to answer the question: "What business are we in?"
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-12
23. Which of these basic questions will be answered by a well-developed mission

statement?
A. Who are our customers?
B. How do we expand our business?
C. How do we acquire customers?
D. Who are our competitors?
E. What products do we sell?
A well-developed mission statement, no matter what the industry or size of business, will
answer five basic questions: a. Who are we? b. Who are our customers? c. What is our
operating philosophy (basic beliefs, values, ethics, etc.)? d. What are our core competencies
and competitive advantages? e. What are our responsibilities with respect to being a good
steward of environmental, financial, and human resources?
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
24. Nathan's business has grown from a small startup in his room to a chain of outlets all over
the country. His business has the potential to expand further, provided he has the resources.
To attract investors and other resources, he is required to create a mission statement for his
company. Which of the following basic questions should the mission statement answer?
A. What is our operating philosophy?
B. When do we plan to go international?
C. Who are our stockholders?
D. Who are our competitors?
E. What is our sales target?
A well-developed mission statement, no matter what the industry or size of business, will
answer five basic questions: a. Who are we? b. Who are our customers? c. What is our
operating philosophy (basic beliefs, values, ethics, etc.)? d. What are our core competencies
and competitive advantages? e. What are our responsibilities with respect to being a good
steward of environmental, financial, and human resources?

Bloom's: Apply
6-13
25. A(n) _____ is best described as the result that a firm wishes to achieve.
A. protocol
B. statute
C. referendum
D. agenda
E. goal
A goal is best described as the result that a firm wishes to achieve. A company almost always
has multiple goals, which illustrates the complex nature of business.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
26. In the context of company goals, which of the following is an effective practice?
A. A company should pursue only one goal at a time.
B. A company should use its goal as a substitute for its mission.
C. Company goals should be specific.
D. Company goals should not be defined in terms of a target to be achieved.
E. Company goals should not be limited by a time frame.
To be successful, company goals should be specific. This allows for better decision making in
organizations.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-14
27. Which of the following statements is true of the goals of a company?

A. A company can have only one goal that combines all elements of its mission statement.
B. A goal is defined as a declaration of a company's fundamental purpose and basic
philosophy.
C. Once a goal is set, companies typically do not need to review the goal or monitor progress
against the goal set.
D. A goal merely states what a company seeks to achieve without stipulating any standards of
quality or amount of time needed to reach the goal.
E. An attribute, a target, and a time frame are the three elements of a goal set by a company to
achieve its mission.
A goal has three key components: an attribute sought, such as profits, customer satisfaction,
or product quality; a target to be achieved, such as the volume of sales or extent of
management training to be achieved; and a time frame, which is the time period in which the
goal is to be achieved.
AACSB: Analytic
Bloom's: Understand
28. In the context of a business's objectives, which of the following is an ineffective practice?
A. Isolating them from the business's mission
B. Stating them in such a way that they are measurable
C. Using them to make tactical plans for the business
D. Keeping them elaborate or simple
E. Using them to establish criteria to evaluate performance
Objectives, the ends or results desired by an organization, derive from the organization's
mission. A business's objectives may be elaborate or simple. Common objectives relate to
profit, competitive advantage, efficiency, and growth.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-15
29. _____ are the ends or results desired by an organization that are derived from the
organization's mission.
A. Protocols
B. Statutes
C. Objectives
D. Agendas
E. Referendums
Objectives, the ends or results desired by an organization, derive from the organization's
mission. A business's objectives may be elaborate or simple. Common objectives relate to
profit, competitive advantage, efficiency, and growth.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
30. The principal difference between objectives and goals is that:

A. objectives are broad, while goals are narrow.
B. objectives can be multiple, while a company can have only one goal.
C. objectives are measurable, while goals need not be measurable.
D. objectives are long term, while goals are short term.
E. objectives cannot lead to a competitive advantage, while goals can lead to a competitive
advantage.
The principal difference between objectives and goals is that objectives are generally are
measurable, while goals need not be measurable. Organizations with profit as an objective
want to have money and assets left over after paying off business expenses.
AACSB: Analytic
Bloom's: Understand
6-16
31. An organization's objectives regarding profits are generally stated in terms of:
A. the unlimited liability it has.
B. the money and assets left over after paying off business expenses.
C. its ability to promote diversity.
D. the time taken to release new products in the marketplace.
E. its ability to evaluate opportunity costs.
Organizations with profit as an objective want to have money and assets left over after paying
off business expenses. The principal difference between goals and objectives is that objectives
are generally stated in such a way that they are measurable.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
32. Which of the following objectives are generally stated in terms of percentage of sales
increase and market share, with the goal of increasing those figures?
A. Objectives regarding opportunity costs
B. Objectives regarding efficiency
C. Objectives regarding competitive advantage
D. Objectives regarding employee turnover
E. Objectives regarding raising capital
Objectives regarding competitive advantage are generally stated in terms of percentage of

sales increase and market share, with the goal of increasing those figures. The principal
difference between goals and objectives is that objectives are generally stated in such a way
that they are measurable.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-17
33. Growth objectives essentially relate to:

A. making the best use of an organization's resources.
B. coordinating an organization's resources smoothly.
C. focusing on profit as the sole indicator of growth.
D. adapting and releasing new products in the market.
E. building an organization's ability to promote diversity.
Growth objectives relate to an organization's ability to adapt and to get new products to the
marketplace in a timely fashion. The principal difference between goals and objectives is that
objectives are generally stated in such a way that they are measurable.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
34. When efficiency is an objective, organizations primarily focus on:

A. making the best use of their resources.
B. sales as the sole criterion for evaluating employees' performance.
C. profit as the sole indicator of growth.
D. ensuring that their business expenses are equal to their assets.
E. limiting workplace diversity.
Efficiency objectives involve making the best use of an organization's resources. Objectives,
the ends or results desired by an organization, derive from the organization's mission.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-18
35. Which of the following provides direction for all managerial decisions and establishes
criteria for evaluating performance within organizations?
A. Protocols
B. Minutes
C. Objectives
D. Statutes
E. Referendums
Objectives provide direction for all managerial decisions; additionally, they establish criteria
by which performance can be evaluated. Objectives, the ends or results desired by an
organization, derive from the organization's mission.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
36. The top management of Dusk Automobiles Inc. has decided that the company's objective
for the next two years will be to expand the overall business internationally. This is an
example of _____.
A. functional planning
B. static planning
C. strategic planning
D. tactical planning
E. operational planning
This is an example of strategic planning. A firm's highest managers develop its strategic
plans, which establish the long-range objectives and overall strategy or course of action by
which the firm fulfills its mission. Strategic plans generally cover periods ranging from one
year or longer.

Bloom's: Apply
6-19
37. _____, a type of plan for meeting objectives, include plans to move into international
markets.
A. Incremental plans
B. Tactical plans
C. Strategic plans
D. Operational plans
E. Static plans
Strategic plans, a type of plan for meeting objectives, include plans to add products, purchase
companies, sell unprofitable segments of the business, issue stock, and move into
international markets. Strategic plans must take into account an organization's capabilities and
resources, the changing business environment, and organizational objectives.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
38. _____, a type of plan for meeting objectives, establish the long-range objectives and the
overall course of action by which a firm fulfills its mission.
A. Functional plans
B. Tactical plans
C. Strategic plans
E. Static plans
A firm's highest managers develop its strategic plans, which establish the long-range
objectives and overall strategy or course of action by which the firm fulfills its mission.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-20
39. _____, a type of plan for meeting objectives, generally cover periods ranging from one
year or longer.
A. Functional plans
B. Tactical plans
C. Static plans
E. Strategic plans
A firm's highest managers develop its strategic plans, which establish the long-range
objectives and overall strategy or course of action by which the firm fulfills its mission.
Strategic plans generally cover periods ranging from one year or longer.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
40. The top management of New 18 Apparels Inc. has decided to set up an online store to
cater to the changing business environment and reach out to the Asian market. The
management has also identified that the success of the company will depend on its ability to
create and develop new products and processes in the next two years. This is an example of
_____.
A. functional planning
B. strategic planning
C. static planning
D. operational planning
E. tactical planning
This is an example of strategic planning. Strategic plans generally cover periods ranging from
one year or longer. They include plans to add products, purchase companies, sell unprofitable
segments of the business, issue stock, and move into international markets.

Bloom's: Apply
Difficulty: 3 Hard
6-21
41. Tactical plans usually cover a period of:

A. five years or more.
B. one year or less.
C. three years.
D. one week or less.
E. ten years.
Tactical plans are short range and designed to implement the activities and objectives
specified in the strategic plan. These plans usually cover a period of one year or less.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
42. Strategic plans:

A. establish the short-range objectives of an organization.
B. must take into account an organization's capabilities and resources.
C. are designed to implement the activities and objectives specified in the tactical plans.
D. generally cover periods ranging from two to six months.
E. must be developed by an organization's lower management.
Strategic plans must take into account an organization's capabilities and resources, the
changing business environment, and organizational objectives.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-22
43. Short-range plans covering a period of one year or less that are designed to implement the
activities and objectives specified in an organization's strategic plan are referred to as _____.
A. referendums
B. protocols
C. static plans
D. operational plans
E. tactical plans
Tactical plans are short range and designed to implement the activities and objectives
specified in the strategic plan.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
44. Which of the following statements is true of tactical plans?

A. They are developed by the highest managers of a firm.
B. They establish the long-range objectives of a firm.
C. They allow a firm to react to changes in the environment.
D. They specify what actions each individual needs to accomplish in a firm.
E. They help establish strategic plans.
Tactical plans allow an organization to react to changes in the environment while continuing
to focus on the company's overall strategy.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-23
45. Which of the following is an effective practice with regard to tactical plans?
A. They should cover a period of three years or more.
B. They should protect an organization from reacting to changes in the environment.
C. They should disregard a company's overall strategy.
D. They should be periodically reviewed and updated by an organization's management.
E. They should be established by an organization's first-line managers.
Because tactical plans allow an organization to react to changes in the environment while
continuing to focus on the company's overall strategy, management must periodically review
and update them.
AACSB: Analytic
Bloom's: Understand
46. _____ are very short-term plans that specify what actions individuals, work groups, or
departments need to accomplish in order to achieve an organization's tactical plan and
ultimately the strategic plan.
A. Operational plans
B. Protocols
C. Static plans
D. Referendums
E. Executive-level plans
Operational plans are very short term and specify what actions specific individuals, work
groups, or departments need to accomplish in order to achieve the tactical plan and ultimately
the strategic plan.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-24
47. Xtreme Toys, a company that manufactures toys inspired by popular video games, creates
a strategic plan to be the leader in the product category within a period of three years. The
company's middle management also creates a half-yearly plan to ensure that the objectives of
the strategic plan are properly implemented. The half-yearly plan created by Xtreme Toys can
be regarded as a(n):
A. operational plan.
B. contingency plan.
C. static plan.
D. tactical plan.
E. executive-level plan.
The half-yearly plan created by Xtreme Toys can be regarded as a tactical plan. Tactical plans
are short range and designed to implement the activities and objectives specified in the
strategic plan. These plans, which usually cover a period of one year or less, help keep the
organization on the course established in the strategic plan.

Bloom's: Apply
Difficulty: 3 Hard
6-25
48. The top management of XSports Autos Inc. creates a strategic plan to enter new product
markets within a period of five years. The company's middle management creates half-yearly
plans to ensure that the objectives of the strategic plan are properly implemented. Along with
these plans, each department creates short-term plans that specify the actions to be taken by
specific employees and teams to meet the objectives of the strategic plan and the half-yearly
plans. These short-term plans established at the departmental level are referred to as _____.
A. operational plans
B. contingency plans
C. static plans
D. tactical plans
E. executive-level plans
These short-term plans established at the departmental level are referred to as operational
plans. Operational plans are very short term and specify what actions specific individuals,
work groups, or departments need to accomplish in order to achieve the tactical plan and
ultimately the strategic plan.

Bloom's: Apply
Difficulty: 3 Hard
49. Crisis management plans generally cover maintaining business operations during a crisis
and:
A. holding first-line employees solely responsible for the crisis.
B. avoiding responsibility for the crisis in the media.
C. communicating with others about the situation and the company's response to the crisis.
D. ensuring that the employees do not know about details of the crisis.
E. isolating top managers from the process of dealing with the crisis.
Crisis management plans generally cover maintaining business operations throughout a crisis
and communicating with the public, employees, and officials about the nature of and the
company's response to the problem.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-26
50. _____ is an element in planning that deals with potential disasters such as product
tampering, oil spills, fire, earthquake, computer viruses, or airplane crash.
A. Supply chain management
B. Crisis management
C. Value chain management
D. Enterprise resource planning
E. Material requirements planning
An element of planning is crisis management or contingency planning, which deals with

potential disasters such as product tampering, oil spills, fire, earthquake, computer viruses, or
even a reputation crisis due to unethical or illegal conduct by one or more employees.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
51. Bigbag.com, a leading online retailer, uses the services of Data Safe Inc., a small startup
that helps companies manage and keep their electronic data safe. This helps Bigbag.com keep
a backup of its proprietary information in case of virus attacks or any sort of damage to
property. This is an example of _____.
A. supply chain management
B. contingency planning
C. materials requirement planning
D. enterprise resource planning
E. value chain management
An element of planning is crisis management or contingency planning, which deals with

potential disasters such as product tampering, oil spills, fire, earthquake, computer viruses, or
even a reputation crisis due to unethical or illegal conduct by one or more employees.

Bloom's: Apply
6-27
52. Dividing work into small units and assigning it to specific individuals is a task related to
the management function of _____.
A. evaluating
B. organizing
C. staffing
D. controlling
E. recruiting
Managers organize by reviewing plans and determining what activities are necessary to
implement them; then, they divide the work into small units and assign it to specific
individuals, groups, or departments.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
53. _____ is the structuring of resources and activities to accomplish objectives in an efficient
and effective manner.
A. Evaluating
B. Organizing
C. Crowdsourcing
D. Controlling
E. Factoring
Organizing is the structuring of resources and activities to accomplish objectives in an

efficient and effective manner. Managers organize by reviewing plans and determining what
activities are necessary to implement them; then, they divide the work into small units and
assign it to specific individuals, groups, or departments.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-28
54. Which of the following statements is true of the management function of organizing?
A. Organizing is the process of evaluating and correcting activities to keep a business on
course.
B. Organizing involves determining and administering appropriate rewards and recognition
for employees in an organization.
C. Organizing is a management function that leads to the duplication of resources.
D. Organizing is the last step in the process of managing a business.
E. Organizing helps create synergy, whereby the effect of a whole system equals more than
that of its parts.
Organizing is important for several reasons. Organizing helps create synergy, whereby the
effect of a whole system equals more than that of its parts.
AACSB: Analytic
Bloom's: Understand
55. Hiring people to carry out the work of an organization is known as _____.
A. factoring
B. bartering
C. staffing
D. controlling
E. directing
Management functions include staffing an organization with qualified people. Hiring people
to carry out the work of the organization is known as staffing.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-29
56. Maria and Harold have just finished interviewing four candidates for a job position in
Jackson Office Supplies Inc., a large company based in Houston. In which of the following
management functions are Maria and Harold involved?
A. Downsizing
B. Benchmarking
C. Staffing
D. Controlling
E. Directing
Maria and Harold are involved in staffing. Staffing involves hiring people to carry out the
work of an organization.

Bloom's: Apply
57. Downsizing is an aspect most closely associated with the management function of:
A. staffing.
B. crowdsourcing.
C. motivating.
D. bartering.
E. directing.
Downsizing, the elimination of significant numbers of employees from an organization, has

been a pervasive and much-talked-about trend in staffing.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-30
58. Due to a drop in the sales of its products, a few production employees and sales personnel
of Red Fin Products Inc. were laid off. Which aspect of staffing does this scenario illustrate?
A. Downsizing
B. Bartering
C. Outsourcing
D. Benchmarking
E. Directing
The scenario best illustrates downsizing. Downsizing is the elimination of significant numbers
of employees from an organization and has been a pervasive and much-talked-about trend in
staffing.

Bloom's: Apply
59. Providing incentives to employees to motivate them toward achieving organizational

objectives relates to the management function of:
A. factoring.
B. benchmarking.
C. evaluating.
D. controlling.
E. directing.
Directing is motivating and leading employees to achieve organizational objectives; managers

may motivate employees by providing incentives—such as the promise of a raise or
promotion—for them to do a good job.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-31
60. Which of the following is true of the management function of directing?

A. All managers are involved in directing, but it is most important for top-level managers.
B. Directing designs the map that lays the groundwork for the other managerial functions.
C. Good directing does not require the implementation of deadlines.
D. Directing involves determining and administering appropriate rewards and recognition.
E. Telling employees what to do and when to do it is against the principles of directing.
Directing is motivating and leading employees to achieve organizational objectives. It also

involves determining and administering appropriate rewards and recognition.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
61. _____ is the process of evaluating and correcting activities to keep an organization on
course.
A. Planning
B. Benchmarking
C. Staffing
D. Controlling
E. Recruiting
Controlling is the process of evaluating and correcting activities to keep an organization on

course. This requires managers to monitor performance and compare it to standards.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-32
62. When Betsy informed her supervisor that the furniture assemblers at their manufacturing
plant were using 20 percent more raw materials in the current month when compared to the
preceding months, she was involved in the management function of:
A. planning.
B. structuring.
C. staffing.
D. controlling.
E. benchmarking.
Betsy was involved in the management function of controlling. Controlling is the process of
evaluating and correcting activities to keep an organization on course. This requires managers
to monitor performance and compare it to standards.

Bloom's: Apply
63. For an organization, the first step in the management function of controlling is to:
A. compare present performance with standards.
B. take corrective actions when necessary.
C. investigate the causes of any deviations.
D. measure the actual performance.
E. identify deviations from the standard.
Control involves five activities: (1) measuring performance, (2) comparing present
performance with standards or objectives, (3) identifying deviations from the standards, (4)
investigating the causes of deviations, and (5) taking corrective action when necessary.
AACSB: Analytic
Bloom's: Understand
6-33
64. In businesses, _____ include the president and other top executives, such as the chief
executive officer, chief financial officer, and chief operations officer, who have overall
responsibility for an organization.
A. first-line managers
B. top managers
C. trade creditors
D. external auditors
E. middle managers
In businesses, top managers include the president and other top executives, such as the chief
executive officer, chief financial officer, and chief operations officer, who have overall
responsibility for an organization.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
65. In an organization, decisions regarding adding new products, acquiring companies, and
moving into foreign markets would most typically be made by:
A. the first-line management.
B. a sales manager.
C. the middle management.
D. a production manager.
E. the top management.
Top managers decide whether to add products, acquire companies, sell unprofitable business
segments, and move into foreign markets.
AACSB: Analytic
Bloom's: Understand
6-34
66. Identify the management function in which top managers in an organization spend most of
their time.
A. Benchmarking
B. Controlling
C. Organizing
D. Staffing
E. Planning
Top-level managers spend most of their time planning. They make an organization's strategic
decisions, decisions that focus on an overall scheme or key idea for using resources to take
advantage of opportunities.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
67. _____ are responsible for tactical planning that will implement the general guidelines
established by top management.
A. Chief executive officers
B. Middle managers
C. Top-level managers
D. Trade creditors
E. External auditors
Middle managers are those responsible for tactical planning that will implement the general
guidelines established by top management.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-35
68. The specific operations of an organization, plant, division, or department would most
typically involve the _____ of the company.
A. top management
B. middle management
C. executive officers
D. board of directors
E. stockholders
In business, plant managers, division managers, and department managers make up middle
management. Middle managers are involved in the specific operations of an organization and
spend more time organizing than other managers.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
69. Which of the following has been a recent trend with regard to the different levels of
management within an organization?
A. With technological advances accelerating, the role of privacy officers has declined within
organizations.
B. The top management of most organizations spends most of its time directing and
controlling workers' daily performance on the job.
C. Effective managers at enlightened corporations have found that diversity is detrimental for
workers and for the bottom line.
D. The ranks of middle managers have been shrinking as more and more companies downsize
to be more productive.
E. Most stakeholders support the perks and special treatment the top management of an
organization gets.
The ranks of middle managers have been shrinking as more and more companies downsize to
be more productive.
AACSB: Analytic
Bloom's: Understand
6-36
70. Positions such as foremen, supervisors, and office service managers are a part of the
_____ of a company.
A. top management
B. first-line management
C. middle management
D. executive levels
E. strategic planning division
Common titles for first-line managers are foremen, supervisors, and office service managers.
Most people get their first managerial experience as first-line managers, those who supervise
workers and the daily operations of an organization.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
71. Most people get their initial managerial experience as _____, those who supervise workers
and the daily operations of an organization.
A. top managers
B. middle managers
C. first-line managers
D. chief operations officers
E. chief financial officers
Most people get their first managerial experience as first-line managers, those who supervise
workers and the daily operations of an organization.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-37
72. _____ spend most of their time directing and controlling the daily operations of an
organization.
A. Board of directors
B. Middle managers
C. Top-level managers
D. First-line managers
E. Chief executive officers
First-line managers spend most of their time directing and controlling. They are responsible
for implementing the plans established by middle management and directing workers' daily
performance on the job.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
73. Janet works as a manager at Unicorn Infra Inc. Janet and her team members are primarily
responsible for procuring the funds needed for the successful operation of the organization
and investing that money to pursue organizational goals. Thus, Janet is a _____.
A. financial manager
B. production manager
C. sales manager
D. human resource manager
E. marketing manager
Janet is a financial manager. Financial managers focus on obtaining the money needed for the
successful operation of an organization and using that money in accordance with
organizational goals.

Bloom's: Apply
6-38
74. George is a bank manager. He manages the activities of an entire branch without
specializing in any one particular function. Thus, George is a(n) _____.
A. human resource manager
B. production manager
C. sales manager
D. administrative manager
E. marketing manager
George is an administrative manager. Administrative managers manage an entire business or a

major segment of a business and do not specialize in a particular function.

Bloom's: Apply
75. Production and operations managers are concerned with:

A. identifying and efficiently using sources of financing.
B. managing an entire market segment of a business.
C. planning, pricing, and promoting products.
D. transforming resources into good and services.
E. recruiting new employees and developing employee programs.
Production and operations managers develop and administer the activities involved in
transforming resources into goods, services, and ideas ready for the marketplace.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-39
76. A marketing manager is primarily responsible for:

A. identifying and efficiently using sources of financing.
B. hiring employees and dealing with them in a formalized manner.
C. planning, pricing, and promoting products and overseeing their distribution.
D. managing an entire business of a major segment of the business.
E. implementing, maintaining, and controlling technology applications required by a
company.
Marketing managers are responsible for planning, pricing, and promoting products and
making them available to customers through distribution.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
77. When a manager works with suppliers, distributors, and labor unions to reach agreements
about the quality and price of input, technical, and human resources, he or she is fulfilling the
managerial role of a _____.
A. disseminator
B. negotiator
C. resource allocator
D. leader
E. figurehead
As a negotiator, a manager works with suppliers, distributors, and labor unions to reach
agreements about the quality and price of input, technical, and human resources; he or she
also works with other organizations to establish agreements to pool resources to work on joint
projects.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-40
78. When a manager informs employees about the changes taking place in the external and
internal environment that will affect them and their organization, he or she is acting as a
_____.
A. negotiator
B. monitor
C. resource allocator
D. liaison
E. disseminator
As a disseminator, a manager informs employees about the changes taking place in the
external and internal environment that will affect them and their organization.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
79. _____ refer to the ability of an individual to think in abstract terms and to see how parts fit
together to form the whole.
A. Technical skills
B. Perceptual skills
C. Conceptual skills
D. Social skills
E. Human relations skills
Conceptual skills, the ability to think in abstract terms, and to see how parts fit together to
form the whole, are needed by all managers, but particularly top-level managers.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-41
80. _____ refer to the ability to identify relevant issues and recognize their importance,
understand the relationships between them, and perceive the underlying causes of a situation.
A. Technical skills
B. Analytical skills
C. Cognitive skills
D. Social skills
E. Human relations skills
Analytical skills refer to the ability to identify relevant issues and recognize their importance,
understand the relationships between them, and perceive the underlying causes of a situation.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
81. Which of the following is a feature of democratic leadership?

A. Encouraging employees to discuss concerns and provide inputs
B. Using economic rewards as sole means to motivate employees
C. Allowing employees complete autonomy to work on their own
D. Monitoring employee actions very closely and in great detail
E. Making decisions and telling employees what must be done and in what manner
Democratic leaders involve their employees in decisions. The manager presents a situation
and encourages his or her subordinates to express opinions and contribute ideas.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
Learning Objective: 06-05 Describe the different types of leaders and how leadership can be used to empower employees.
6-42
82. The _____ style of leadership can be a powerful motivator because it demonstrates a
great deal of trust and confidence in an employee and allows employees to meet their work
demands with little or no interference.
A. free-rein
B. autocratic
C. authoritarian
D. repressive
E. totalitarian
The free-rein style of leadership can be a powerful motivator because it demonstrates a great
deal of trust and confidence in an employee and allows employees to meet their work
demands with little or no interference.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
83. A(n) _____ is best for stimulating unskilled or unmotivated employees.

A. authentic leadership style
B. democratic leadership style
C. free-rein leadership style
D. autocratic leadership style
E. participative leadership style
An autocratic leadership style is best for stimulating unskilled or unmotivated employees.

Autocratic leaders make all the decisions and then tell employees what must be done and how
to do it.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-43
84. Which of the following statements is true of authentic leaders?

A. Authentic leaders display all the characteristics of autocratic leaders.
B. Authentic leaders make all the relevant decisions and inform employees what they have to
do and how.
C. Authentic leaders are an exclusive group of leaders whose leadership behaviors are
distinctive from democratic and free-rein leaders.
D. Authentic leaders are identified by the way in which they conduct themselves with
stakeholders.
E. Authentic leaders are concerned about the task at hand rather than establishing lasting
relationships with stakeholders.
Both democratic and free-rein leaders could qualify as authentic leaders depending upon how
they conduct themselves among stakeholders. Authentic leaders are passionate about the goals
and mission of a company, display corporate values in the workplace, and form long-term
relationships with stakeholders.
AACSB: Analytic
Bloom's: Understand
85. Which of the following statements is true of employee empowerment?

A. Employee empowerment is most assured in autocratic style of leadership.
B. Employee empowerment has been reducing in organizations.
C. Employee empowerment is not possible in companies that have a participative corporate
culture.
D. Employee empowerment allows employees to provide input but not feedback on company
decisions.
E. Employee empowerment does not mean that managers are not needed.
Employee empowerment does not mean that managers are not needed. Managers are
important for guiding employees, setting goals, making major decisions, and other
responsibilities.
AACSB: Analytic
Bloom's: Understand
6-44
86. _____ occurs when employees are provided with the ability to take on responsibilities and
make decisions about their jobs.
A. Employee outplacement
B. Crowdsourcing
C. Micromanagement
D. Benchmarking
E. Employee empowerment
Employee empowerment occurs when employees are provided with the ability to take on
responsibilities and make decisions about their jobs.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
87. Which of the following is the first step in decision making?

A. Recognizing and defining the decision situation
B. Developing options to resolve a complicated situation
C. Analyzing the options available to resolve a situation
D. Monitoring the consequences of a decision
E. Implementing a decision
A systematic approach using the following six steps usually leads to effective decision
making: (a) recognizing and defining the decision situation, (b) developing options to resolve
the situation, (c) analyzing the options, (d) selecting the best option, (e) implementing the
decision, and (f) monitoring the consequences of the decision.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-45
88. Managers at Sprocket Inc. have recognized declining sales on their water purifier and
must decide upon what has to be done to improve it. Which of the following would be their
next step?
A. Defining the situation
B. Developing options
C. Analyzing options
D. Selecting the best option
E. Implementing the decision
The next step for managers at Sprocket Inc. would be to define the decision situation that they
have already identified. As part of the first step in decision making, the manager must first
recognize the situation and then define it before developing options.

Bloom's: Apply
89. When selecting the best option among a series of possible decisions, _____.
A. it is always advisable to choose just one.
B. quantitative and qualitative analyses are foolproof at all times.
C. all options must be tried and tested simultaneously.
D. it is always possible to use an objective procedure.
E. it may be possible to use a combination of several options.
Selecting the best option is often a subjective procedure because many situations do not lend
themselves to quantitative analysis. Of course, it is not always necessary to select only one
option and reject all others; it may be possible to select and use a combination of several
options.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-46
90. When assessing the appropriateness of a decision option, managers should:

A. consider its impact on the organization as a whole.
B. think narrowly about the one department most affected by the decision.
C. disregard the practicality of the options available.
D. choose the option that partially addresses the problem.
E. limit the evaluation to objective procedures.
When assessing appropriateness, a decision maker should consider whether the proposed
option adequately addresses the situation. When analyzing the consequences of an option,
managers should consider its impact on the situation and on the organization as a whole.
AACSB: Analytic
Bloom's: Understand
91. When analyzing options in the decision-making process, managers must consider the
appropriateness and _____ of each option.
A. novelty
B. practicality
C. creativity
D. universality
E. reversibility
Once the options for a decision situation have been developed, management should then
analyze the practicality and appropriateness of each option. An option may be deemed
impractical because of a lack of financial resources to implement it.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-47
92. Which of the following best describes the importance of monitoring the consequences of
decisions?
A. The consequences of decisions may not be apparent quickly enough without monitoring.
B. Monitoring the consequences of decisions is the immediate logical step after selecting the
best option.
C. Monitoring the consequences always leads to redefining the decision situation from the
beginning.
D. The consequences of decisions have to be monitored only when desired results are
achieved.
E. Monitoring the consequences of decisions is not important and it is expensive.
Without proper monitoring, the consequences of decisions may not be known quickly enough
to make efficient changes. If the desired result is achieved, management can reasonably
conclude that it made a good choice. If the desired result is not achieved, further analysis is
warranted.
AACSB: Analytic
Bloom's: Understand
93. A(n) _____ is like a calendar, containing both specific and vague items, that helps a
manager figure out what must be done and how to get it done to meet the objectives set by an
organization.
A. balance sheet
B. executive summary
C. proforma invoice
D. referendum
E. agenda
An agenda contains both specific and vague items, covering short-term goals and long-term
objectives. Like a calendar, an agenda helps a manager figure out what must be done and how
to get it done to meet the objectives set by an organization.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-48
94. Which of the following refers to the process of building relationships and sharing
information with colleagues who can help a manager achieve the items on his or her agenda?
A. Controlling
B. Directing
C. Benchmarking
D. Networking
E. Monitoring
Managers spend a lot of time networking—building relationships and sharing information

with colleagues who can help them achieve the items on their agendas.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
95. _____ is used for job networking and is gaining in popularity among the younger
generation as an alternative to traditional job hunting.
A. eBay
B. Twitter
C. LinkedIn
D. Orkut
E. Amazon
LinkedIn has been used for job networking and is gaining in popularity among the younger
generation as an alternative to traditional job hunting. Some speculate that social networks
might eventually replace traditional résumés and job boards.
AACSB: Analytic
Bloom's: Remember
Difficulty: 1 Easy
6-49

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Chapter 06 - The Nature of Management

M Business 5th Edition Ferrell

Test Bank: https://testbankpack.com/p/test-bank-for-m-business-

Solution Manual: https://testbankpack.com/p/solution-manual-for-

True / False Questions

1. Management takes place only in business settings.

Top-level managers make an organization's strategic decisions, decisions that focus on an

5. The first step in decision-making process is developing options directly.

Multiple Choice Questions

Management is a process designed to achieve an organization's objectives by using its

Management is a process designed to achieve an organization's objectives by using its

AACSB: Reflective Thinking

10. Managers need adequate _____ to pay for essential activities.

11. Jason is an operations manager in an automobile company. Which of the following is

Jason's primary management function in the firm is most likely to be administering

AACSB: Reflective Thinking

13. Determining an organization's objectives and deciding how to accomplish them, a

Melanie is involved in the management function of planning. Planning involves forecasting

AACSB: Reflective Thinking

15. Which of the following is the first function of management?

Planning, the process of determining an organization's objectives and deciding how to

16. Planning is a crucial management activity because:

17. Forecasting is a part of the management function of:

18. Before an organization can plan a course of action, it must first:

All businesses—from the smallest restaurant to the largest multinational corporation—need to

19. A declaration of an organization's fundamental purpose and basic philosophy is known as

A mission, or mission statement, is a declaration of an organization's fundamental purpose

AACSB: Reflective Thinking

21. Which of the following explains an organization's reason for existence?

A mission, or mission statement, is a declaration of an organization's fundamental purpose

23. Which of these basic questions will be answered by a well-developed mission

AACSB: Reflective Thinking

27. Which of the following statements is true of the goals of a company?

30. The principal difference between objectives and goals is that:

Objectives regarding competitive advantage are generally stated in terms of percentage of

33. Growth objectives essentially relate to:

34. When efficiency is an objective, organizations primarily focus on:

AACSB: Reflective Thinking

AACSB: Reflective Thinking

41. Tactical plans usually cover a period of:

42. Strategic plans:

44. Which of the following statements is true of tactical plans?

AACSB: Reflective Thinking

AACSB: Reflective Thinking

An element of planning is crisis management or contingency planning, which deals with

An element of planning is crisis management or contingency planning, which deals with

AACSB: Reflective Thinking

Organizing is the structuring of resources and activities to accomplish objectives in an

AACSB: Reflective Thinking

Downsizing, the elimination of significant numbers of employees from an organization, has

AACSB: Reflective Thinking

59. Providing incentives to employees to motivate them toward achieving organizational

Directing is motivating and leading employees to achieve organizational objectives; managers

60. Which of the following is true of the management function of directing?

Directing is motivating and leading employees to achieve organizational objectives. It also

Controlling is the process of evaluating and correcting activities to keep an organization on

AACSB: Reflective Thinking

AACSB: Reflective Thinking

George is an administrative manager. Administrative managers manage an entire business or a