Suggested Answers
Introduction to Management-I (MB111): April 2006
1. Answer : (b)Introduction to Management-I (MB111): April 2006
Reason : Statements (II) and (V) describe the principled level of the
stages of moral development.
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2. Answer : (b)
Reason : The belief that improvement of the social environment
benefits both society and business, is known as “Business is
a part of society” argument for social responsibility of
business. Hence from above discussion, we can infer that
option (b) is correct.
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3. Answer : (c)
Reason : The following are the characteristics of organization culture:
distinctiveness; based on strong norms; observed behavioral
regularities; member identity; stable and dominant values;
and variable strength (weak and strong cultures).
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4. Answer : (e)
Reason : Creating a long-term and healthy relationship with creditors
is an obligation towards creditors (and not customers) that
business firms should fulfill.
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5. Answer : (a)
Reason : The corporate level would be appropriate to address the
questions facing Mr. Anusheel Gupta as the purpose of corporate level
strategy is to identify the business areas in which an organization
will carry out its operations.
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6. Answer : (d)
Reason : An organization can be described as an open system
because it
I. Has interrelated and interdependent parts (departments
and divisions) that function as a whole.
II. Gets inputs from and distributes outputs to the external
environment.
III. Impacts, and is impacted by, the external environment.
A closed system is perfectly deterministic and predictable.
Hence statement (IV) does not pertain to an open system
and option (d) is the answer.
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7. Answer : (c)
Reason : A hybrid organization structure represents a form of
departmentalization that adopts both the functional and the
divisional structures at the same level of management.
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8. Answer : (d)
Reason : Effective managers delegate as many routine jobs as
possible to their subordinates and concentrate their efforts
on more important jobs. Therefore, statement (II) is not true
about delegation.
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9. Answer : (a)
Reason : An informal organization is a network of personal and
social relations not established or required formally. It
consists of the unofficial but influential means of
communication, decision-making, and control that are part
of the habitual way things get done in the organization.
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10. Answer : (d)
Reason : The characteristic of decision-making under risk is that
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future environment is unpredictable and everything is in a
state of flux.
11. Answer : (b)
Reason : Bounded rationality differs from the rational model in that
decision makers focus on easy-to-find choices.
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12. Answer : (e)
Reason : A reason for organizations to scan the environment is to
identify and interpret changes or conditions that could affect
the success of their activities and their revenues.
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13. Answer : (b)
Reason : The incremental model is concerned more about achieving
short-run solution of a problem than making decisions that
would facilitate long-term goal accomplishment. This
model does not require managers to process a great deal of
information for decision-making.
(a) The rational decision-making model assumes that
managers possess and understand all the information that is
relevant to their decisions. They are also aware of different
possible alternatives, all potential outcomes and
ramifications, and hence make optimal decisions.
(c) The garbage can approach to decision-making holds that
managers behave in a random fashion in making nonprogrammed
decisions.
(d) Game theory is a technique for determining the strategy
that is likely to produce maximum profits in a competitive
situation.
(e) Decision tree is a sophisticated mathematical tool that
enables a decision-maker to consider various alternative
courses of action and select the best one.
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14. Answer : (b)
Reason : Statement (II) – job performance depends on the individual
worker is a pre-judgement of the Hawthorne Studies. The
other two statements are findings.
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15. Answer : (b)
Reason : Whenever an employee comes up with a new idea, and
gives feasible plan to develop a new product, it is called
entrepreneurship. So, (b) is correct answer.
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16. Answer : (c)
Reason : Line authority is the employer-employee authority
relationship that follows the chain of command.
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17. Answer : (b)
Reason : The various steps in the planning process are as follows:
(i)Analyse opportunities.
(ii)Establish organizational objectives.
(iii) Determine planning premises.
(iv) Identify alternatives.
(v) Evaluate alternatives by weighing them in the light of
premises and goals.
(vi) Select the best alternative.
(vii) Implement the plan.
(viii) Review the implemented plan.
Hence, from above discussion, we can infer that option (b)
is correct.
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18. Answer : (e)
Reason : Fear of criticism is a factor that affects delegation of
authority from the delegant’s aspect. All other options are
factors that affect delegation of authority from the
delegator’s aspect.
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19. Answer : (d)
Reason : Policies are standing plans that furnish broad guidelines for
channeling management thinking in specified direction.
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20. Answer : (c)
Reason : The advantages of a funcitional structure are
II. Power and prestige.
III. Clarity about career paths
Statements (I) and (IV) are advantages of a product
structure.
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21. Answer : (d)
Reason : Locus of Control indicates the degree to which people
believe they are masters of their own fate. Hence from
above discussion, we can infer that option (d) is correct.
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22. Answer : (d)
Reason : Power based upon identification with a person who has
desirable resources or personal traits is known as referent
power.
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23. Answer : (c)
Reason : Departmentation by Time makes use of shift systems.
When an organization works with several shift systems,
coordination and communication may be a problem.
Hence from above discussion, we can infer that option (c) is
not an advantage of Departmentation by Time.
Options (a), (b), (d) and (e) are all advantages of
Departmentation by Time.
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24. Answer : (b)
Reason : If Coca-Cola wished to examine its general environment
before constructing its business strategy, the company
would explore all of the following environments except the
knowledge environment.
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25. Answer : (b)
Reason : A planning tool that helps managers figure out how much to
produce and points out the relationship between revenues,
costs, and profits is breakeven analysis.
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26. Answer : (c)
Reason : With respect to factors that affect reorganization, when a
single change triggers off a sequence of related changes, it is
called the domino effect.
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27. Answer : (a)
Reason : Brainstorming is a method that can be used to overcome the
tendency toward conformity in group decision-making.
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28. Answer : (a)
Reason : A divisional structure focuses on results.
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29. Answer : (b)
Reason : The given example is that of an operational plan.
Operational plans help in day-to-day functioning and are
developed by lower level managers. They consider time-
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frames of less than a year.
30. Answer : (c)
Reason : Statement (I) – effectiveness refers to the achievement of
stated organizational objectives while efficiency denotes the
judicious use of resources to achieve organizational
objectives is true. Statement (III) – effectiveness is the
foundation of success whereas efficiency is a minimum
condition for survival after success is achieved is also true.
Statement (II) – effectiveness means “doing things right”
while efficiency means “doing the right things” is not true
as efficiency means “doing things right” while effectiveness
means “doing the right things”. Hence, option (c) is the
answer.
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31. Answer : (b)
Reason : Linear programming technique cannot be applied to pricing
decisions, which are better decide through simulation.
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32. Answer : (e)
Reason : The following are factors that affect delegation of authority
from the organizational aspect:
I. Policy towards centralization or decentralization.
II. Availability of managerial personnel.
III. Type of control mechanisms.
Hence, option (e) is the answer.
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33. Answer : (c)
Reason : Statement (I) – objectives and planning programs are coexistential
and co-relational and statement (III) – a manager
can effectively pursue only a few objectives, are true about
objectives. Statement (II) is not true as goals and plans are
rarely linear, in fact they are interlocked and form a
network. Statement (IV) not true, as objectives require
deadlines for results to be accomplished. Therefore option
(c) is the answer.
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34. Answer : (d)
Reason : Planning is more rational than instinctive and does allow
scope for innovation and creativity. Hence from above
discussion, we can infer that option (d) is not true about
planning. Options (a), (b), (c) and (e) are true about
planning.
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35. Answer : (c)
Reason : In the strategic management process, any organizational
skills or resources that are exceptional or unique are the
organization’s Core competencies. Hence from above
discussion, we can infer that option (c) is correct.
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36. Answer : (d)
Reason : Strategic planning encourages firms to take the most
rational and risk-free decision. Therefore, option (d) is not a
limitation.
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37. Answer : (a)
Reason : The limitation of Weber’s bureaucracy is that it destroys
individual creativity and the flexibility to respond to
complex changes in the environment.
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38. Answer : (a)
Reason : A large organization that has three levels of managers but
each one has ten or more subordinates reporting directly to
that manager is organized to have a flat structure i,e a flat
structure has few hierarchical levels and wide spans of
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control. (b) Product structures are structures created to
concentrate on a single product or service or at least a
homogenous set of products or services. (c) Functional
structure is a type of departmentalization in which positions
are grouped according to their main functional area. (d)A
tall structure has many hierarchical levels and narrow spans
of control. (e) Divisional structure is a type of
departmentation in which positions are grouped according
to similarity of products, services or markets.
39. Answer : (a)
Reason : Henry Fayol’s principle of division of labor states that
‘work specialization leads to efficiency of operations’.
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40. Answer : (d)
Reason : In the first step of the extended model of the planning
process, i.e., being aware of opportunity, an organization
focuses on its strengths and weaknesses, competition, and
customers’ needs.
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41. Answer : (c)
Reason : The most significant ways that culture is transmitted to
employees consist of shared beliefs, values, rituals, stories,
myths and specialized language that foster a feeling of
community among organization members. Hence from
above discussion, we can infer that option (c) is correct.
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42. Answer : (e)
Reason : In case of Product Departmentation, managerial costs are
higher because of the decentralization of various activities
such as personnel, production, sales and accounts. Hence
from above discussion, we can infer that option (e) is a
disadvantage of Product Departmentation. Options (a), (b),
(c) and (d) are all advantages of Product Departmentation.
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43. Answer : (c)
Reason : An objective is the aim of an action. It implies a specific
work to be accomplished within a given period of time.
Short-term objective is developed to accomplish a work in a
very short period of time. Hence, option (c) is correct.
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44. Answer : (b)
Reason : An absolute cost advantage would most likely appear as a
decision variable for new entrants.
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45. Answer : (c)
Reason : Conceptual skill refers to the ability to think and
conceptualize abstract situations. It is the ability to
understand and coordinate the full range of corporate
objectives and activities. Hence, from above discussion, we
can infer that option (c) is correct.
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46. Answer : (d)
Reason : In the mature matrix stage (stage 4), bosses have equal
power.
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47. Answer : (b)
Reason : Environmental scanning, forecasting, and benchmarking are
the three most effective tools that managers can use to
analyze their organization’s environment. Hence, option (b)
is correct.
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48. Answer : (d)
Reason : A criticism of planning would be that formal plans can’t
replace intuition and creativity.
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49. Answer : (c)
Reason : Centralisation is not a characteristic of organic structure.
Decentralisation is a characteristic of organic structure.
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50. Answer : (d)
Reason : In an environment of high uncertainty, one should adopt a
directional plan with an emphasis on the short-term, to
make a plan more effective.
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51. Answer : (d)
Reason : The major disadvantage of the matrix structure is its
propensity to foster power struggles.
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52. Answer : (c)
Reason : Middle level managers would specifically engage in setting
(I) division objectives and (IV) specific overall organization
objectives such as those pertaining to key result areas. Top
level managers would set (II) overall organization
objectives, while lower level managers would set (III)
individual performance objectives.
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53. Answer : (d)
Reason : The limitation of the empirical approach to management is
that situations are all different. There is limited value for
developing management theory.
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54. Answer : (d)
Reason : Behaviorally Anchored Rating Scales (BARS) is a
performance evaluation method, and not a decision-making
tool.
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55. Answer : (b)
Reason : Ability to take advantage of economies of scale could be a
strength of the company and not an opportunity.
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56. Answer : (c)
Reason : The argument ‘weakened international balance of
payments’ points out that, since the cost of social initiatives
would be added to the price of products, multinational
companies selling in domestic markets would be at a
disadvantage when competing with domestic companies not
involved in social activities.
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57. Answer : (b)
Reason : The principle which intends to eliminate the practice of
“passing the buck”, is known as downward delegation of
authority.
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58. Answer : (d)
Reason : The following are the weaknesses of the Delphi method of
group decision-making
III. There is too much emphasis on obtaining consensus.
IV. It consumes considerable amount of time.
V. It does not produce accurate results.
Statements (I) and (II) are disadvantages of the nomial
group technique.
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59. Answer : (d)
Reason : Decentralizing an organization is a structural change aimed
at reducing the cost of coordination, increasing the
controllability of subunits, and increasing motivation.
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60. Answer : (e)
Reason : Companies can achieve a sustainable competitive advantage
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with
I. Non-physical assets, such as customer database
information.
II. Online ordering systems and other continual product
and process innovations.
III. Employee knowledge sharing.
61. Answer : (a)
Reason : Garbage-can model is effective in the following situations:
(i) when the managers have no goal preference, (ii) the
means of achieving goals are unclear and (iii) decision
making participants change rapidly.
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62. Answer : (e)
Reason : Centralisation refers to the degree to which decision-making
is concentrated at a single point in the organization. he
characteristic that makes centralisation more appropriate is
when lower level managers are reluctant to be involved in
decision-making. Hence, from above discussion, we can
infer that option (e) is correct.
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63. Answer : (c)
Reason : As per Frederick Taylor, Soldiering refers to the practice of
employees deliberately working at a place slower than their
capabilities.
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64. Answer : (a)
Reason : Problem identification stage in decision-making process
attempts to understand the performance gap between
predicted or expected level of performance and the actual
level. Hence, from above discussion, we can infer that
option (a) is correct.
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65. Answer : (d)
Reason : Incentives based on meeting quantitative targets is an
organizational requirement with respect to the Porter’s cost
leadership strategy.
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66. Answer : (b)
Reason : Hawthorne effect is defined as the possibility that
individuals selected to participate in a study may show
higher productivity only because of the added attention they
receive from the researchers rather than any other factor
being tested in the study.
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67. Answer : (d)
Reason : Span of management includes:
Statement (III) – Determination of how many people
working with each other report to a single manager.
Statement (IV) – Determination of the number of
individuals a manager can effectively supervise.
Hence, option (d) is the answer.
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68. Answer : (a)
Reason : Functional authority violates the principle of unity of
command.
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69. Answer : (c)
Reason : The anticipated environment in which plans are expected to
operate is known as planning premise.
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70. Answer : (d)
Reason : All the stated reasons, except statement (IV), which is not
applicable to staff personnel, cause line-staff conflict as
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seen from a staff personnel perspective.
71. Answer : (b)
Reason : The following are benefits of position descriptions:
• They identify duties and responsibilities that are
overlapping or neglected
• They provide guidance regarding candidate
requirements, salary levels, and training needs
of new employees
• They help managers determine the tasks to be done and
the employees who should do them
• They act as means of control over the organization by
furnishing standards against which the
necessity of the position can be ascertained.
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72. Answer : (a)
Reason : Therbligs is the term coined by Gilbreths to refer to the
seventeen basic hand motions they identified while carrying
out motion studies.
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73. Answer : (c)
Reason : The management function of organizing involves
determining
(I). Tasks to be performed.
(II). How tasks can best be combined into specific jobs.
(III). Authority and reporting relationships within the
corporate hierarchy.
Promotions and career planning are part of th estaffing
function. Hence, option (c) is the answer.
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74. Answer : (b)
Reason : Planning can’t eliminate change, but managers usually plan
in order to anticipate changes and develop the mosteffective
response to changes.
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75. Answer : (a)
Reason : A narrow product line relative to rivals could be a ‘potential
resource weakness for a company. All other options are
potential external threats to a company’s well being.
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76. Answer : (b)
Reason : Making proper use of the staff abilities is an appropriate
technique for line personnel in reducing line-staff conflict.
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77. Answer : (c)
Reason : Ethical hotline is not a factor that effects ethical/unethical
behavior. It is a tool that helps employees in reporting
ethical dilemmas or problems.
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78. Answer : (d)
Reason : Among the given steps of the nominal group procedure,
‘ideas listed for review’ precedes the other steps.
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79. Answer : (a)
Reason : The briefing stage includes discussing the areas of the task
that are sensitive to error or risk. Options (b), (c) and (d) are
included in the progress monitoring stage. Option (e) is
included in the evaluation stage.
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80. Answer : (d)
Reason : The function of planning in organizations is very closely
linked to controlling, because it sets the goals or standards
against which performance is measured.
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81. Answer : (c)
Reason : In a highly decentralized organization, decisions made at
the lower levels are very important. All other options are
true about a highly centralized organization.
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82. Answer : (e)
Reason : Discipline is vital for running an organization is one of the
14 principles of management as outlined by Henry Fayol.
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83. Answer : (b)
Reason : MBO is the joint setting of goals and objectives by
superiors and subordinates and clarifying on the objective
itself. The final step of a typical MBO process is that
successful achievement of objectives is reinforced by
performance based rewards. Hence, option (b) is correct.
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84. Answer : (b)
Reason : A mechanistic organization has a very formal structure with
strict lines of communication where there are many rules,
and duties are fixed.
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85. Answer : (c)
Reason : Departmentatoin is requird for the following reasons:
• It helps an organization take advantage of functional
specialization
• It defines the role of every individual, indicating
activities to be performed
• It facilitates control, coordination and communication
• It provides the necessary platform to build loyalty
among members of the organization
• It helps identify sources of skills, information and
competence that aid in managerial decision-making.
Therefore, the statement – It helps in avoiding conflicts
among power centers – is not a reason why departmentation
is required.
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86. Answer : (d)
Reason : Interpersonal behaviour approach to management
emphasizes managing people by understanding their
individual psychological needs. Hence, we can infer that option
(d) is correct.
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87. Answer : (e)
Reason : Henry R. Towne emphasized the importance of business
skills for running a business.
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88. Answer : (b)
Reason : Rational decision-making model does not assume that
preferences change slowly.
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89. Answer : (d)
Reason : The approaches for selecting among alternatives, in the
decision-making process are:
I. Experience.
II. Experimentation.
III. Research and analysis.
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90. Answer : (a)
Reason : Question marks either need more investment or can be
considered for withdrawal.
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91. Answer : (b)
Reason : An SBU formulates its own interdependent plans, which are
different from those of other SBUs. Therefore, option (b) is
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not true about why an organization adopts a strategic
business unit (SBU) structure
92. Answer : (a)
Reason : Problems in structuring the organization is not a problem
associated with a poor ‘span of control.
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93. Answer : (e)
Reason : A subordinate identifies communication from the superior
as being authoritative only if he
• Understands the message
• Believes that it is in agreement with the organization’s
purpose
• Feels that it serves his interests
• Is in a position to comply with it
Hence, option (e) is the answer.
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94. Answer : (c)
Reason : The intensity of an ethical issue is greater in th efollowing
cases:
I. The number of people harmed is large.
II. Everyone agrees that the action is wrong.
III. The consequences of the action may be felt
immediately.
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95. Answer : (e)
Reason : The key result areas in business suggested by Peter Drucker
include
I. Physical and financial resources.
II. Profitability.
III. Innovation.
IV. Worker performance and attitude.
Hence, option (e) is the answer.
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96. Answer : (d)
Reason : Sometimes it is necessary to deviate from the plans. Plans
need to be redesigned and adjusted based on deviations.
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97. Answer : (c)
Reason : The principle – an organization should provide for the
development of leaders- relates to ‘working relationships’.
Options (a), (d) and (e) pertain to grouping of activities.
Option (b) pertains to authority and responsibility.
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98. Answer : (a)
Reason : A well-managed company, according to Moskowitz, blurs
distinction in ranks.
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99. Answer : (b)
Reason : Logrolling refers to politically wheeling and dealing, which
can displace sound thinking, when an individual’s pet
project or vested interest is at stake. So it is a disadvantage
of group decision-making. Hence, option (b) is the answer.
Options (a), (c), (d) and (e) are advantages of group
decision-making.
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100. Answer : (b)
Reason : Leading is substantially more important for first level
supervisors than for managers at higher levels. Hence,
statement (II) is not true and option (b) is the answer.
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