Business Strategy Final

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

It reduces the trust of shareholders in the organization as a vehicle for value creation.

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases.

Which of the conditions prevail when an industry is at the end of its life cycle?

The level of process innovation reaches its maximum as firms attempt to lower cost.

Which quadrant in the core competence-market matrix is the hardest to pursue?

building new core competencies to create and compete in markets of the future

In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources.

factor

A greater cultural distance between two trading countries

increases the liability of foreignness.

The board of directors of a public stock company consists of

individuals who formally represent the firm's shareholders and oversee the work of executives.

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing.

industry

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by

introducing results-only-work-environments to tap intrinsic motivations.

A firm is said to be pursuing a polycentric innovation strategy when

it draws from multiple, equally important research facilities located throughout the world.

A trend observed during the Globalization 3.0 stage involves

multinational companies organizing as global-collaboration networks.

Shareholders of public companies need to appoint a board of directors to represent their interests because

of the separation of ownership and control.

The key objective for firms during the growth phase is to

stake out a strong strategic position not easily imitated by rivals.

The MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after

the Hippocratic oath in medicine.

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

the absence of a trading bloc.

In a non-equity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

Organizational design is

the process of creating, implementing, and modifying the structure of an organization.

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

Which of the following factors is the most important determinant of economic distance?

the wealth and per capita income of consumers

A company that is using extrinsic motivation as an output control mechanism will most likely

threaten to lay off employees if they do not achieve targets.

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration.

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

Adverse selection in a public stock company occurs when

information asymmetry increases the likelihood of selecting inferior alternatives.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

informational advantage of the lower-level employees.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

exporting goods.

To be successful and to survive the shakeout stage of the industry life cycle, a firm should

**gain economies of scale** (charge higher prices than its competitors.)

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that

**some of the firm's proprietary know-how may be appropriated by the foreign partner.** (the foreign firm will need to make larger investments when compared to entering the new market on its own.)

How can strategists decide between borrowing and buying the resource in question?

A firm deciding whether to borrow or buy a resource heavily relies on a relationship. If a firm has a relationship built between them and the firm they will be borrowing from, they are more likely to borrow.

Why do firms have more strategic variety in the growth stage of the industry life cycle?

A firm's strategic variety increases during the growth stage because demand increases significantly. First-time buyers are rushing to enter the market. This causes firms to have to produce more but also allows them to lower costs.

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

A firm pursuing a transnational strategy would believe that

CANNOT FIND THE RIGHT ANSWER!!!

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

Coordination costs

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

Each stage of the industry life cycle is dominated by a different customer group.

Which of the following examples describes the task of an alliance manager?

Hussein trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?

It allows the conglomerate to overcome institutional weaknesses in emerging economies.

What most likely happens when a firm optimizes its organizational structure to its current situation?

It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

How is process innovation different from product innovation?

Product innovation is a new or recombined knowledge embodied in new products. Whereas process innovations are new ways to produce existing products or to deliver existing services. Product innovation is creating a new product, but process innovation is how to improve existing products.

Which of the following scenarios would be characteristic of an entrepreneur?

Rachel implemented a new and more efficient way to produce pottery.

The administrative and political distance between two trading countries decreases when

there is a well-functioning capital market in the host country.

A bank, CQC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?

The bank knows that the customer will be unable to pay the loan if the interest rate rises.

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

The first mover will be able to reduce costs through economies of scale.

Discuss the drawbacks of the industry life cycle.

The industry life cycle is completed with five steps: introduction, growth, shakeout, maturity, and decline. These steps occur in an industry over time, but sometimes a company does not realize what stage they are in. One drawback to this cycle is figuring out where the company is and how to prevent it from declining in the market.

Which of the following accurately describes an organic organization?

a flexible organization that fosters fast decision making and high employee motivation

A functional structure is recommended when a firm

has a low level of diversification.

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in

**architectural innovations** (incremental innovations.)

According to the perspective of shareholder capitalism, shareholders in public stock companies

**have the most legitimate claim on profits** (are restricted from buying shares of two competing companies.)

Which of the following is a drawback of vertical integration?

**some of the firm's proprietary know-how may be appropriated by the foreign partner.** (It impedes scheduling and planning.)

In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application.

20 years

Which of the following describes a firm in the Globalization 1.0 stage?

Asha Inc. had a base office in New York and distributed some of its products overseas.

How will an increase in coordinated economic and political integration between countries affect the world economy?

There will be gains in social welfare and living standards across the globe.

Which of the following is true of acquisitions?

They can be friendly or hostile.

According to Michael Porter, which of the following is a problem with many publicly traded companies?

They have defined value creation too narrowly in terms of financial performance.

A primary advantage of organizing economic activity within firms is the

ability to coordinate highly complex tasks to allow for specialized division of labor.

Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies.

backward vertical integration

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

benefits from lower labor costs in manufacturing and services

The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs.

blue ocean

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

building downstream complementary assets can be expensive and time-consuming.

The name for an agreed-upon code of conduct in business, based on societal norms, is

business ethics.

According to the agency theory,

conflicts that arise in corporations should be addressed in the legal realm.

One way to foster ethical behavior in employees is to

create a control system that encourages desired values.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

The customers entering the market in the growth stage are primarily

early adopters.

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they

enter into the market in large numbers, creating a herding effect.

Which of the following is an ineffective practice in alliance management?

focusing on developing an alliance-management capability in isolation

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a ________ structure.

global matrix

The process of closer integration and exchange between different countries and peoples worldwide is

globalization.

The four-step innovation process ends with

imitation.

The informational advantage that agents possess over principals is often based on the fact that

insiders are the first to learn about important developments before the information is released to the public.

Which of the following lists the stages of the industry life cycle in the correct order?

introduction, growth, shakeout, maturity, and decline

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.

matrix

Which of the following motivations for business growth involves principal-agent problems?

motivating managers

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

Michael Porter's diamond framework explains

national competitive advantage.

In a radical innovation, a firm targets

new markets by using new technologies.

Ethics is

not synonymous with law.

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and

obeys the VRIO principles.

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

organic.

The strategic objective of a first mover during the introduction stage of the industry life cycle is to

pursue a harvest strategy.

The process of alliance management begins with

selecting the best possible partner.

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are

similar to those that need to be developed and superior to those of competitors in the targeted area.

A high degree of formalization in an organization is most likely to

slow down decision making.

Employees learn about an organization's culture through the process of

socialization

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance.

Successful ________ requires managers to design and shape structure, culture, and control mechanisms.

strategy implementation

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

structure

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

the expectation that the agent will act in the principal's best interest

A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

unrelated diversification strategy

The most important yet least visible element of organizational culture is

values.

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?

exporting

In a public stock company, senior executives, such as the CEO, face agency problems when

they delegate authority of strategic business units to general managers.

A drawback of short-term contracting as an alternative to making a component in-house is that

**The supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.** (it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.)

What is the main reason that most mergers and acquisitions negatively effect shareholder value?

**fail to add any value** (Market conditions change too quickly.)

What are the advantages and disadvantages of organizing economic activity within firms?

1. Ability to make command and control decisions bey flat along clear hierarchical lines of authority 2. The ability to coordinate tasks that are highly complex, this way labor can be specialized by division. 3. A firm's transaction-specific investments are of high value within firms. 4. Creating a community of knowledge. This includes aiding employees in creating relationships. Creating relationships between employees can lead to the exchange of ideas and the creation of a close-knit working environment, where problems are easier solved. Disadvantages of organizing economic activity within firms include 1. A firm's administrative cost is disadvantaged because of the necessary bureaucracy. 2. A firm's incentives are lowered. (hourly wages and salaries) 3. A firm's principal-agent problem is disadvantaged as well.

The downside of equity alliances is

the amount of investment that can be involved.

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer