BUSMHR 4490 Final Practice Questions
Long-term contracts include which forms?
- franchising - licensing
What are the risks of vertical integration?
- reduced flexibility - increased costs - reduced quality
When an established firm makes an equity investment in an entrepreneurial venture it is known as ___ investment
a corporate venture capital
When firms from wealthy countries trade with firms from poor countries, they benefit from economic ___
arbitrage
___ are unique assets with high opportunity cost
specialized assets
___ costs refer to the costs that arise from managing the linked businesses in a related-constrained or related-linked diversification scenario
coordination
___ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes
diversification
What is true of an M-form?
each division operates independently
The primary way cultural change is enacted in a company is through ___
new leadership
___ refers to the act of outsourcing some of the firm's activities outside of the home country to another nation
offshoring
The first stage of the industry value chain is typically what?
raw materials
What are the managerial advantages of building a firm into a large organization?
- greater prestige - increased power - more job security
When supporting a related-diversification strategy with the M-form organizational structure, managers typically ___
concentrate decision making at the top of the organization
What are the types of general diversification strategies?
- product - geographic - product-market
What are examples of input controls?
- standard operating procedures - budgets
What are the three choices in the build-borrow-or-buy framework?
- acquisition of new resources - strategic alliances - internal development
What are the three options used by executives to drive firm growth?
- acquisitions - alliances - organic growth
What are advantages of joint ventures?
- commitment - trust - strong ties
What do managers use the key levers of structure, culture, and control for?
- coordinate work - motivate employees
Because executives make decisions about structure and strategy, ___
a change in leadership often results in a change in culture
The BCG growth-share matrix requires managers to view their SBUs in terms of relative market ___ and speed of market ___
share; growth
What are the most important determinants of economic distance?
- per capita income - wealth
Corporate strategies associated with competitive M-form structure?
- related diversification - unrelated diversification
Which of the following occurs when a targeted firm is unwillingly acquired?
a hostile takeover
According to the BCG matrix, cash cows are SBUs that do what?
compete in a low-growth market but have high market share
___ are partnerships in which at least one partner takes partial ownership in the other partner
equity alliances
The ___ depicts the transformation of raw materials into finished goods and services along distinct vertical stages, each of which represents a distinct industry in which a number of different firms are competing
industry value chain
What is the main reason why boards fire CEOs?
ineffective strategy implementation
___ is an example of an alternative arrangement located on the continuum between "buying" and "making"
short-term contracting
Why did Coca-Cola enter into a strategic alliance with Monster?
so that it could gain private information to determine whether an acquisition might be beneficial
Causal ambiguity and ___ make it difficult to imitate the cultures of successful firms
social complexity
The element of organizational structure that separates the tasks of one job from the tasks of another is known as ___
specialization
When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ___
winner's curse
What are the three main reasons firms make acquisitions?
- gain access to new distribution channels and markets - preempt rivals - gain access to a new capability or competency
What are extremely important aspects of alliance success?
- partner compatibility - inter-organizational trust
A firm with alliance management capability is able to effectively manage what tasks?
- partner selection and alliance formation - alliance design and governance - post-formation alliance management
The forms of specialized assets include what?
- physical asset specificity - human asset specificity - site specificity
What are downsides of equity alliances?
- the amount of investment involved can be great - assembling the partnership may be slow and inflexible
What are the dimensions along which corporate strategy is assessed?
- the stages of the industry value chain in which the business participates - the range of products and services the business offers - where (geographically) to compete
What are the primary reasons for pursuing a merger?
- to overcome competitive disadvantage - to gain superior acquisition and integration capability - to address principal-agent problems
Firms can achieve increased competitive advantage as a result of ___, which are firms that produce a good or service that increases the perceived value of a focal firm's offering when the two are combined
complementors
A(n) ___ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services
strategic alliance
Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of what?
strategic alliances
What dimensions are considered in the CAGE distance framework?
- cultural - economic - geographic
Corporate strategy needs to be dynamic over time in order to ___
- diversify to capture growth opportunities - keep and maintain a competitive advantage - respond to the ever-changing external environment
What are examples of artifacts?
- dress code - private offices - formal vocabulary
What are the three mechanisms that alliances can be governed by?
- equity alliance - joint venture - non-equity alliance
The four quadrants of the core competence-market matrix are?
- existing competencies with existing markets - existing competencies with new markets - new competencies with existing markets - new competences with new markets
Advantages of vertical integration include?
- facilitating scheduling - bettering quality - reducing costs
Characteristics of simple organizational structures:
- flat hierarchy - decentralized - low formalization
What two things accurately describe organic organizations?
- flat organizational structure - low degree of specialization
What conditions suggest a multidomestic strategy might be the appropriate strategy for MNEs?
- high demand for local responsiveness - little need for cost reductions - host countries with idiosyncratic domestic markets
Disadvantages of organizing economic activity in the open market include?
- high search costs - incomplete contracting - opportunism by others
Which of the following are alternatives on the make-or-buy continuum?
- joint ventures - equity alliances
Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. This is an example of what?
a fully vertically integrated company
Which type of structure uses domain expertise to separate employees into specific areas based on their purpose, such as sales and HR?
a functional structure
What approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?
a real-options perspective
What is a major problem for between 30-70% of all strategic alliances?
at least one partner in the alliance considers the venture to be a failure
In general, if a resource is highly tradable, then it should be ___ using a license or contractual agreement
borrowed
A real option gives a firm the right to continue making investments ___
but does not obligate the firm to do so
Strategic positions ___
can fluctuate
Transaction cost economies helps managers do what?
choose which activities to carry out within the firm
How willing the firms in an alliance are to share necessary resources and make sacrifices in the name of long-term rewards is referred to as partner ___
commitment
___ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously
corporate
A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of ___
critical complementary assets
A(n) ___ is a situation in which the stock price of a highly diversified firm is valued as less than the sum of their individual business units
diversification discount
Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience what?
diversification discount
How does an organization's culture influence employee behavior?
employees are motivated by positive culture because it appeals to their higher ideals
In order to implement a transnational strategy, MNEs typically adopt a global ___ structure
matrix
What level of diversification leads to the highest levels of performance?
moderate
___ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution
taper integration
What is a national competitive advantage?
the extent to which a country can compete in international markets
Transaction costs include ___ costs associated with an economic exchange
the internal and external
The degree of vertical integration corresponds to ___
the number of industry value chain stages in which a firm directly participates
What is a major disadvantage of organizing economic activity within firms?
the principal-agent problem
What states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries?
the relational view of competitive advantage
What are economies of scope?
the savings that come from producing two or more outputs at less cost than producing each output individually
How can firms build alliance management capability?
through repeated experiences over time
What is the goal of a differentiation strategy?
to control costs while offering products or services at a higher perceived value, thereby creating a competitive advantage
What is the main goal of corporate venture capital investments?
to create real options in terms of gaining access to new technologies
What is NOT a reason to pursue horizontal integration?
to reduce flexibility
Unlike short-term contracts, long-term contracts encourage firms to make ___ investments
transaction-specific
What factors help define administrative and political distance?
- shared monetary associations - the strength of financial institutions - political hostilities
Which types of diversification tend to have the lowest performances?
- single - unrelated
Corporate strategies associated with functional structure?
- single business - dominant business
What are the main types of corporate diversification?
- single business - dominant business - related diversification - unrelated diversification
What are two internal governance mechanisms put in place to align principal and agent incentives?
- strategic control - reward systems
Two alternatives to vertical integration are?
- strategic outsourcing - taper integration
How does horizontal integration affect Porter's Five Forces?
- strengthens bargaining power vis-a-vis suppliers - reduces the threat of entry - reduces rivalry among existing firms
What characteristics help make an MNE's international strategy successful?
- strong reputation - large domestic markets - prominent brand names
What three key levers can managers use when shaping their organization into a firm with the highest level of competitive advantage?
- structure - control - culture
What describes searching for new knowledge that may enhance a firm's future performance?
exploration
When looking at the modes of foreign-market entry, one could conclude that ___
exporting might be the earliest stage of commitment because it allows the firm to test whether a foreign market is ready for its products
An advantage of using a non-equity alliance to govern a strategic alliance is its ___
flexibility and ease of initiation
The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which strategy?
focused differentiation
The organizational structure element that deals with the degree to which employees are guided by specific, codified rules and processes is known as ___
formalization
What structure is best for international strategy?
functional
What structure is best for transnational strategy?
global matrix; balance of centralized and decentralized decision making, two layers of hierarchy (geographic and product)
How do foreign governments typically influence a firm's use of strategic alliances to enter new markets?
governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders
Specialized assets have what?
high opportunity cost
A firm's unwillingness to alter how things are currently done is known as ___
inertia
What uses codified policies and procedures to define and direct employee behavior?
input controls
What is true of tacit knowledge?
it can only be acquired through actively participating in the process
A standalone organization that two or more companies create and own together is a ___
joint venture
Kava Botanicals, a boutique that sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which type of strategic alliance?
joint venture
What is a disadvantage of a joint venture?
knowledge shared with the new partner could be misappropriated by opportunistic behavior
When two firms that have formed a strategic alliance to learn vary in the rate at which they learn, a(n) ___ may result
learning race
One notable advantage of a multidomestic strategy is ___
lower exchange-rate exposure
TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the ___. When they announced the spin-off, the stock price of TWN went up by 5%
diversification discount
___ is an advantage of a firm in organizing economic activity
transaction-specific investments
What must a firm do to effectively implement a cost-leadership strategy?
use a functional structure that has mechanistic organizational elements
What is important is defined by ___; which attitudes and behavior are deemed appropriate are defined by ___
values; norms
When a firm is more efficient in organizing economic activity than markets are, the firm should ___
vertically integrate
What statement is true of the network organizational structure?
- it enables firms to access communities of practice - it should be supported by uniform, company-wide policies and procedures
Strategy scholars believe that firms should create a dedicated alliance function with which features?
- it should be led by a vice president or director - it should have its own resources and support staff
Groups that are highly cohesive and lack diversity are at risk of falling victim to ___
groupthink
When two competitors merge, leading to industry consolidation, they are engaging in ___
horizontal integration
In order for a company to be considered a MNE, it must operate ___
in more than one country
Companies seek to access international markets as a means of ___
increasing their economic value creation
In order to build alliance management capabilities in small companies, it is recommended that firms take the ___ approach
learning-by-doing
What is an option for formulating strategy via core competencies?
leverage existing core competencies to improve current market position
What is a related-linked diversification strategy?
one in which executives pursue various business opportunities that share only a limited number of linkages
A ___ diversification strategy refers to a firm that pursues both product and geographic diversification
product-market
One disadvantage of a matrix structure is that ___
reporting structures are often unclear
When a firm's employees have internalized norms and share the firm's core values, the firm is said to have a(n) ___ culture
strong
In order for firms to achieve superior performance, ___
structure must follow strategy
The lemons problem suggests that information asymmetries can cause ___
superior goods to be replaced by inferior ones
In many fast-moving markets, strategic alliances allow firms to ___ to hedge against uncertainty
take a wait-and-see approach
What are sources of value creation in a horizontal integration strategy?
- lower costs - reduction in competitive intensity
What should partners do in order to make a strategic alliance work?
- make relation-specific investments - establish knowledge-sharing routines - build inter-firm trust
Stages four and five of the industry value chain involve?
- marketing - sales - after-sales service and support
What is true of cross-functional teams?
- meant to facilitate collaboration between departments - work on specific products/projects
Characteristics of organic organizations:
- low formalization - low specialization - differentiation strategy - decentralized - flat structure
What are the types of vertical integration along the industry value chain?
- forward - backward
Because organizational culture encompasses interactions among employees in all levels of the firm as well as the firm's relationships with its customers and suppliers, it is said to be ___
socially complex
Taper integration allows firms to do what?
- gain knowledge from external sources - be more flexible when responding to market changes such as fluctuations in demand
What are the four essential aspects of an organizational structure?
- hierarchy - formalization - specialization - centralization
Why do firms enter into strategic alliances?
- learn new capabilities - enter new markets - strengthen competitive position
What forms of agreement do non-equity alliances typically take?
- licensing - supply - distribution
What are advantages of strategic alliances?
- might give companies a competitive advantage - help firms achieve goals faster than they would alone
Characteristics of mechanistic organizations:
- tall structure - cost-leadership strategy - high formalization - high specialization - centralized
Knowledge that can be codified is also called ___ knowledge
explicit
A top-down strategic plan generally takes place in what type of organization?
highly centralized
What structure is a combination of the multidivisional structure and the functional structure?
matrix structure
What structure is divided into several distinct business units, each with its own profit-and-loss center?
multidivisional
What structure is best for multidomestic strategy?
multidivisional with divisions according to geographic ares; decentralized decision making
What structure is best for global standardization strategy?
multidivisional with divisions according to products; centralized decision making
Wheels on the Go! is a company that manufactures tires for semis. The company is entirely owned by North American Haulers, a large company in the semi industry. The two companies have formed a(n) ___.
parent-subsidiary relationship
The ___ dimension of national culture focuses on how a society deals with inequality among people
power-distance
A firm follows a(n) ___ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity
related
When pursuing an international strategy, a company ___
sells the same product in both domestic and foreign markets