Dever Final Exam

A ____ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both. (A) corporate-level (B) business-level (C) national-level (D) industry-level

A

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) ____ strategy. (A) vertical complementary (B) horizontal complementary (C) uncertainty reduction (D) network

A

A successful ____ innovation will be less risky but less profitable than a successful ____ innovation. a. incremental, radical b. radical, incremental c. alliance-generated, acquisition-generated d. acquisition-generated, alliance-generated

A

A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure.

A

After a leveraged buyout, ______ typically occur(s). a. selling of assets b. further rounds of acquisitions c. due diligence d. private synergy

A

An agency relationship exists when one party delegates a. decision-making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party.

A

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be: (A) concerned if the value of the dollar strengthened. (B) pleased if the value of the dollar strengthened. (C) unconcerned about the fluctuation in the value of the dollar because the company is widely diversified geographically. (D) likely to consider moving to international strategic alliances or acquisitions if the value of the dollar fell and remained low.

A

Dynamic alliance networks work best in industries: (A) characterized by frequent product innovations and short product life cycles. (B) that are mature and stable in nature. (C) where the coordination of product and global diversity is critical. (D) that are characterized by predictable market cycles and demand.

A

Horizontal, vertical, and related acquisitions to build market power a. are likely to undergo regulatory review and analysis by financial markets. b. are rarely permitted to occur across international borders. c. typically involve a firm purchasing one of its suppliers or distributors. d. concentrate on capturing value at more than one stage in the value chain.

A

IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as __________ and the appropriate organizational structure to implement this strategy is the __________ structure. a. transnational; combination b. global; worldwide product divisional c. multidomestic; worldwide geographic area d. competitive; strategic business unit multidivisional

A

In the Chapter 9 Mini Case, the cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple functions. (A) synergistic (B) opportunistic (C) horizontal (D) diversifying

A

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's: (A) brand name. (B) capital resources. (C) access to a consolidated market. (D) geographic locations.

A

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT: (A) to enhance the compensation packages of top managers. (B) to leverage core competencies in new markets. (C) to operate within government restrictions in the local country. (D) to escape limited domestic growth opportunities.

A

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach. (A) cost minimization (B) trust but verify (C) opportunity maximization (D) pragmatic realism

A

One of the primary reasons for failure of cross-border strategic alliances is: (A) the incompatibility of the partners. (B) conflict between legal and business systems. (C) security concerns and terrorism. (D) high debt financing

A

Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

A

Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.

A

Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.

A

The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____. a. cooperative; economies of scope b. competitive; cost efficiencies c. functional; sensitivity to cultural diversity d. SBU; quick response to local customer needs

A

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry.

A

The two types of complementary strategic alliances are: (A) vertical and horizontal. (B) macro and micro. (C) outsourcing and insourcing. (D) network and complementary.

A

Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with whom Toyota has contracts for services. This results in the suppliers and the Toyota (the strategic center firm) being more a. interdependent. b. rivalrous. c. creative. d. complementary.

A

Usually, large-block shareholders are considered to be those shareholders with at least __________ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

A

Which of the following is NOT a disadvantage associated with exporting? (A) Potential loss of proprietary technologies (B) High transportation costs (C) Loss of control over distribution activities (D) Tariffs imposed by local governments

A

____ involves internally developed incremental and radical innovations that result from deliberate efforts. a. Internal corporate venturing b. Autonomous strategic behaviors c. Bottom-up strategic behaviors d. Product championing

A

A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of: (A) licensing. (B) exporting. (C) a strategic alliance. (D) a greenfield venture.

B

A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance. (A) joint venture (B) synergistic strategic alliance (C) diversifying strategic alliance (D) dynamic alliance network

B

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to: (A) get venture capital from Pet Resort. (B) gain access to Pet Resort's tacit knowledge. (C) collude with Pet Resort to diminish competition in the kennel industry in Atlanta. (D) join in a vertical complementary alliance with Pet Resort.

B

A nonequity strategic alliance exists when: (A) two firms join together to create a new company. (B) two or more firms have a contractual relationship to share resources and capabilities. (C) two partners in an alliance own unequal shares in the combined entity. (D) the partners agree to sell bonds instead of stock in order to finance a new venture.

B

A(n) _____ occurs when one firm buys a controlling, or 100 percent interest, in another firm. a. merger b. acquisition c. spin-off d. restructuring

B

All of the following are external environmental sources that affect managerial discretion EXCEPT a. industry structure. b. corporate culture. c. market growth rate. d. potential for product differentiation.

B

Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm.

B

Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors b. shareholders and managers c. the board of directors and managers d. None of the these options are correct.

B

Currently, the rationale for making an acquisition includes each of the following EXCEPT a. to increase market power. b. to decrease taxes paid by shareholders. c. to overcome entry barriers. d. to increase diversification.

B

Firms entering into synergistic strategic alliances expect to attain: (A) technological complexity. (B) economies of scope. (C) monopolistic market power. (D) learning curve efficiencies.

B

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT: (A) a host nation may forbid a merger or acquisition. (B) opportunistic behaviors are less likely. (C) cooperative strategies require fewer resources. (D) cooperative strategies allow greater flexibility in diversifying the firm's portfolio.

B

In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets.

B

It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.

B

McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(an): a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.

B

Research shows that internationally diversified firms tend to be ____ than domestic-only firms. a. less profitable b. more innovative c. less technologically advanced d. more likely to have an individualistic culture

B

Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.

B

Stable alliance networks will most often: (A) be used to enhance a firm's internal operations. (B) appear in mature industries where demand is relatively constant and predictable. (C) emerge in industries with short product life cycles. (D) emerge in declining industries as a way to increase process innovations.

B

The March 2011 announcement that AT&T was acquiring T-Mobile USA from Deutsche Telekom is a ________ acquisition and is intended to ______. a. vertical; increase diversification. b. horizontal; increase market power. c. vertical; overcome entry barriers. d. related; increase speed to market.

B

The Renault Nissan alliance discussed in the Mini Case is an example of a ________ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. (A) joint venture (B) synergistic alliance (C) horizontal complementary alliance (D) dynamic alliance network

B

The term "leverage" in leveraged buyouts refers to the a. firm's increased concentration on the firm's core competencies. b. amount of new debt incurred in buying the firm. c. fact that the employees are purchasing the firm for which they work. d. process of removing the firm's stock from public trading.

B

A firm pursuing an unrelated diversification strategy will utilize a ____ structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional

C

A leveraged buyout refers to a. a firm restructuring itself by selling off unrelated units of the company's portfolio. b. a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background. c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. d. an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity

C

A licensing agreement: (A) results in two firms agreeing to share the risks and the resources of a new venture. (B) is best way to protect proprietary technology from future competitors. (C) allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host country. (D) can be greatly impacted by currency exchange rate fluctuations.

C

Agency costs reflect all of the following EXCEPT _________ costs. a. monitoring b. enforcement c. opportunity d. incentive

C

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this? (A) Joint venture (B) Equity strategic alliance (C) Nonequity strategic alliance (D) Competition reduction alliance

C

Financial controls are most important in the ____ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary

C

Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership. b. differentiation. c. related constrained diversification strategy. d. single or dominant business corporate strategy.

C

If conflict in a strategic alliance or joint venture is not manageable, a(n) _______may be a better option. (A) licensing strategy (B) exporting strategy (C) acquisition (D) new wholly owned subsidiary

C

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ____ is the preferred entry mode. (A) exporting (B) strategic alliance (C) a joint venture or wholly owned subsidiary (D) licensing

C

In the United States, a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.

C

Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50 percent of the stock of any one firm.

C

Internal corporate venturing does NOT involve a. autonomous strategic behavior. b. induced strategic behavior. c. strategic alliances. d. product champions

C

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n): (A) joint venture. (B) network strategy. (C) equity strategic alliance. (D) nonequity strategic alliance.

C

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last 2 years. b. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. c. The CEO/chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.

C

Some experts consider the ____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional

C

Some research findings have shown that acquisitions typically _____ for shareholders in the acquiring firm. a. result in above-average returns b. provide approximately average returns c. result in returns near zero d. take some time to achieve private synergy, but eventually result in above-average returns

C

There are few true mergers because a. few firms have complementary resources. b. integration problems are more severe than in outright acquisitions. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

C

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.

C

Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance? a. Functional structure b. Cooperative M-Form c. SBU Form d. Competitive M-Form

C

All of the following are reasons why firms use international strategic alliances EXCEPT: (A) sharing of risks and resources. (B) alliances facilitate the development of new capabilities. (C) learning new competencies particularly those related to technology. (D) strategic alliances are easy to manage.

D

Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance.

D

In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with whom it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.

D

In some countries, the only legal way for foreign firms to invest in the country is through: (A) acquisitions. (B) mergers. (C) greenfield ventures. (D) strategic alliance with a local firm.

D

McDonald's, Hilton International, and Subway all heavily rely on the ____ strategy. (A) transnational (B) network cooperative (C) cross-border alliances (D) franchising cooperative

D

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement? (A) Meredith will own a majority equity stake in the new venture. (B) JaZz will own a majority equity stake in the new venture. (C) Meredith or JaZz will own an equal equity stake in the new venture. (D) Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

D

Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors.

D

Product diversification provides two benefits to managers that do not accrue to shareholders: ___________ and ___________. a. greater experience in a wider range of industries; lessening of managerial employment risk b. the manager frequently invests in the acquired firm, which allows him or her extensive profits; the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered; the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk

D

Structural stability affects the organization's ability to: a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. consistently and predictably manage its daily work routines.

D

The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. is a structure organized around both functional specialization and business projects. d. is a structure requiring heavy use of horizontal integrative devices.

D

The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors.

D

The means of entry into international markets that offers the greatest control is: (A) licensing. (B) acquisitions. (C) joint ventures. (D) greenfield ventures.

D

The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT a. making CEOs more accountable for their performance. b. challenges to the decisions of boards. c. focusing attention on ineffective boards of directors. d. a direct effect on firm performance.

D

The problems associated with exporting include: (A) merging corporate cultures. (B) a partner's incompatibility. (C) difficulty in negotiating relationships. (D) high transportation costs and the expense of tariffs

D

The risks of international entrepreneurship include all the following EXCEPT a. unstable foreign currencies. b. problems with market efficiencies. c. limitations on market size. d. strong "buy-domestic" programs.

D

The three structural characteristics which differ between organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.

D

The use or application of entrepreneurship within an established firm is called a. corporate emergence. b. transformational leadership. c. exceptional R&D. d. corporate entrepreneurship.

D

Which of the following is NOT a disadvantage of international acquisitions? (A) They are very expensive and often require debt financing. (B) The acquiring firm has to deal with the regulatory requirements of a host country. (C) Merging the acquired and acquiring firm is difficult. (D) It is the slowest way to enter a new market.

D

Which of the following is NOT a typical disadvantage of licensing? (A) Little control over the marketing of the products (B) Licensees may develop a competitive product after the license expires (C) Lower potential returns than the use of exporting or strategic alliances (D) Incompatibility of the licensing partners

D

Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration

D

Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top managers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management.

D

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data.

D

Which of the following statements is FALSE? (A) Franchising is most appropriate in fragmented industries. (B) Franchising provides corporate growth with less risk than do mergers and acquisitions. (C) Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. (D) Franchising agreements require more trust between firms than do other cooperative strategies.

D

____ are LEAST likely to involve potential or current competitors. (A) Mutual forbearance strategies (B) Tacit collusion strategies (C) Horizontal complementary strategic alliances (D) Vertical complementary strategic alliances

D

________ refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business. a. Downsizing b. Hostile takeovers c. Shakeouts d. Downscoping

D

Research shows that about ______ percent of mergers and acquisitions are successful. a. 20 b. 40 c. 60 d. 80

a

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) a. vertical acquisition. b. unrelated acquisition. c. horizontal acquisition. d. merger of equals.

a

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners a. resisted selling at any price. b. sold the company to the larger brewer. c. designed a poison pill to discourage a takeover. d. looked for smaller brewers to acquire instead of selling to the larger brewer

b

In a merger a. one firm buys controlling interest in another firm. b. two firms agree to integrate their operations on a relatively coequal basis. c. two firms combine to create a third separate entity. d. one firm breaks into two firms.

b

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(an) a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this mark

b

The ______ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions. a. pre-acquisition negotiations b. pre-acquisition due diligence c. post-acquisition integration d. post-acquisition restructuring

c

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition

d

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

d

One problem with becoming too large is that large firms . a. tend to have less market power. b. have less potential for economies of scale. c. become attractive takeover targets. d. usually increase bureaucratic controls

d

When a firm acquires its supplier, it is engaging in a(n) a. merger. b. unrelated acquisition. c. hostile takeover. d. vertical acquisition.

d