Final Exam MGT449
Which of the following represents an economic factor in a firm's external general environment? A) The stage of the business cycle that the country is in B) The values and norms prevalent in the society in which the firm operates C) The government regulations and laws in the country in which the firm exists D) The bargaining power of the firm's suppliers and buyers
A
Which of the following resources is a firm's resource stock? A) Reputation for quality B) Land and building C) Plant and machinery D) Cash at bank
A
________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A) Isolating mechanisms B) Market niches C) Cartel arrangements D) Embargoes
A
Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of ________. A) equity alliances B) non-equity alliances C) joint ventures D) cartel arrangements
B
_____ Describes a situation in which the cause and effect of a phenomenon are not readily apparent. A) Resource heterogeneity B) Causal ambiguity C) Resource immobility D) Social complexity
B
A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) functional-level strategy B) code of ethics C) business-level strategy D) mission statement
C
The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this financial data primarily imply? A) GD Products is less efficient than AP Goods in collecting accounts receivables. B) AP Goods has a larger value gap as compared to GD Products. C) GD Products collects accounts receivables faster than what AP Goods does. D) AP Goods pays its creditors more quickly as compared to GD Products.
C
When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A) 9,000 units B) 13,000 units C) 11,000 units D) 15,000 units
C
Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A) The firm customizes products and services to better suit local requirements. B) The firm has all its key business functions located in the home country. C) The firm reaps significant economies of scale and location economies. D) The firm follows a differentiation strategy at the business level.
C
Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it? A) Legal responsibilities B) Contract responsibilities C) Philanthropic responsibilities D) Economic responsibilities
C
A differentiation strategy works best when a: A) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. B) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. C) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
D
A successfully implemented integration strategy allows a firm to: A) reduce its value gap beyond that created by the cost leader in the industry. B) create lesser economic value than the differentiator in the industry. C) increase its price above that of the differentiator in the industry. D) charge a higher price than the cost leader in the industry.
D
When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust? A) It acquired Orocobre as part of its backward vertical integration plans. B) It offered Orocobre franchising opportunities to sell hybrid vehicles. C) It offered Orocobre exposure to Toyota's proprietary information. D) It made a credible commitment by taking an equity stake in Orocobre.
D
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the: A) differentiator is able to create a significant difference between perceived value and current market prices. B) source of a competitor's differential appeal is tangible rather than intangible. C) new product features added raise costs but not the perceived value in the minds of consumers. D) differentiator is able to significantly reduce the value gap.
A
After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A) The company's exposure to exchange rate fluctuations will reduce. B) The company will be able to reap greater benefits from economies of scale. C) The company will be exposed to a lower risk of intellectual property appropriation. D) The company's operations will become more cost efficient.
A
Ethics is: A) not synonymous with law. B) impossible to codify into law. C) the minimum acceptable standard in business practice. D) always universal and cannot differ between cultures.
A
Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A) Archer Cycles has created a greater economic value than Evia Cycles. B) Both Evia Cycles and Archer Cycles have achieved cost parity. C) Both Evia Cycles and Archer Cycles have achieved differentiation parity. D) Evia Cycles has a competitive advantage over Archer Cycles.
A
For which of the following products is an international strategy most suitable? A) For luxury goods that can be shipped across the globe B) For products with low value-to-weight ratios such as steel C) For products with high linguistic content D) For food products that are specific to certain cultures
A
Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? A) Frank is an outside director on Lofloy's board of directors. B) Frank is a part-time employee at Lofloy Greens. C) Frank is a stockholder of Lofloy Greens. D) Frank cannot serve as a director on Spinson Locomotives' board.
A
Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm? A) The firm will have more flexibility in purchasing and comparing prices of goods and services. B) The firm will be protected against the principal-agent problem. C) The firm's administrative costs will be low because of necessary bureaucracy. D) The firm will have high-powered incentives, such as hourly wages and salaries.
A
How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010? A) It has access to convenience stores and a new distribution channel. B) It opens a market for it that is growing slowly but has high profit margins. C) It automatically gains monopoly in the chocolate-manufacturing industry. D) Its main strategic focus is now on the domestic market.
A
How does a firm capture its producer surplus for a good or service? A) As profit per unit sold B) As earnings per share C) As cost per unit sold D) As market price per share
A
In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as ________. A) agents B) shareholders C) principals D) clients
A
Johan is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan's team lead realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies ________. A) adverse selection B) corporate governance C) shared value creation D) moral hazard
A
The 3D television division of a large consumer electronics company has been recognized as a question mark. The company's LCD television division has been categorized under dogs. Which of the following statements will hold well in this scenario? A) The 3D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market. B) The LCD television division will benefit by pursuing a differentiation strategy, and the 3D television division will benefit by following a cost-leadership strategy. C) The 3D television division will have a high market share in its industry, whereas the LCD television division will have a low-market share in its industry. D) The strategic recommendation for the 3D television division is to harvest it, and the strategic recommendation for the LCD television division is to invest further in it.
A
The day-to-day operations of a publicly traded company are conducted by: A) its managers and lower-level employees. B) people who finance the company, such as investors. C) the CEO and the board of directors. D) people who own the company, such as shareholders.
A
The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this? A) Allowing employees to purchase the stock of the company at a discounted rate B) Issuing new additional shares to the existing stockholders in proportion to their current holdings C) Reinvesting the annual profits of the company into research and development D) Declaring the annual profits as bonus dividends to the existing stockholders
A
The resource-based view of a firm assumes that the: A) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. B) resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C) resources of firms are highly scarce and hence the government interferes to ensure equal distribution. D) resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm.
A
To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A) A global-standardization strategy B) A localization strategy C) A multidomestic strategy D) A transnational strategy
A
Today, Hollywood movies are banking more on foreign sales for their overall revenues. Hollywood studios have been adapting scripts to appeal to global audiences, and casting foreign actors in leading roles. Which of the following statements most accurately explains the reason for this change? A) Hollywood is now a truly global enterprise with the vast majority of revenues coming from outside the United States. B) The movie industries of other countries are not doing so well. C) Hollywood actors and actresses are no longer willing to participate in domestic productions since there is no money in this industry. D) The purchasing power of the U.S. audience has reduced drastically.
A
When applying the five forces model, the first step should ideally be: A) defining the relevant industry. B) identify the underlying drivers of each force. C) assessing the overall industry structure. D) drawing a strategic group map.
A
Which of the following best illustrates a non-equity alliance? A) A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. B) An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc. C) A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices D) An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company
A
Which of the following do NOT serve as additional external-governance mechanisms? A) Board of directors B) Auditors C) Industry analysts D) Government regulators
A
Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A) Car manufacturers require large-scale production in order to be cost-competitive. B) Few industrial products are as easy to build as cars powered by internal combustion engines. C) New entrants in the automotive industry expect that incumbents will not or cannot retaliate. D) New auto companies create electric cars powered by simpler motors and gearboxes.
A
Which of the following firms is least integrated? A) A firm that buys all the required raw materials from multiple external vendors B) A firm that makes equity investments in its supplier's company C) A firm that enters a joint venture with another company to develop a new technology D) A firm that owns production subsidiaries across the globe
A
Which of the following forces was NOT originally a part of Michael Porter's fives forces model? A) Strategic role of complements B) Rivalry among existing competitors C) Threat of substitute products or services D) Bargaining power of buyers
A
Which of the following statements best describes local responsiveness? A) The need to tailor product and service offerings to fit native consumer preferences and host-country requirements B) The process of producing goods in one country and selling them in another C) The additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances D) The belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogeneous The day-to-day operations of a publicly traded company are conducted by:
A
Which of the following statements is true of the social responsibilities of a business? A) A firm's ethical responsibilities go beyond its legal responsibilities. B) Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society. C) Ethical responsibilities are the foundational building block of a firm's social responsibility. D) Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities.
A
________ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies. A) Corporate venture capital investments B) Joint ventures C) Greenfield ventures D) Loan sharks
A
________ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use. A) Specialized assets B) Cost drivers C) Liquid assets D) Value drivers
A
________ are the legal owners of public companies. A) Shareholders B) Employees C) Creditors D) Category captains
A
Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) ________. A) shareholder capitalism scenario B) principal-agent problem C) fiduciary responsibility oversight D) inside director-outside director conflict
B
Cocoa Noir Inc., a company that manufactures chocolates, incurs higher costs because of its refusal to import cocoa beans from countries where child labor is prevalent. This reflects Cocoa Noir's ________ responsibility. A) economic B) ethical C) demographic D) legal
B
Coral Orchids is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver? A) Economies of scale B) Superior customer service C) Availability of complements D) Low cost of input factors
B
Diversification premium is a situation in which: A) the overall value creation of highly diversified firms is more than the sum of the value created by individual business units. B) the stock price of related-diversification firms is valued at greater than the sum of their individual business units. C) shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale. D) customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope.
B
Economies of scale do NOT allow firms to: A) take advantage of certain physical properties. B) spread their variable costs over a larger output. C) employ specialized systems and equipment. D) spread their fixed costs over a larger output.
B
European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy? A) To take advantage of the high cost of living in the southern United States B) To take advantage of lower taxes in the southern United States C) To take advantage of the low impact of globalization in the United States D) To take advantage of the high labor costs in the southern United States
B
Fervana Autos Inc., a large automobile company, made an initial small investment in a startup company that was developing a solar-powered car. This gave Fervana Autos controlling interests in the startup company. However, Fervana Autos had no obligations to make continued investments in the experiments of the startup company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Fervana Autos would have the right to buyout the startup company. This approach to strategic alliance is referred to as ________. A) a break-even analysis B) a real-options perspective C) transaction cost economics D) credible commitment
B
In Galvania Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate? A) Oligopoly B) Natural monopoly C) Perfect competition D) Monopolistic competition
B
India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because: A) it has emerged as a manufacturing powerhouse. B) of an abundance of well-educated, English-speaking young people. C) it has an abundance of uneducated workers who are highly trainable. D) of an efficient infrastructure and high labor costs.
B
Onyx Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework. A) inexhaustible B) valuable C) tangible D) perishable
B
Path dependence rests on the notion that: A) rare resources can be built in a short period of time. B) time cannot be compressed at will. C) strategic decisions are easily reversible. D) competitive advantage can be sustained indefinitely.
B
Rosa Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Rosa Apparel's strategic position? A) Availability of complements B) Low-cost input factors C) Network effects D) Superior customer service
B
Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate? A) Bootstrapping B) Franchising C) Credit Rationing D) Crowdsourcing
B
True Gold Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely: A) maintain its absolute advantage for long time. B) only achieve competitive parity. C) easily achieve a temporary competitive advantage. D) easily achieve a sustainable competitive advantage.
B
True West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A) West Railways, which follows a differentiation strategy B) Jet King Airlines Inc., which follows a low-cost strategy C) Pioneer Airlines Inc., which follows a cost-increase strategy D) Blue Cabs Inc., which follows a cost-leadership strategy
B
Which of the following do the sociocultural forces in a firm's external environment best represent? A) The rate of employee attrition within the firm B) The family size of the firm's target market C) The laws protecting small enterprises in a nation D) The interest rates prevalent in an economy
B
Which of the following features about a buyer indicates that the buyer has high bargaining power? A) When the buyer cannot purchase specific products from other sellers. B) When the buyer operates in an industry where products are undifferentiated. C) When the buyer cannot credibly threaten to backwardly integrate into the industry. D) When the buyer faces high switching costs.
B
Which of the following is a drawback of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They necessitate the sharing of rewards between the partners. C) They produce weak ties, trust, and commitment between the partners. D) They do not enable the transfer and sharing of tacit knowledge.
B
Which of the following perspectives best supports the Shared Value creation framework? A) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. B) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs. C) Failing to create value for society almost always reflects on the bottom line. D) Markets are more often than not defined by societal needs rather than economic needs.
B
Which of the following statements is true of top-down strategic planning? A) Information flows both ways in the process, from the upper management to the lower management and also the other way around. B) In this process, the formulation of strategy is separate from implementation. C) The process is based on the assumption that the past cannot be used to predict the future. D) Employees at the operation level have major responsibility in strategizing for competitive advantage.
B
________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A) Cost of capital B) Economic value created C) Consumer surplus D) Break-even point
B
A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A) The Boston Consulting Group (BCG) matrix B) The core competence matrix C) The VRIO framework D) The transaction-cost economics model
C
A firm pursuing a differentiation strategy as opposed to a low-cost strategy will: A) build an organization structure that relies on strict budget controls. B) create a lower economic value as compared to its competitors. C) focus its research and development on product technologies to add uniqueness. D) concentrate on leveraging its economies of scale through process technologies.
C
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C). A) threat of entry B) attrition rate C) strategic position D) incumbency
C
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A) The consumer surplus B) The producer surplus C) The value (V) the consumer attaches to the dress D) The firm's cost (C) in manufacturing the dress
C
Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against Electra Series, Myoco Electronics should: A) keep its value gap lower than that of Electra Series. B) increase its cost of production to more than that of Electra Series. C) create greater perceived economic value than Electra Series. D) achieve differentiation parity with Electra Series.
C
DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the ________. A) network effect B) diseconomies of scale C) quality D) availability of complements
C
GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp. as they operate in the same industry. B) It takes longer time to build tangible assets than intangible assets. C) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. D) It is easier to buy intangible assets with cash than tangible assets.
C
Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its: A) resource advantage is maintained for a short period of time. B) resource advantage is not causally ambiguous or socially complex. C) internal strengths change with its external environment in a dynamic fashion. D) competitive advantage is derived from static resource or market advantages.
C
In the AFI strategy framework, strategy analysis primarily involves: A) designing a business, corporate, and global strategy to gain and sustain a competitive advantage. B) deciding the type of corporate governance that would be most effective in the implementation of a strategy. C) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. D) organizing a firm in order to effectively put the formulated strategy into practice.
C
Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario? A) While Marc Works Inc.'s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities. B) Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide. C) Torque Inc. focuses more on cost reductions when compared to Marc Works Inc. D) Torque Inc. is exposed to greater risks of exchange rate fluctuations.
C
Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use? A) An international strategy B) A multidomestic strategy C) A transnational strategy D) A focused-differentiation strategy
C
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A) VRIO framework B) BCG matrix C) PESTEL framework D) SWOT analysis
C
The best example of a firm's external stakeholder is a(n): A) board member from a wholly owned foreign subsidiary of the firm. B) government agency that regulates the prices of products manufactured by the firm. C) shareholder who has invested money in the firm but is not employed by the firm. D) employee of the firm who is responsible for a contract project.
C
The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well-prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing ________ as the approach to the development of strategy. A) reverse engineering B) top-down strategic planning C) scenario planning D) pattern recognition
C
Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario? A) An acquisition B) A proprietorship C) A strategic alliance D) A leveraged buyout
C
Which of the following occurrences was NOT an event that facilitated HP's sordid "soap opera"? A) Jodie Fisher, an independent contractor, worked as a hostess at HP-sponsored events and personally ensured that Mr. Hurd spent time with the most important clients. B) Leo Apotheker, who came to HP after being let go from SAP, proposed a new corporate strategy for HP. C) Mark Hurd, newly appointed CEO, oversaw large-scale layoffs and a pay cut for all remaining employees as he reorganized the company. D) Patricia Dunn, then chairman of the board, launched a covert investigation where she conducted surveillance on HP's board members, selected employees, and some journalists.
C
Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A) Strategy implementation B) Strategy analysis C) Strategy formulation D) Strategy control
C
________ is best described as a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. A) Scenario planning B) Top-down strategic planning C) Planned emergence D) Reverse engineering
C
A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) ________. A) stock exchange B) commission C) bonus D) stock option
D
Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A) Oligopoly B) Monopolistic competition C) Perfect competition D) Monopoly
D
Bill is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Bill should be hired as a sales person in the company. However, in his resume, Bill had not mentioned his previous work experience as he was fired from that job on the account of using illegal drugs. Which of the following does this scenario best illustrate? A) Principal-agent problem B) Experience-curve effect C) Learning-curve effect D) Information asymmetry
D
Family Needs Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Family Needs has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate? A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition
D
General Electric's CEO, Jeffrey Immelt, decided to refocus GE's portfolio of businesses and leverage the firm's core competency in industrial engineering while pursuing future-growth industries. The two industries that CEO Immelt had identified as major future-growth industries were the: A) capital finance and information technology sectors. B) consumer electronics sector and hospitality sector. C) education and entertainment sectors. D) clean-technology sector and health care sector.
D
How has China been affected by its one-child-per-family policy and appreciation of its currency? A) The standard of living within the economy has lowered. B) The purchasing power of its workforce has reduced. C) The value added to production has reduced. D) The country's advantage in low-cost manufacturing has reduced.
D
In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A) economic trends B) ecological trends C) political trends D) demographic trends
D
In order to achieve a competitive advantage, a firm should be able to: A) increase its payable turnover. B) keep its producer surplus low. C) increase the difference between consumer surplus and its profits. D) increase the difference between the value created and the cost to produce it.
D
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self interests. What does this best illustrate? A) Information asymmetries B) Diseconomies of scale C) Experience-curve effects D) Principal-agent problem
D
Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success? A) It focused on sponsoring future athletic superstars who embodied a likely success story. B) It spread its marketing budget more widely. C) It stopped spending money on celebrity endorsements and started restricting its expenditure for sponsoring only track and field sports stars. D) It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete.
D
Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions? A) GH Medicines' vision is more product-oriented than the vision of Pioneer Pharma. B) Pioneer Pharma's vision is more long-term and futuristic than GH Medicines' vision. C) Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. D) GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.
D
The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Based on this, which of the following is a mission of PepsiCo? A) Performing with a purpose B) Focusing on only the nonalcoholic beverages line of business C) Splitting PepsiCo into two standalone companies each focusing on beverages and snack foods respectively D) Including healthy choices in its lineup
D
The fixed asset turnover of a company is 8.3. What do you infer from this? A) The return on fixed assets will break even in 8.3 years. B) The cost of capital invested on fixed assets is 8.3% of the total profit. C) 8.3% of the company's revenue is invested in fixed assets. D) Every dollar spent on the company's fixed assets generates $8.30 of revenue.
D
The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we can conclude that: A) BlackBerry can extend its payment periods, while Apple is required to pay its creditors more quickly. B) BlackBerry has a clear advantage over Apple as its credits are paid much faster than that of Apple. C) BlackBerry has taken a longer time to pay its creditors as compared to Apple. D) Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers.
D
The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the: A) higher number of lower-level employees than senior executives. B) operational expertise of lower-level employees in concentrated areas of a particular field. C) knowledge of employees regarding day-to-day tasks. D) informational advantage of the lower-level employees.
D
The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A) For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. B) For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. C) For every $6.00 Tesva Systems puts to work, the company realizes a sales of $1.00. D) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.
D
To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to: A) reduce the causal ambiguity and the social complexity of the firm's source of success. B) create a static fit between the company's internal resources and the external environment. C) reduce the immobility and the heterogeneity of the firm's resources. D) contribute to the firm's strategic position as either low-cost leader or differentiator.
D
Which of the following firms is most prone to experiencing a diversification discount? A) A company that pursues related-constrained diversification B) A company that deals in petroleum as well as natural gas C) A company that derives its revenues from selling aerated drinks and health drinks D) A company that pursues unrelated diversification
D
Which of the following is NOT a reason why firms enter alliances? A) To strengthen competitive position B) To learn new capabilities C) To enter new markets, either in terms of geography or products and services D) To replace competitive advantage with competitive parity
D
Which of the following is an example of a firm's resources? A) Assistance available from the government in the form of rules and regulations B) Liabilities such as bills payables and short-term debts C) Routine activities like order taking and invoicing customers, performed in a firm D) Assets such as land and building owned by a firm
D
Which of the following is not included within the types of strategic alliances? A) Franchising B) Joint ventures C) Licensing D) Acquisitions
D
Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business? A) The financial crisis in Europe brought about by money lenders seeking to make quick money B) The collapse of the economy in the U.S. brought about by the housing crisis C) The rise of GDP in countries that do not believe in Milton Friedman's philosophy D) The nonsustainable debt levels incurred by sovereign governments to fund social programs
D
Which of the following statements accurately describes a firm's resource stock? A) Resource stocks are a firm's level of resources that are common to competitors. B) Resource stocks are a firm's level of investments to maintain or build a resource. C) Resource stocks are a firm's future estimate of both tangible and intangible resources. D) Resource stocks are a firm's current level of intangible resources.
D
Which of the following statements accurately describes firm effects? A) They refer to the external circumstances surrounding all the firms in an industry. B) They attribute firm performance to the industry in which the firm competes. C) They refer to the value-creation potential of a large, diversified enterprise. D) They attribute firm performance to the actions managers take within a chosen industry.
D
Which of the following statements best supports the separation of ownership and control in publicly traded companies? A) Managers control the company but may also have stock ownership. B) Shareholders can freely trade the company stocks. C) Shareholders are liable only for the capital they invest and not for their personal wealth. D) Shareholders own stocks but do not run the company.
D
Which of the following statements is true of strategic alliances? A) They are always focused on joining the same value chain activities. B) They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. C) They enable firms to achieve goals faster, but at higher costs. D) They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.
D
Which of the following statements is true of taper integration? A) It is the most-integrated alternative to performing an activity within one's own corporate family. B) It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities. C) It does not rely on outside-market firms for its supplies. D) It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.
D
Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A) The competition in the industry is insignificant. B) The entry barriers in the industry are extremely high. C) The number of buyers in the industry is small. D) The firms can differentiate their product offerings.
D
Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A) Terra, which is located close to Zeda and is easily accessible by road B) Olax, which has the same wealth and per capita income as Zeda C) Jordax, which has a very profitable economy and where people speak Jordaxian D) Segar, where people speak English and have a low standard of living
D
________ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A) Payables turnover B) Assets turnover C) Inventory turnover D) Receivables turnover
D
________ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A) Inventory turnover B) Receivables turnover C) Assets turnover D) Payables turnover
D
