mgmt 352 exam 2 practice

Agency problems in a public stock company are exacerbated (worsened) by A.information asymmetry. B.corporate governance. C.executive compensation. D.shareholder value.

A information asymmetry

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate? A)backward vertical integration ● B)horizontal integration ● C) forward vertical integration D) strategic outsourcing

A)backward vertical integration

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n) A.tall hierarchical structure. B.flat hierarchical structure. C.organic organizational structure. D.decentralized organizational structure.

A. tall hierarchical structure.

Which of the following is an important external corporate-governance mechanism? A.market for corporate control ● B.Information asymmetry ● C.board of directors ● D.executive compensation

A.market for corporate control

Plow Inc. is a greeting card manufacturing company. Plow's market dominance exists primarily because of the innovative designs of its greeting cards when compared to those of its competitors. In this scenario, Plow Inc.'s managers must ideally rely on a functional structure that resembles a(n) ________ organization. A.organic ● B.decentralized ● C.mechanistic ● D.multidivisional

A.organic

What causes the winner's curse? A.overpaying for an acquisition ● B.buying a firm with a competitive disadvantage ● C.underpaying for an acquisition ● D.buying a firm with principal-agent problems

A.overpaying for an acquisition

Which of the following is the source of the principal-agent problem in publicly traded companies? A.the separation of ownership and control ● B.limited liability for investors ● C.transferability of investor ownership ● D.the law of legal personality

A.the separation of ownership and control

A(n) ________ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A.transnational ● B.international ● C.global-standardization ● D.multidomestic

A.transnational

In which of the following situations is pursuing an international strategy advisable? A.when a firm enjoys a large domestic market, strong reputation, and brand name ● B.when a firm wants to be perceived as a domestic company by the host-country consumers ● C.when a firm operates in an industry where the pressure to keep the costs low is extremely high ● D.when a firm manufactures products related to national and religious identity

A.when a firm enjoys a large domestic market, strong reputation, and brand name

Which of the following is true of business ethics? A.The perception of what is ethical and what is not is similar across different cultures. ● B.Certain notions such as fairness, honesty, and reciprocity are universal norms. ● C.Business ethics needs to be codified into law in order to be followed. ● D.Business ethics is an agreed-upon code of conduct in business, based on laws.

B. Certain notions such as fairness, honesty, and reciprocity are universal norms.

Which of the following statements is true of internal transaction costs? A.Internal transaction costs arise when companies transact in the open market. ● B.Internal transaction costs tend to increase with organizational size and complexity. ● C.It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low. ● D.When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate.

B.Internal transaction costs tend to increase with organizational size and complexity.

Which of the following is a characteristic of a public stock company? A.Investor ownership cannot be transferred easily between investors. ● B.Legal personality allows a firm's continuation beyond the founder or the founder's family. ● C.Shareholders who provide risk capital are liable for all losses incurred by the company. ● D.In publicly traded companies, professional managers are the legal owners of the company.

B.Legal personality allows a firm's continuation beyond the founder or the founder's family.

Raj 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 start-up recruits Raj based on his stated credentials without verifying them. Two days into the job, Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview. This scenario best exemplifies A.moral hazard ● B.adverse selection ● C.corporate governance ● D.shareholder value

B.adverse selection

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon? A.superior customer service ● B.price ● C.product differentiation ● D.local responsiveness

B.price

A primary advantage of organizing economic activity within firms is the A)low administrative costs because of reduced bureaucracy. ● B)high-powered incentive to work as salaried employees for an existing firm. ● C)ability to coordinate highly complex tasks to allow for specialized division of labor. ● D)correction of the principal-agent problem.

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

Which of the following alternatives on the make-or-buy continuum allows for most integration? ● A)licensing ● B)short-term contracting ● C)parent-subsidiary relationship ● D)joint ventures

C)parent-subsidiary relationship

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization? A.It leads to competition between SBUs. ● B.It helps evaluate each SBU as a stand-alone profit-and-loss center. ● C.It allows a high level of integration. ● D.It helps contain the core competencies within a strategic business unit (SBU).

C.It allows a high level of integration.

Which of the following is a disadvantage of a horizontal integration corporate strategy? A.It increases the costs associated with increasing value. ● B.It increases the threat of new entrants in an industry. ● C.It increases the potential for legal repercussions. ● D.It increases competitive intensity within an industry.

C.It increases the potential for legal repercussions.

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal? A.People are highly unlikely to buy clothes from a store run by a fashion design student. ● B.The online admiration of her designs will not translate into sales. ● C.Once the firm starts growing and attracting more customers she is likely to feel overloaded. ● D.She has a high administrative cost in running the firm.

C.Once the firm starts growing and attracting more customers she is likely to feel overloaded.

Which of the following statements is true of strategy in an organization? A.To implement a strategy successfully, an organization's structure must be rigid. ● B.Strategy implementation is considered unsuccessful if it requires changes within an organization. ● C.Organizational structure must follow strategy in order forfirms to achieve superior performance. ● D.Strategy implementation does not affect resource allocation and power distribution within an organization.

C.Organizational structure must follow strategy in order forfirms to achieve superior performance.

Which of the following is an advantage of non-equity alliances? A.They are based on ownership rather than contracts. ● B.They facilitate the sharing of tacit knowledge between the alliance partners. ● C.They are flexible and easy to initiate and terminate. ● D.They produce strong ties between alliance partners as they are permanent in nature.

C.They are flexible and easy to initiate and terminate.

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement? A.a global-standardization strategy B.a transactional strategy C.a multidomestic strategy D.an international strategy

C.a multidomestic strategy

Which of the following is a common drawback of a non-equity alliance? A.lack of flexibility for the partners ● B.difficulty initiating the contract ● C.lack of trust between partners ● D.difficulty terminating the contract

C.lack of trust between partners

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A.iron ore extracted in Fernsland. ● B.food processed in Fernsland. ● C.luxury items manufactured in United Nerumbia. ● D.movies and TV shows produced in United Nerumbia.

C.luxury items manufactured in United Nerumbia.

Which of the following is an unintended side effect of a high degree of specialization in an organization? A.decreased opportunities for the division of labor ● B.reduced productivity ● C.reduced employee satisfaction due to repetition of tasks ● D.decreased trade-off between breadth and depth of knowledge

C.reduced employee satisfaction due to repetition of tasks

Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A.to change the liability of shareholders from limited to unlimited ● B.to bring about a separation of CEO/chair duality ● C.to align incentives between shareholders and management ● D.to reduce the transferability of stocks between stockholders

C.to align incentives between shareholders and management

Virtue Products Inc., a large conglomerate, procures a few component parts from external suppliers and alsomanufactures some of the key raw materials in its own subsidiaries. This apart, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Virtue Products applying? A)backward vertical integration ● B)horizontal integration ● C) forward vertical integration D) taper integration

D) taper integration

How do firms benefit from vertical integration? A)Firms that vertically integrate will have increased strategic flexibility when faced with technological changes. ● B)Vertical integration allows firms to reduce organizational complexity and administrative costs. ● C)Firms that vertically integrate do not have to make transaction-specific investments. ● D)Vertical integration allows firms to secure critical supplies and distribution channels.

D)Vertical integration allows firms to secure critical supplies and distribution channels.

Which of the following firms is most prone to experiencing a diversification discount? A)a company that deals in petroleum as well as natural gas ● B)a company that pursues related-constrained diversification ● C)a company that derives its revenues from selling aerated drinks and health drinks ● D)a company that pursues unrelated diversification

D)a company that pursues unrelated diversification

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using ● A)related-linked diversification. ● B)single business. ● C)dominant business. ● D)related-constrained diversification.

D)related-constrained diversification.

Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) A.acquisition. ● B.greenfield venture. ● C.joint venture. ● D.non-equity alliance.

D.non-equity alliance.