mgmt 352 final final
Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa's business?
A firm that relies on high output controls to tap into extrinsic motivation.
Which of the following descriptions best exemplifies adverse selection?
A manager cannot ascertain the contributions of individual team members in team production.
Which of the following accurately describes a common difference between a merger and an acquisition?
A merger tends to be friendly; an acquisition can be friendly or unfriendly.
Mediflow, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Mediflow's European sales?
Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can gain access to new distribution channels.
Dom 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 Dom based on his stated credentials without verifying them. Two days into the job, Dom's team lead realized that Dom does not know much of what he claimed to know during the interview. This scenario best ecemplifies
Adverse selection
Which of the following describes a firm in the Globalization 1.0 stage?
Asha Inc. had a base office in New York and distributed some of its products overseas.
Avalanche operates as a strategic business unit (SBU) under Snowfall Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that
Avalanche is led by its own CEO (or equivalent general manager).
Which of the following is an observable feature in the Globalization 3.0 stage?
Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.
The same for an agreed-upon code of conduct in business, based on societal norms is
Business eithics
Arnold is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Arnold most likely to agree?
Businesses can use their resources to create profit as long as they do so within the rules of the game.
How does horizontal integration within an industry affect the surviving firms?
By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
Stella accepts a job as vice president for human resources at a technology startup. She discovers that the startup believes that teamwork is so important that it plans to award all raises and bonuses by splitting them equally within a team rather than presenting them to individual employees. What action should Stella take regarding this plan?
Cancel the plan because under it, opportunistic employees will do little or no work.
________ refers to the degree to which decision making is concentrated at the top of the organization.
Centralization
R&M Chatelaine is one of the largest tax-preparation firms in the United States. It wants to acquire The Tax Experts, a smaller rival. After the merger, Chatelaine will be one of the two largest income-tax preparers in the U.S. market. What should Chatelaine include in its acquisition plans?
Chatelaine will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.
Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest?
Coolco, because firms that face stiff competition at home tend to do better abroad
The bulwark Tea & Coffee chain recently reorganized, laying off some managers and employees. The remaining managers were told they would each have an increased span of control. What does this mean?
Each manager will have more employees to supervise and monitor.
Which of the following is an implication for the strategist in the context of corporate governance and a company's success?
Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.
Which of the following statements is true of explicit knowledge?
Explicit knowledge is shared in non-equity alliance firms.
Future Clothes Inc., a publicly traded company, designs and manufactures wearable technology. What approach should Future Clothes take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently.
Focus on research and development as a form of non-price competition.
Elvira is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?
How would the media report her decision to accept the opportunity if it were to become public?
Describe the role of inside directors as part of a company's board of directors.
Inside directors are members of a company's board of directors who also hold executive or managerial positions within the company.
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?
It allows a high level of integration
Which of the following is an advantage offered by a functional structure?
It allows for a higher degree of specialization and deeper domain expertise.
Which of the following is a disadvantage of a functional strategy?
It cannot effectively address a higher level of diversification.
In which of the following ways does Zappos achieve organizational control?
It enforces that each group member's compensation depends in part on the group's overall productivity.
A short coming of vertical integration is
It increases the potential of legal repercussions.
Which of the following statements best describes groupthink?
It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.
Which of the following statements is true of organizational culture?
It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.
What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?
It reduces the trust of shareholders in the organization as a vehicle for value creation.
Which of the following is a drawback of pursuing a transnational strategy?
It requires a global matrix structure, which is difficult to implement.
Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma?
It will lower its costs through economies of scale.
Which of the following scenarios best illustrates horizontal integration?
King Autos Inc. joins with Dimitra Motors Inc., one of its direct competitors.
GameGo is a publicly traded manufacturer of home electronics. Based on what you have read, which of these actions would be wisest for GameGo's board of directors to take to be sure that the company's new CEO is as motivated as possible?
Link the CEO's pay to her performance, but avoid high-powered incentives that may cause reckless behavior.
Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy?
M-Form with centralized decision-making power (cooperative multidivisional)
Makes Scents Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. PriceSmasher Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?
Makes Scents Inc. will sell the same products in both domestic and foreign markets, whereas PriceSmasher Inc. will customize its product offerings to suit local requirements.
An organization that is organized according to strategic business units and also along organizational structures is most likely using a ___ structure
Matrix
Which of the following best exemplifies the use of input controls?
McDonald's use of standard operating procedures
Which of the following real-world scenarios best exemplifies formalization?
McDonald's use of standard operating procedures across the world
________ define appropriate employee attitudes and behaviors.
Norms
Ayesha is a strategist for the firm Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Ayesha to suggest?
Optiks should acquire Expert Technology.
________ describes the collectively shared values and norms of an organization's members.
Organizational culture
________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.
Organizational inertia
Which of the following statements is true of strategy in an organization?
Organizational structure must follow strategy in order for firms to achieve superior performance.
Amazon is trying to enter the pharmaceutical fulfillment business in the markets they operate. The goals is the leverage the efficiencies in stocking, sorting, packing, and distribution to lower the cost of pharmaceuticals. This development shows Amazon's relentless pursuit of
Product diversification
What is the main reason that most mergers and acquisitions negatively effect shareholder value?
Promised synergies never take place.
Heaven Freezes Over (HFO) is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should HFO take as it strives to become multinational?
Pursue a multidomestic strategy, customizing product offerings to suit local preferences.
Delores recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Delores to undertake to help safeguard the company's financial health?
Request and review a copy of the firm's risk assessment plan, if such a plan exists.
Juno LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juno's owners or managers to take?
Seek an alliance with a company or companies that will complete the value chain.
Angie owns and runs Archana, a private start-up company with a current value of $1.3 billion. Archana is interested in going public to fund future growth. Which action should Angie take before Archana's initial public offering?
She should investigate Archana's existing or potential problems with ethics or the law, if such problems exist.
Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?
Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.
Why does strategy implementation often require changes within an organization?
Strategy implementation transforms strategy into actions and business models.
General Electric's board has only one inside director, John Flannery, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE?
The CEO possesses invaluable inside information that can help him or her chair the board effectively.
A bank, CQC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?
The bank knows that the customer will be unable to pay the loan if the interest rate rises.
Uptown Office Systems recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision?
The increased span of control for remaining managers may lead to higher levels of stress and possible burnout.
Nissan. Inc. is a large car company. The company's gas-based cars strategic business unit has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?
The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.
A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?
The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
Which of the following is true of the codes of conduct of an organization?
They detail how the organization expects an employee to behave and to represent the company in business dealings.
Which of the following statements is true of joint ventures?
They enable the exchange of both tacit and explicit knowledge.
Which of the following is an advantage of equity alliances when compared to non-equity alliances?
They produce stronger ties between partners.
Amber is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, she knows that trade and investment barriers are falling among wealthy nations. She also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Amber and her company take?
They should seriously consider globalization because of the falling trade and investment barriers.
Which of the following is true of the process of organizing for competitive advantage?
To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.
Tony's Tacos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Tony's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's?
Tony's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.
Dinesh is a senior manager at a large, publicly traded corporation. He has access to insider information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks.
True
If a privately held company has a history of legal and ethical problems, those problems can prevent a successful initial public offering (IPO) from taking place.
True
Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take?
Turn down the acquisition offer and prepare to resist a hostile takeover.
Save On Everything Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Future Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other?
Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level.
Which of the following is true of the board of directors in a public stock company?
Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country?
a firm that extracts and exports iron ore
Mona sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Mona's business?
a firm that relies on high output controls to tap into intrinsic motivation
To keep track of the latest developments in computing, Lenovo's research centers are located in China, the United States, and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Lenovo's products are the same for its domestic and foreign markets. Which strategy does Lenovo follow?
a global-standardization strategy
Blush Bashful Cosmetics Inc. 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 Blush Bashful most likely implement?
a multidomestic strategy
Which of the following is an example of explicit knowledge?
a research summary
Braintree 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 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 Braintree and the software company best referred to as in this scenario?
a strategic alliance
Braintree 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 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 Braintree and the software company best referred to as in this scenario?`
a strategic alliance
Devonshire Ventures is a large snack-food conglomerate that operates in more than 50 countries and employs more than 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 Devonshire most likely use?
a transnational strategy
Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers?
acquiring an airplane-parts manufacturer in another country
Vassar Systems Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Vassar Systems?
acquisition
When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)
acquisition
At Agile Ltd., a cross-functional team is formed to work on a project for a new client. The team consists of Charles and four other members. At most of the team's presentations to senior management, Charles takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Charles is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Charles did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Agile Ltd. is a typical consequence of
adverse selection.
Nate 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 Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies
adverse selection.
The Palace Hotel Group purchased Orange Roof Hotels for an estimated value of $120 billion. All the hotels previously owned by Orange Roof Hotels are now managed by the Palace Hotel Group and are known as Palace hotels. What does this scenario best illustrate?
an acquisition
Screaming Eagle, a luxury motorcycle company, sells the same motorcycles and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Screaming Eagle most likely pursue?
an international strategy
American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern?
arrange for the alliance to be managed at the corporate level
Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?
because of the large economic distance between the United States and India
A firm pursuing a transnational strategy would believe that
best practices, ideas, and innovations should be diffused throughout the world.
The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs.
blue ocean
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because
building downstream complementary assets can be expensive and time-consuming.
The name for an agreed-upon code of conduct in business, based on societal norms, is
business ethics.
How did Canada, Mexico, and the United States reduce the administrative and political distance between them?
by establishing the North American Free Trade Agreement (NAFTA)
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?
by lowering competitive intensity in the industry overall
David and Fred are customer care employees at JPN Care. In between calls, David and Fred spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior
can be stopped by implementing performance incentives and strict control mechanisms.
RHC Pharmaceuticals Inc., Lawrence Pharma Inc., and Quincy Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?
co-opetition
ABX Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as
co-opetition.
According to the agency theory,
conflicts that arise in corporations should be addressed in the legal realm.
GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies
core rigidity.
One way to foster ethical behavior in employees is to
create a control system that encourages desired values.
When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.
cultural
Cheetah, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so?
dedication to a cost-leadership business strategy
Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing
differentiation.
A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n)
equity alliance
Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?
exporting
Which of the following modes of entering a foreign market allows for the lowest level of control?
exporting
In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources.
factor
Which of the following features helps match a cost-leadership strategy to a functional structure?
focus on economies of scale
Which of the following types of organizations comparatively requires the lowest levels of investment and control?
franchising
Which of the following organizational structures matches best with an international strategy?
functional
A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a ________ structure.
global matrix
The process of closer integration and exchange between different countries and peoples worldwide is
globalization.
A functional structure is recommended when a firm
has a low level of diversification.
According to the perspective of shareholder capitalism, shareholders in public stock companies
have the most legitimate claim on profits.
Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?
horizontal
A greater cultural distance between two trading countries
increases the liability of foreignness.
The board of directors of a public stock company consists of
individuals who formally represent the firm's shareholders and oversee the work of executives.
Adverse selection in a public stock company occurs when
information asymmetry increases the likelihood of selecting inferior alternatives.
The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the
informational advantage of the lower-level employees.
Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is a(n) ________ for Anderssen and a(n) ________ for EEC.
inside director; outside director
What do we call the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance?
inside directors
The informational advantage that agents possess over principals is often based on the fact that
insiders are the first to learn about important developments before the information is released to the public.
Because keeping cost low is critical to IKEA's value innovation, it switched from a(n)
international strategy to a global-standardization strategy.
Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by
introducing results-only-work-environments to tap intrinsic motivations.
Bejukistan Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country
is a world leader in the pharmaceutical industry.
McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's
is mechanistic in nature.
Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because
it underestimated its liability of foreignness when entering the Balalaika market.
Worldwide Minerals Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Worldwide Minerals wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm?
joint ventures
Which of the following is a common drawback of a non-equity alliance?
lack of trust between partners
WackyPop Inc. produces an inexpensive microwave popcorn that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has WackyPop performed poorly in?
local responsiveness
Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of
location economies.
Winter Wonder Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleds by Bob Inc. This company produced bobsleds, but its sales had slowed. The managers of Winter Wonder convinced themselves that they were able to manage the business of Sleds by Bob more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleds by Bob's bobsleds plummeted. Which of the following terms is often used to describe this scenario?
managerial hubris
An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.
matrix
Fine Lines Inc. is a notebook manufacturing company based in Ohio. Fine Lines' main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Fine Lines Inc. likely to use if it has functional setup?
mechanistic
A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) ________ in the context of a principal-agent problem.
moral hazard
Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of
moral hazard.
Harvey's, a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Harvey's use?
multidivisional
When a firm diversifies into different product lines and geographies, a ________ structure is preferred.
multidivisional
Which of the following global strategies best matches with a multidivisional structure?
multidomestic
Ethics is
not synonymous with law.
Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and
obeys the VRIO principles.
Shareholders of public companies need to appoint a board of directors to represent their interests because
of the separation of ownership and control.
Butterfly Technologies produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Butterfly devices. In this scenario, Butterfly would be best served to embrace
open innovation.
Which of the following types of organizations best helps match a differentiation strategy to a functional structure?
organic organization
BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, BioCure Inc. is most likely an organization that is
organic.
To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly
organic.
Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?
practicing effective corporate governance
Yelena, the CEO of Andron Inc., reports to the board of directors appointed by the shareholders of Andron. Based on shareholder suggestions, the board ties Yelena's compensation to the performance of Andron. Due to this pressure, Yelena begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Yelena's compensation to firm performance is to overcome
principal-agent problem.
CPA Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Joaquin. The stockholders expect Joaquin to make decisions that will benefit the company. However, Joaquin begins to find ways to maximize his total compensation, which hinders CPA's performance. This scenario reflects
principal-agent problems.
The managers at Speed Automobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Speed Automobile is most likely a result of
principal-agent problems.
Planet Resource Inc. is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Planet Resource is most likely doing this to
reduce its cultural distance from the other countries.
Describe moral hazard in the context of the principal-agent relationship. Use an example.
refers to a situation where the agent, has the ability to take risks or engage in actions that benefit themselves at the expense of the principal.
Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of
related and supporting industries/complementors.
Which of the following characteristics of a public stock company deals with principals and agents?
separation of legal ownership and management control
Medequip Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medequip?
serial acquisitions
Megan is a graduate student pursuing a course in business. Presented with the case of a company's unethical behavior, Megan wonders if the company's board of directors should ask the CEO to step down. Having a strong belief in Michael Porter's idea of value creation, Megan is most likely to conclude that company's board of directors
should ask the CEO to step down because it has a greater obligation toward society.
In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are
similar to those that need to be developed and superior to those of competitors in the targeted area.
While working a night job at a call center, Eric creates an app called EatOut, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on EatOut. He creates a start-up called BestApps and hires three people to help him improve EatOut and maintain the servers that run it. In this scenario, BestApps most likely has a ________ structure.
simple
A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a
strategic alliance
Successful ________ requires managers to design and shape structure, culture, and control mechanisms.
strategy implementation
A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.
structure
Telescopic 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, Telescopic Inc. can be said to have a(n)
tall hierarchical structure.
Which of the following is a major issue at the forefront of CEO compensation in recent years?
the absolute size of the CEO pay package compared with the pay of the average employee
The downside of equity alliances is
the amount of investment that can be involved
In a non-equity alliance, which of the following types of information would firms most likely share?
the documented information about the material composition of a product
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?
the expectation that the agent will act in the principal's best interest
It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because
the horizontal integration activity has the potential to reduce competitive intensity in an industry.
Organizational design is
the process of creating, implementing, and modifying the structure of an organization.
What is horizontal integration?
the process of merging with a competitor at the same stage of the value chain
Which of the following is the source of the principal-agent problem in publicly traded companies?
the separation of ownership and control
Which of the following factors is the most important determinant of economic distance?
the wealth and per capita income of consumers
The administrative and political distance between two trading countries decreases when
there is a well-functioning capital market in the host country.
In a public stock company, senior executives, such as the CEO, face agency problems when
they delegate authority of strategic business units to general managers.
Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because
they offer the same products or services in all their stores throughout the world.
Which of the following best explains why a board of directors may grant stock options as part of a compensation package?
to align incentives between shareholders and management
European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?
to take advantage of lower taxes in the southern United States
Gary owns shares in a company called Archibald Industries Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Gary wants to proactively cut his losses and therefore sells his shares. Anneke, a trading enthusiast, buys shares in Archibald Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?
transferability of investor ownership
The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n)
transnational strategy.
The most important yet least visible element of organizational culture is
values
When does a merger between companies typically occur?
when two firms of comparable size join to form a combined entity