MGMT 464 Test 3
A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n):
intrapreneur
In the U.S., the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application.
20 years
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
How has Apple been able to sustain its competitive advantage in the smartphone industry?
By regularly introducing incremental improvements in its products
How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?
By using internal capital markets as a source of value creation
An intrapreneur is described as a person who:
innovates within existing companies.
With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to:
integrate different strategic positions, pursued by different strategic business units.
By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to:
invade the healthcare market from the bottom up.
Investments in specialized assets tend to incur high opportunity costs because the:
threat of one of the partners pursuing his or her self-interest is high.
A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.
unrelated diversification strategy
How was Wikipedia able to outperform both Encyclopedia Britannica and Microsoft Encarta?
By allowing any person, expert or novice, to generate and edit content
When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario?
Consolidated strategy
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?
Information asymmetry
_____ is best described as a situation in which one party is more informed than another, because of the possession of private information.
Information asymmetry
Which of the following statements is NOT true about innovation?
Innovation has to be high-tech in order to be a potent competitive weapon
Which of the following statements is true of internal transaction costs?
Internal transaction costs tend to increase with organizational size and complexity.
What did Microsoft do to gain a foothold in the online search and advertising market dominated by Google?
It entered into a strategic alliance with Yahoo.
Which of the following statements is true of taper integration?
It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.
How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?
It has access to convenience stores and a new distribution channel.
Which of the following statements is true of a disruptive innovation?
It invades the market from the bottom up, by first capturing the low end.
Which of the following statements accurately describes social entrepreneurs?
Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.
_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.
Strategic outsourcing
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?
The 3D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market.
In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development?
The alliance manager
Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?
The chief executive officer
Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community?
The company was no longer able to generate adequate growth through closed innovation.
How does a conglomerate benefit from following an unrelated diversification strategy?
The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
Which of the following is an example of an internal transaction cost?
The cost of maintaining a production unit
Which of the following is an example of an external transaction cost?
The cost of searching for a contract manufacturer
While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this?
The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.
_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.
Vertical integration
How do firms benefit from vertical integration?
Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.
When does a firm fall into the large competitive chasm between early adopters and early majority?
When it fails to successfully launch a mass-market version of its product
Which of the following statements accurately brings out the difference between closed innovation and open innovation?
While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.
Which of the following firms is most prone to experiencing a diversification discount?
A company that pursues unrelated diversification
Red Empire Inc., a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?
A conglomerate
White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM?
A dominant-business firm
Which of the following firms is least integrated?
A firm that buys all the required raw materials from multiple external vendors
Which of the following best illustrates forward vertical integration?
A firm that manufactured and sold car engines to major automobile companies launches its own line of cars.
Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc., to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate?
A joint venture
Which of the following is true of acquisitions?
Acquisitions can be friendly or hostile.
Which of the following is stated by the long tail phenomenon?
Almost 80 percent of sales in a given product category come from only 20 percent of the offerings in that category.
In the context of industrial growth, which of the following statements is true of standards?
As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.
_____ is best described as cooperation by competitors to achieve a strategic objective.
Co-opetition
Which of the following is a feature of the shakeout phase of the industry life cycle?
Competitive intensity within the industry increases.
Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry?
The second movers imitated CNN's incremental innovation to continuously improve their offering.
The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently?
Decline stage
Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?
Diversification discount
Which of the following best illustrates site specificity?
Equipment necessary for mining bauxite and aluminum smelting
Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan?
Equity alliance
Which of the following statements is true of explicit knowledge?
Explicit knowledge is shared in non-equity alliance firms.
Which of the following statements is true of firms pursuing a closed innovation?
Firms in the closed innovation model are extremely protective of their intellectual property.
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?
Franchising
In which of the following stages of the industry life cycle is a standard first established?
Growth stage
In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones?
Information asymmetry
Which of the following statements is NOT true of tacit knowledge?
It is regularly shared between partners in a non-equity alliance
How did Apple plan to attack Amazon's stronghold in the e-reader market?
It orchestrated a web of strategic alliances with major publishing houses.
In the context of the long tail phenomenon, what does the short head represent?
It represents products that appeal to the largest segment of the market with homogenous tastes.
Which of the following is true of a disruptive innovation?
It targets existing markets.
Which of the following types of strategic alliances is the least common in terms of frequency?
Joint ventures
While the personal computer industry is flooded and growing with laptops and tablets, John recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does John best represent?
Laggards
Hitoro Inc. developed a superior touchscreen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
Licensing
_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge.
Licensing agreements
A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?
Maturity stage
In a radical innovation, a firm targets:
New markets by using new technologies
Galaxi Products Inc. is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?
Parent-subsidiary relationship
HK Goods Inc. is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?
Product diversification
Marva Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Marva Industries pursuing?
Product-market diversification strategy
Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?
Related diversification strategy
WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in:
Restructuring
Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit?
She will prefer to buy from well-established brands rather than unknown new ventures.
Which of the following companies will be considered as a conglomerate?
The Tata Group, active in industries such as tea, steel, IT, power, and automobiles
Which of the following is a drawback of Wikipedia's business model?
The user-generated content may be unreliable and unauthoritative.
The market for 3D televisions is in the introduction stage of the industry life cycle. What does this imply?
There are only a few competitors in the 3D television market.
Which of the following is an advantage of non-equity alliances?
They are flexible and easy to initiate and terminate.
Which of the following statements is true of strategic alliances?
They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.
Which of the following is a disadvantage of equity alliances?
They can entail significant investments.
Which of the following is an advantage of joint ventures?
They create strong ties, trust, and commitment between the partners.
Which of the following statements is true of the early majority section of consumers?
They weigh the benefits and costs carefully when adopting a new product.
With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota?
To learn the lean manufacturing system pioneered by Toyota
Why did Yahoo enter into a strategic alliance with Microsoft?
To overcome its competitive disadvantage in comparison to Google
Which of the following statements is true of transaction costs?
Transaction costs are necessary to explain and predict the boundaries of a firm.
When does a merger between companies typically occur?
When two firms of comparable size join to form a combined entity
Process innovation is more important than product innovation during the growth stage because:
a standard, in terms of engineering features and design choices, has been set across the industry.
When large, incumbent firms buy startup companies, the transaction is generally described as a(n) _____.
acquisition
To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) _____.
acquisitions-led growth strategy
In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight.
alliance champion
A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.
conglomerate
When a firm pursues a maintain strategy, it:
continues to support marketing efforts even if the demand for the product is declining.
ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low-growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under:
dogs.
Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are:
engaging in strategic outsourcing.
It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they:
enter into the market in large numbers, creating a herding effect.
As a research scholar, Richard had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Richard can be best described as a(n) _____.
entrepreneur
After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n):
entrepreneur who commercialized invention into an innovation.
A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner.
equity alliance
The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) _____.
equity alliance
Intel's Celeron chip and Atom chip are initiatives to:
guard the company against disruptive innovation by protecting the low end of the market.
In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs:
hold a small market share in a low-growth market.
The four-step innovation process ends with:
imitation
Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the:
increasing supply and mobility of skilled workers.
A factor favoring the success of disruptive innovation is that:
incumbent firms are slow to change.
A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.
industry value chain
Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) _____.
joint venture
The _____ business model is best described as one in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices
long tail
In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for:
making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.
Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of _____.
non-equity alliances
Equity alliances are less common than non-equity alliances because they:
often require larger investments
A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.
patent
When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a _____.
patent
PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in _____.
product-market diversification
Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix.
question marks
A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.
real-options perspective
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 _____.
related-constrained diversification
Disney became the world's leading media company to a large extent by pursuing a corporate strategy of _____.
related-linked diversification
The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.
relational view of competitive advantage
The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to:
survive by drawing on "deep pockets."
Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to:
the entrepreneurial spirit in tesla.
In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates _____.
the real-options perspective
Diversification premium is a situation in which:
the stock price of related-diversification firms is valued at greater than the sum of their individual business units.