MGT4000 Exam 2 Prep

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to gain a new capability

organizational design is

the process of creating, implementing, and modifying the structure of an organization

Leslie has completed the organizational design of her firm but is now interested in the second key informal building block, which she believes will help her firm achieve a competitive advantage. Specifically, she's interested in how things will get done on a day-to-day basis and the intangible piece of her organization that cannot be easily codified. Leslie wants to build an effective

organizational culture

Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?

purchasing competitors

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

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.

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration

Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger?

If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company.

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?

Increase investment in the personal health monitoring unit to encourage future growth.

Which of the following is a disadvantage of a functional strategy?

It cannot effectively address a higher level of diversification.

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.

What most likely happens when a firm optimizes its organizational structure to its current situation?

It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy?

M-Form with centralized decision-making power (cooperative multidivisional)

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them?

Many owners, managers, and business analysts believe they are essential to survive in an industry.

Sarah, 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 Sarah?

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

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

Promised synergies never take place.

Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take?

Seek an alliance with a company or companies that will complete the value chain.

Which of the following statements is true of joint ventures?

They enable the exchange of both tacit and explicit knowledge.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity.

Why are controls like budgets and operating procedures that McDonald's implements known as input controls?

They are considered before employees make any decisions.

Inity Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

Yubaba Inc., a fidget spinner manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Bill has worked at Yubaba for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

Yubaba Inc. has a flat organizational structure.

In 2013, CEO Hsieh announced that Zappos would implement a reorganization in which, as Hsieh said, "... employees ... act more like entrepreneurs and self-direct their work ..." Hsieh changed Zappos from

a hierarchy to a holacracy.

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways?

acquisitions

Duke & Duke is the parent company of GetItDone.com and NownNever Inc. To cut costs, Duke & Duke integrated GetItDone.com's and NownNever Inc.'s management functions with Duke & Duke's management, while keeping other functions such as product development independent. Duke & Duke has encourage the senior teams at both GetItDone and NownNever to exploit the success of their existing products while exploring new products for the future. This scenario best exemplifies a(n)

ambidextrous organization.

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of

building new core competencies to create and compete in markets of the future.

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

________ refers to the degree to which decision making is concentrated at the top of the organization.

centralization

The Tata Group, Warren Buffet's Berkshire Hathaway and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as

conglomerates

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

coordination costs

Hooli, 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

XYZ Inc. is a publicly traded company and a highly diversified firm. However, XYZ's most recent stock price is valued less than the sum of all its individual business units. We would conclude that XYZ is currently experiencing a

diversification discount

Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created?

diversification premium

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n)

equity alliance

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to

fill gaps in its competency lineup.

Tom is the inventor of a personal fitness tracking device, and he is in the process of hiring employees after receiving investment funding. When considering how to structure his company, he should

first establish a strategy and let that be him guide.

Elvira is the CEO of All Things Inc. which employs a matrix structure which is the combination of the ________ and ________ structure.

functional ; M-form

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

Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens?

harvest and/or divest

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks?

higher costs

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

Decisions relating to the range of products and services a firm will offer determine the firm's

level of diversification

Initech Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

licensing

In Fasehatice'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.

PolyCon's, a large and successful retail chain on the East Coast, decides to expand its operations across the United States. Which of the following organizational structures should PolyCon's use?

multidivisional

Which of the following global strategies best matches with a multidivisional structure?

multidomestic

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

E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp 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, E Corp Inc. is most likely an organization that is

organic

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to

preempt its competitors from buying Waze.

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

related-linked diversification

Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario?

related-linked strategy

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions?

relative market share and speed of market growth

The process of alliance management begins with

selecting the best possible partner

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

Jared works as a front-line employee for a nationwide retail store. He reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following bestdescribes this retail store?

tall structure

Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as

taper integration

Rundofase International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, 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 Rundofase International applying?

taper integration

The downside of equity alliances is

the amount of investment that can be involved.

A drawback of short-term contracting as an alternative to making a component in-house is that

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality

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

________ 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