SEVI - ALL CHAPTERS

Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate? a. Blood donors are suppliers and are powerful due to the critical nature of what they provide to the blood bank. b. Blood donors are suppliers and are powerful due to their concentration relative to the blood bank. c. Blood donors are buyers and are not due to low switching costs needed to change to alternative inputs. d. Blood donors are buyers and are powerful due to the volume of blood needed.

A

Boards of directors are now becoming more involved in a. the strategic decision making process. b. selecting new CEOs. c. the firm's tax issues. d. governmental relations.

A

Business-level strategies are concerned specifically with a. creating differences between the firm's position and its competitors. b. selecting the industries in which the firm will compete. c. how functional areas will be organized within the firm. d. how a business with multiple physical locations will operate one of those locations.

A

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth. a. activity map b. profit pool c. value diagram d. five forces model

A

All of the following are true about the strategic decisions managers make about their firm's internal organization EXCEPT that they: A : are directly correlated to executive compensation. B : are nonroutine. C : have ethical implications. D : significantly influence the firms ability to earn above-average returns.

A

Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Am-brose received a. a golden parachute. b. a poison pill. c. greenmail. d. a silver handshake.

A

An agency relationship exists when one party delegates a. decision making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party.

A

An analysis of society's attitudes and values would be conducted when studying the ____ segment of the general environment. a. sociocultural b. global c. demographic d. economic

A

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem? a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad. b. The decorator has no core competencies that will transfer to his new geographic market. c. The decorator should choose a strategy of cost-leadership in this environment. d. The decorator is highly affiliated with the new target market and understands how he can create value for it.

A

An owner of a stable of racehorses has been earning below-average returns for over 15 years. To a colleague, he expressed his determination to stay in horse racing until he died because "racing is in my blood." This individual is probably still racing horses because of a. high barriers to exit. b. high switching costs. c. high fixed costs. d. low levels of competitive rivalry.

A

Archibald Smith has moved from an upper-middle management job at Chromatic Array, Inc., to a similar position with Pixilair Corporation. The gap between CEO pay and the pay of other top executives at Chromatic was significantly larger than at Pixilair. What difference can Archibald expect? a. The working relationships among the top management team will be more collabora-tive at Pixilair than at Chromatic. b. The focus of Chromatic's board of directors will have been more on the creation of shareholder wealth than Pixilair's focus. c. The rating of Pixilair by Institutional Shareholders Services will be less favorable than Chromatic's rating. d. Pixilair will be more vulnerable to hostile takeover than Chromatic.

A

Cellphones, iPods, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider ____ in order to develop new products other than watches. a. unrelated diversification. b. backward integration. c. forward integration. d. horizontal acquisitions.

A

One of the managers at RDK has a successful track record that goes back several years. As a result, he has become extremely confident in his judgment, and has begun to make decisions without taking the time to evaluate contingencies that he feels are not relevant. This has led to some mistakes recently. The over-confidence exhibited by this manager is an example of what? A : Cognitive bias B : Intelligent risk-taking C : Executive judgment D : Value capability

A

One reason executive judgment can be a particularly important source of competitive advantage is that judgment: A : allows a firm to build a strong reputation. B : compensates for lower returns during harsh market conditions. C : increases human intellectual capacity D : allows for superior bundling of resources

A

Quality is a. meeting or exceeding customer expectations in the goods and/or services offered. b. only a major factor in the production of luxury goods, such as BMW cars. c. an assured way to gain competitive advantage. d. a viable trade-off with product cost in gaining a competitive advantage.

A

Research has shown that the more ____, the greater is the probability that an acquisition will be successful. a. related the acquired and acquiring firms are b. diverse the resulting portfolio of competencies c. disparate the corporate cultures d. involved investment banking firms are in the due diligence process

A

Research shows that about ____ percent of mergers and acquisitions are successful. a. 20 b. 40 c. 60 d. 80

A

Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.

A

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

B

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy? a. Cost leadership b. Focused cost leadership c. Differentiation d. Focused differentiation

B

In a merger a. one firm buys controlling interest in another firm. b. two firms agree to integrate their operations on a relatively coequal basis. c. two firms combine to create a third separate entity. d. one firm breaks into two firms.

B

In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets.

B

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is a. similar competitive rivalry. b. less competitive rivalry. c. more competitive rivalry. d. no competitive rivalry.

B

In the U.S., the fundamental goal of business is to a. ensure customer satisfaction. b. maximize shareholder wealth. c. provide job security. d. generate profits.

B

In the airline industry, frequent flyer programs, ticket kiosks, and e-ticketing are all examples of capabilities that are __________ but no longer __________. A : rare; valuable B : valuable; rare C : socially complex; rare D : valuable; causally ambiguous

B

The threat from substitutes is high when a. switching costs are high. b. the substitute product's price is lower than the industry product's price. c. the quality of the substitute product is lower than the quality of the industry's product. d. the substitute product stimulates new process innovations within the industry.

B

Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of a. the perception of perceived prestige and status as a means of differentiating a product. b. the importance of high-quality raw materials when using the differentiation strategy. c. the risk of product imitation by competitors. d. the danger counterfeiting holds for firms pursuing the differentiation strategy.

A

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are: A : complexity, rarity, and human intellectual capital. B : uncertainty, complexity, and intraorganizational conflicts. C : imitability, complexity, and interorganizational conflicts. D : imitability, comparability, and human intellectual capital.

B

The three parts of the external environment which affect a firms strategic actions are a. economic, political, and legal b. general, industry, and competitor c. industry, business, and product d. local, national, and global

B

The typical risks of a cost leadership strategy include a. the inability to balance high differentiation and low price. b. production and distribution processes becoming obsolete. c. excessive differentiation to the point where the customer base is too small. d. loss of customer loyalty.

B

The use of high levels of debt in acquisitions has contributed to a. the increase in above-average returns earned by acquiring firms. b. an increased risk of bankruptcy for acquiring firms. c. the confidence of the stock market in firms issuing junk bonds. d. an increase in investments that have long-term payoffs.

B

Value chain activities are the: A : activities or tasks most likely to be imitated by competitors. B : activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers. C : activities or tasks the firm completes to support the work being done to produce, sell, distribute, and service the products the firm is producing. D : activities or tasks most crucial to implementing the firms business strategy.

B

Value consists of a product's: A : proprietary characteristics and attributes for which customers are willing to pay. B : performance characteristics and attributes for which customers are willing to pay. C : proprietary characteristics and attributes for which customers consider paying. D : performance characteristics and attributes for which customers consider paying.

B

Wal-Mart initially used a focused cost leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was _______ because they __________. a. rapid; were nimble and flexible b. slow; lacked the ability to marshal resources c. rapid; perceived gains from responding to Wal-Mart's attack d. rapid; had the resources and flexibility compete against Wal-Mart

B

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to ____ by making an acquisition. a. increase new product speed to market b. broaden its competitive scope c. increase its economies of scale d. overcome entry barriers

B

When executives have ownership positions or stock options with their employing firm, they are a. going to actively defend their firm from takeover attempts. b. likely to gain financially if their employing firm is taken over by another. c. pressure the board of directors to reprice their stock options. d. likely to be terminated by the acquiring firm even in a friendly takeover.

B

When managers become overly focused on making acquisitions, it is a. because the skills of top executives are better used in making acquisitions than they are in daily organization operations. b. because of the thrill of selecting, chasing and seizing a target. c. due to pressure from major stakeholders to diversify the firm. d. because acquisitions are a quick way to improve the financial standing of the firm.

B

Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors? a. Compaq b. IBM c. HP d. Dell

B

Which of the following is NOT a component of internal analysis leading to competitive advantage? A : Tangible and intangible resources B : Analysis of supplier power C : Capabilities D : Core competencies

B

Which of the following is NOT a reputational resource? A : Customers opinions that the firms products are high quality B : Employees opinions of their supervisors fairness C : Suppliers opinions that the firm pays its bills in a timely manner D : Customers opinions that using the firms products makes them attractive

B

Which of the following is NOT a result of over-diversification? a. Executives do not have a rich understanding of all of the firm's business units. b. Managers emphasize strategic controls rather than financial controls. c. Firms use acquisition as a substitute for innovation. d. Managers become short-term in their orientation.

B

Which of the following is NOT an activity used in the external environmental analysis process? a. Scanning b. Decrypting c. Monitoring d. Assessing

B

Which of the following is TRUE? a. As customer loyalty increases, customers are more sensitive to price increases. b. Customer loyalty has a positive relationship with firm profitability. c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success. d. Customer loyalty is of importance only to firms using the differentiation strategy.

B

Which of the following is true about outsourcing? A : Outsourcing limits a firms flexibility and requires minimal coordination. B : Outsourcing allows firms to concentrate on those areas in which they can create value. C : Outsourcing strengthens the creative and innovative functions within the firm. D : Outsourcing is effective only when it includes all support activities.

B

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by a. avoiding global markets altogether. b. expanding only to developed countries. c. focusing on global niche markets. d. acquiring already established firms in foreign markets.

C

Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a wide-spread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of these statements is most likely TRUE? a. The owners of Bubble-Up are unconcerned about Mega-Toy's entry to the market because of the resource dissimilarity between the firms. b. Bubble-Up's greater organizational slack will allow it to aggressively attack Mega-Toy. c. Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy. d. Competitive rivalry will not increase for Bubble-Up because Mega-Toy is not dependent on the educational toy market.

C

Buyers are powerful when a. there is a threat of forward integration. b. they purchase a small proportion of the supplier's output. c. switching costs are low. d. the buyers' industry is fragmented.

C

By emphasizing core competencies when selecting and implementing strategies, companies learn to compete primarily on the basis of: A : intangible resources. B : their primary activities. C : firm-specific differences. D : efficiency of production.

C

Caterpillar's payment of a 32% premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of a. integration difficulties. b. inability to achieve synergy. c. large or extraordinary debt. d. managers overly focused on acquisitions.

C

The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Implementing a director appraisal system. c. Electing an lead director. d. All of these choices would increase involvement.

D

Outsourcing is the: A : spinning off of a value-creating activity to create a new firm. B : selling of a value-creating activity to other firms. C : purchase of a value-creating activity from an external supplier. D : use of computers to obtain value-creating data from the Internet

C

Private synergy a. occurs in most related acquisitions and allows firms to see increased returns. b. is frequently achieved in conglomerates. c. is not easy for competitors to understand and imitate. d. is assessed by managers during the due diligence process.

C

Product differentiation refers to the a. ability of the buyers of a product to negotiate a lower price. b. response of incumbent firms to new entrants. c. belief by customers that a product is unique. d. fact that as more of a product is produced the cheaper it becomes per unit.

C

The PRQ chain of retail stores has achieved a high level of efficiency in its inventory control by collecting data at the point of purchase. This is an example of a capability in which specific functional area? A : Research and development B : Distribution C : Management D : Management information systems

D

The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. usually on the verge of bankruptcy. b. typically under-performing their industry. c. often performing above their industry averages. d. always outperforming their industry.

C

The political/legal segment of an environment represents a. the political preferences of different ethnic groups in the society. b. the technological values of different political entities in society. c. how organizations and governments mutually try to influence each other. d. the system of regulations governments at all levels place on businesses.

C

The proper matching of what a firm CAN DO with what it MIGHT DO: A : balances the internal characteristics of the firm with the characteristics of the external environment. B : overcomes the rigidity and inertia resulting from a history of success. C : yields insights the firm requires to select its strategy. D : develops core competencies based on human knowledge

C

The separation between firm ownership and management creates a(n) ____ relationship. a. governance b. control c. agency d. dependent

C

There are few true mergers because a. few firms have complementary resources. b. integration problems are more severe than in outright acquisitions. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

C

Tools such as __________ help the firm focus on its core competencies as the source of its competitive advantages. A : marketing B : manufacturing C : outsourcing D : imitation

C

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the ____ segment of the general environment. a. economic b. political/legal c. technological d. global

C

Valuable capabilities allow the firm to: A : exploit threats in its external environment. B : neutralize opportunities in its internal environment. C : exploit opportunities or neutralize threats in its external environment. D : exploit opportunities and threats in its internal environment.

C

Value chain analysis is a tool used to: A : analyze a firms external environment for value-creating opportunities. B : analyze a firms value chain activities and support functions in isolation from its competitors value chain. C : understand the parts of the firms operation that create value and those that do not. D : identify the firms core competencies in each of the primary activities of the firm.

C

Walt Disney's focus on ____ is typical of a slow-cycle market. a. innovation b. total quality c. proprietary rights d. economies of scale

C

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends, they are engaged in a. scanning. b. monitoring. c. forecasting. d. assessing.

C

When firms lay off employees, they are: A : treating employees as an intangible resource. B : recognizing the reduced value of labor in the value chain. C : eroding the organizations knowledge resources. D : temporarily sacrificing a tangible asset that is easily replaced

C

When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of a. an industry with low exit barriers. b. increasing economies of scale. c. slow industry growth. d. high bargaining power among buyers.

C

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(an) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.

C

Which industry can be LEAST described as a slow cycle market? a. Freight railroads b. Pharmaceuticals c. Cell phone provider d. Private ownership of highways and bridges

C

Which of the following are central to implementing value-creating strategies and thereby satisfying customers'needs? a. Firm resources b. Capabilities c. Core competencies d. None of the these.

C

Which of the following is NOT an external event that reveals the danger of relying on existing core capabilities? A : A new competitor figures out a better way to serve the firms customers. B : New technologies emerge and replace those used by the firm. C : A firm changes its focus to a new core competence. D : Political or social events shift the foundation of current core capabilities.

C

Which of the following is an example of a strategic action? a. a "two movies for the price of one" campaign by Blockbuster Video b. use of product coupons by a local grocer c. entry into the European market by Home Depot d. fare increases by Southwest Airlines

C

Which of the following is an example of a tactical action? a. Wal-Mart's launch of Sam's Club stores. b. Continental Airlines exit from a hub airport in Denver. c. Netflix beginning to offer music DVDs in addition to movies. d. Dell's launch of a new line of high performance, custom-made PCs.

C

Which of the following pairs of companies would be least likely to be examined together as part of competitive analysis? a. Home Depot and Lowe's b. Boeing and Airbus c. IBM and Microsoft d. Coca Cola and PepsiCo

C

Which of the following statements is FALSE? a. First movers tend to take higher risks than second and later movers. b. First movers tend to have significantly higher revenues than second movers. c. First movers have lower survival rates than second and late movers. d. First movers tend to have more organizational slack than later movers.

C

Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance.

D

Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the Southwest. Which of the following factors that may have an effect on the success of Golden Lotus is the most directly controllable by the company? a. the socio-cultural environment b. the demographics of the environment c. the economy of the local area d. the power of the customers/buyers

D

Switching costs refer to the a. cost to a producer to exchange equipment in a facility when new technologies emerge. b. cost of changing the firm's strategic group. c. one-time costs suppliers incur when selling to a different customer. d. one-time costs customers incur when buying from a different supplier.

D

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion conscious discount shoppers illustrates the ________________strategy a. cost leadership b. differentiation c. focused differentiation d. integrated cost leadership/differentiation

D

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if a. theme parks with alternative cartoon characters were built in large numbers. b. numerous lawsuits against copyright thieves tainted the reputation of the company. c. Disney attempted to move beyond its traditional industry. d. Disney's cartoon characters became widely perceived as old-fashioned and unappealing.

D

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that __________ of organizational decisions fail. A : one-fourth B : one-fifth C : one-tenth D : one-half

D

The corporate research division of Siemens files, on average, 25 patents a day. The patents are a(n) __________ resource. A : financial B : organizational C : physical D : technological

D

The governance mechanism most closely connected with deterring unethical behaviors by hold-ing top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors.

D

The interests of multinational corporations' shareholders may be best served when there is a. a uniform compensation plan for all corporate executives, U.S. and foreign alike. b. executive compensation that is primarily based on long-term performance. c. elevation of foreign executive compensation to U.S. levels. d. a variety of compensation plans for executives of foreign subsidiaries.

D

The large expenditures on advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what kind of barrier to entry? a. Access to distribution channels. b. Capital requirements. c. Economies of scale. d. Product differentiation.

D

The next critical technological opportunity for organizations is predicted to be a. the Internet. b. multiphasic interventions. c. biological engineering. d. wireless communications.

D

Which of the following is NOT one of the primary reasons many pharmaceutical firms use acquisitions as exemplified by Teva's frendly acquisition of Cephalon? a. entering markets quickly. b. overcoming the high costs of internal product development. c. improving predictability of returns on investment. d. extending patent rights on developed pharmaceuticals.

D

Which of the following is TRUE of Southwest Airlines? a. Southwest has an unusually low amount of flexibility for a large firm. b. Southwest's success is largely due to the fact it has little market commonality with other airlines. c. Decision-making responsibility is centered at its Dallas headquarters, which allows the firm to respond quickly to competitive attacks. d. Southwest's advantage lies in its ability to "think small."

D

Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top man-agers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management.

D

Which of the following is the most strategic action by Wal-Mart? a. Aggressive pricing to ensure they are a price leader b. Aggressively pricing toys and electronics during the holiday season c. Aggressively pricing school-related items in the back-to-school season d. Entering a new foreign market

D

Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm. External incentives to diversify include a. the fact that other firms in an industry are diversifying. b. pressure from stockholders who are demanding that the firm diversify. c. changes in antitrust regulations and tax laws. d. a firm's low performance.

c

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that a. create value. b. reduce value. c. are value-neutral. d. are managerial motives to diversify.

c

Firms seek to create value from economies of scope through all of the following EXCEPT a. activity sharing. b. skill transfers. c. transfers of corporate core competencies. d. de-integration

d

Firms use corporate-level diversification strategies for all the following reasons EXCEPT a. value-creating. b. value-neutral. c. value-reducing. d. value-diversifying

d

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of ______ diversification. a. dominant business b. related constrained c. related linked d. unrelated

d

Large diversified businesses often face a ______, which results from analysts not knowing how to value a vast array of large businesses with complex financial reports. a. threat of regulation by the Securities and Exchange Commission b. high CEO turnover c. threat of takeover d. conglomerate discount

d

Managerial motives to seek diversification include a desire to a. improve their marketability to other firms. b. effectively use corporate resources. c. provide higher returns to corporate stakeholders. d. increase their compensation.

d

Research has shown that horizontal acquisitions a. tend to have disappointing financial results in the long run. b. are being replaced by virtual acquisitions. c. result in lower levels of performance than unrelated acquisitions. d. are able to use activity sharing to successfully create economies of scope.

d

Research suggests that ______ has decreased while ______ has increased possibly due to the restructuring that took place in the 1990s and early twenty-first century. a. forward vertical integration; backward vertical integration b. backward vertical integration; forward vertical integration c. related diversification; unrelated diversification d. unrelated diversification; related diversification

d

Synergy exists when a. cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm. b. two units create value by utilizing market power in their respective industries. c. firms utilize constrained related diversification to build an attractive portfolio of businesses. d. the value created by business units working together exceeds the value the units create when working independently

d

The downside of synergy in a diversified firm is a. increasing independence of businesses. b. the reduction of activity sharing. c. excessive focus on risky innovation. d. the loss of flexibility

d

The purchasing of firms in the same industry is called a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition.

d

The risk for firms that follow the unrelated diversification strategy in developed economies is that a. external investors tend to dump the stocks of conglomerates during economic downturns. b. conglomerates are typically owned by one powerful entrepreneur and do not survive his/her retirement or death. c. government regulations, especially in Europe, have periodically forced the dissolution of conglomerates. d. competitors can imitate financial economies more easily than they imitate economies of scope.

d

Which acquisition would be considered the LEAST related? a. A candy manufacturer purchases a chemical laboratory specializing in food flavorings. b. A chain of garden centers acquires a landscape architecture firm. c. A hospital acquires a long-term care nursing home. d. An upscale "white-tablecloth" restaurant chain acquires a travel agency.

d

Which of the following is NOT a limitation directly relating to vertical integration? a. bureaucratic costs b. the loss of flexibility through investment in specific technologies c. capacity balance and coordination problems from changes in demand d. imitation of core technology by potential competitors

d

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true? a. The cost of the marble will be expensive because of the bargaining power of the supplier. b. The cost of the marble will be moderate because of the bargaining power of the buyer. c. The cost of the marble will be moderate because of economies of scale. d. The cost of the marble will be expensive because of the high strategic stakes involved.

A

A cost leadership strategy provides goods or services with features that are a. acceptable. b. unique. c. substandard. d. mediocre.

A

A cost leadership strategy targets the industry's ____ customers. a. most typical b. poorest c. least educated d. most frugal

A

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT a. the attack is by a price predator. b. the attack makes the firm's market position less defensible. c. the attack damages the firm's ability to use its capabilities. d. the attack improves the competitor's market position.

A

A food bank in Florida was struggling to serve its customers. It asked Walmart for help. Walmart sent a team of managers who reorganized storage and transportation. The food bank was able to increase the number of clients served by tenfold. Walmart shared its expertise in: A : distribution. B : human resources. C : marketing. D : manufacturing.

A

A general environmental analysis can be expected to produce all of the following EXCEPT a. objective answers. b. recognition of environmental trends. c. identification of organizational opportunities. d. identification of organizational threats.

A

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT a. The acquisition of Taylor should be primarily for defensive rather than strategic reasons. b. Research suggests that acquisition strategies are a common means of avoiding risky internal ventures. c. The outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product development process. d. Acquisitions could become a substitute for innovation within your firm.

A

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use a. information networks. b. a flexible manufacturing system. c. differentiation development planning. d. Enterprise Resource Planning.

A

A product's value is created by some combination of: A : high cost and highly differentiated features. B : high cost and less differentiated features. C : low cost and less differentiated features. D : low cost and highly differentiated features.

A

A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure.

A

According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT a. low barriers to entry. b. suppliers and buyers with little bargaining power. c. a moderate degree of rivalry among competitors. d. few good product substitutes.

A

After a leveraged buyout, ____ typically occur(s). a. selling of assets b. further rounds of acquisitions c. due diligence d. private synergy

A

All competitive advantage have: A : a limited life. B : unrestricted sustainability. C : the ability to earn above-average returns indefinitely. D : protections against imitability

A

All core competencies have the potential to become core: A : rigidities. B : stagnations. C : inefficiencies. D : weaknesses.

A

All of the following are considered generic business-level strategies EXCEPT a. product diversification. b. cost leadership. c. focused differentiation. d. integrated cost leadership/differentiation.

A

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension? a. Reach b. Richness c. Affiliation d. None of the these

B

Chico's is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico's has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico's customers based on their spending levels. Chico's uses a ____ strategy. a. focused differentiation based on a buyer group b. focused differentiation based on a product line segment c. generic differentiation d. integrated cost leadership/differentiation

A

Compared to tangible resources, intangible resources are __________ and __________. A : less visible; more difficult to copy B : less visible; less difficult to copy C : more visible; more difficult to copy D : more visible; less difficult to copy

A

Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other strategies. a. business-level b. corporate-level c. acquisition d. international

A

Competitor analysis focuses on a. firms with which the company competes directly. b. firms that produce products that are substitutes. c. all firms in the industry. d. companies that might enter the industry.

A

Consider the criteria necessary for sustainable competitive advantage. Which of the following combinations would most likely bring about a temporary competitive advantage and the possibility for above-average returns? A : Valuable, rare, not costly to imitate, and possibly substitutable B : Valuable, rare, costly to imitate, and possibly substitutable. C : Valuable, not rare, not costly to imitate, and possibly substitutable. D : Valuable, not rare, costly to imitate, and substitutable.

A

Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT: A : lack of scientific transference. B : social complexity. C : unique historical conditions. D : causal ambiguity.

A

Ever improving levels of efficiency enhance profit margins for a cost leader. This effects which of the five forces of industry structure most directly? a. Potential entrants b. Substitutes c. Buyer power d. Supplier power

A

Exit barriers to a firm include all of the following EXCEPT a. generic assets. b. loyalty to employees. c. governmental concern about job loss. d. restrictive labor agreements.

A

Failing to ____________ appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated. a. downsize b. spin-off c. downscope d. buyout

A

Goods or services in standard-cycle markets reflect a. organizations that serve a mass market. b. numerous first mover advantages. c. an inability to sustain a competitive advantage except for brief periods of time. d. competitive advantages that are shielded from imitation.

A

Horizontal, vertical, and related acquisitions to build market power a. are likely to undergo regulatory review and analysis by financial markets. b. are rarely permitted to occur across international borders. c. typically involve a firm purchasing one of its suppliers or distributors. d. concentrate on capturing value at more than one stage in the value chain.

A

In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear for children and adults. It was moderately successful for five years until the local newspaper published an exposé that scanty lingerie stocked in the back of the store's showroom was selling briskly to a certain clientele. Afterward, the store lost most of its customers and nearly closed. Which segment of the environment did the store owner fail to take into account when she began selling the lingerie? a. the sociocultural segment b. the economic segment c. the demographic segment d. the political/legal segment

A

In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

A

In the case of a retail business dependent on drive-in customers, the major cost disadvantage independent of scale would be a. favorable locations are not available. b. other competitors have proprietary product technology. c. access to raw materials is difficult. d. other competitors have government subsidies.

A

Internal product development is often viewed as a. carrying a high risk of failure. b. the only reliable method of generating new products for the firm. c. a quicker method of product launch than acquisition of another firm. d. critical to the success of biotech and pharmaceutical firms.

A

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and: A : the rapid development of the Internets capabilities. B : extensive use of outsourcing within the borders of the United States. C : the declining number of inventions and patents developed by U.S. citizens. D : the simultaneous erosion of the U.S. work ethic and the U.S. education system.

A

Late movers are those firms that a. respond to a competitive action a significant amount of time after the first mover's action and the second mover's response. b. respond to a first mover's competitive action often through imitation or a move designed to counter the effects of the action. c. take an initial competitive action (either strategic or tactical). d. typically achieve higher-than-average returns because they can imitate the most efficient actor.

A

Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green a. is likely to raise the level of competitive rivalry in the industry. b. probably has top management who are affected by emotional barriers to exit. c. has decided that long-run above-average returns are not important. d. will probably embark on an acquisition strategy.

A

According to the five forces model, an unattractive industry would include all of the following characteristics EXCEPT a. low economies of scale needed for new firms to enter. b. low supplier power due to commodity inputs. c. high threat of substitute products due to a large number of low cost alternatives. d. high bargaining power of buyers due to low switching costs.

B

Several months ago, a restaurant developed a new appetizer that is a hit with customers. Many customers go to the restaurant just for the appetizer, and it was at the center of a recent highly positive review by a food critic. Preparation involves common ingredients and average culinary skills but requires a very high oven temperature, which significantly increases utility costs. Several competing restaurants have since added their own version of the appetizer to their menu. Which of the following criterion for assessing capabilities/core competencies is met? A : The restaurant has the capability to develop something that is valuable. B : The restaurant has the capability to develop something that is rare. C : The restaurant has the capability to develop something that is costly to imitate. D : All of these criteria are met.

A

Sustained competitive advantage is most achievable in a ____ market. a. slow-cycle b. medium-cycle c. standard-cycle d. fast-cycle

A

The Obama administration expressed a desire to eliminate coal as an energy source, and introduced regulations to drive the coal industry out of business. The Trump administration eased regulations on the coal industry, but also took steps to encourage the development of other forms of energy. In light of this changing regulatory environment, decision makers in the energy industry are most affected by what condition? A : Uncertainty B : Complexity C : Intraorganizational conflict D : Interorganizational Conflict

A

The ____ environment is composed of dimensions in the broader society that can influence an industry and the firms within it. a. general b. competitor c. sociocultural d. industry

A

The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace. a. reach b. richness c. affiliation d. social

A

The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. What effect will these conditions have on the domestic airline industry? a. It will make the airline industry more attractive because of decreased supplier power. b. It will make the airline industry less attractive because of decreased supplier power. c. It will make the airline industry more attractive because of increased supplier power. d. It will make the airline industry more attractive because of a new entrant.

A

The benefit of a flexible manufacturing system is that a. the lot size needed to manufacture a firm's product efficiently is reduced. b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs. c. it lends itself to empowerment of employees. d. it captures the cost savings of economies of scale.

A

The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is a. setting the option strike price substantially higher than the current stock price. b. insuring that the strike price value of the options can be lowered if the organiza-tional environment becomes more risky. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope.

A

The chief disadvantage of being a first mover is the a. high degree of risk. b. high level of competition in the new marketplace. c. inability to earn above-average returns unless the production process is very efficient. d. difficulty of obtaining new customers.

A

The competition within each strategic group is a. more intense than is the competition between strategic groups. b. less intense than is the competition between strategic groups. c. typically very low. d. an unknown factor in the analysis of competitive practices within a firm's strategic group.

A

The competitive actions and responses in __________ markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide the same positive experience for customers. a. standard-cycle b. fast-cycle c. slow-cycle d. intermediate-cycle

A

The economic environment refers to a. the nature and direction of the economy in which a firm competes or may compete. b. the economic outlook of the world provided by the World Bank. c. an analysis of how the environmental movement and world economy interact. d. an analysis of how new environmental regulations will affect the U.S. economy.

A

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms a. with insufficient diversification. b. having too much debt. c. being unable to achieve synergy. d. growing too large.

A

The flat-panel television market where prices have come down and competition has become more stable is best characterized as a. standard-cycle. b. fast-cycle. c. slow-cycle. d. competitive rivalry.

A

The integration of a cost leadership and a differentiation strategy a. is challenging because it increases the number of value chain activities and support functions in which the firm must become competent. b. forces a firm to adapt more slowly to changes in its environment. c. allows the firm to avoid being "stuck in the middle." d. requires such a large customer base that it is most practical for firms in the global marketplace.

A

The likelihood of entry of new competitors is affected by ____ and ____. a. barriers to entry, expected retaliation of current industry organizations b. the power of existing suppliers, buyers c. the profitability of the industry, the market share of its leading firm d. the demand for the product, the profitability of the competitors

A

The products or services that are differentiated from others have qualities that are a. perceived by the customer to add value for which they will pay a premium. b. valued by the typical industry customer. c. perceived as standardized by the customer. d. seen as classic attributes rather than passing fads.

A

The repurchase at a premium of shares of stock that have been acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the com-pany for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

A

The risks of a focus strategy include a. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment. b. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment. c. decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving. d. decisions by focused competitors to use their resources to serve a wider range of customers' needs.

A

The strategy of Citigroup under CEO Sanford Weill was to create a "financial supermarket" where customers shop for a variety of financial services within the same company. This strategy was executed via a series of acquisitions but ultimately failed. This situation was the result of a. Citigroup's managers focusing too much on acquisitions at the expense of managing their existing businesses. b. key managers leaving from the acquired firms which left the firms with inferior management talent. c. the firm becoming too vertically integrated. d. the firm becoming too focused on its core businesses.

A

The technological segment of environmental analysis includes a. institutions and activities involved with creating new knowledge and translating that knowledge into new outputs. b. the determination of when machinery will need to be replaced in a given firm. c. the need for new technology in order for a firm to gain a competitive advantage. d. places where a firm's technology will allow that firm to dominate a given market.

A

The three dimensions of a firm's relationships with customers include all the following EXCEPT a. exclusiveness. b. affiliation. c. richness. d. reach.

A

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry.

A

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets? a. Commodity goods b. Motion pictures c. Popular music d. Writing instruments

A

Thomas is an upper-middle level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to ____ controls. a. bureaucratic b. strategic c. tactical d. organic

A

To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT be: A : technologically innovative. B : hard for competing firms to duplicate. C : without good substitutes. D : valuable to customers

A

Typically, in a failed acquisition, the organization will a. restructure. b. go into bankruptcy. c. focus on building private synergy. d. increase integration.

A

Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

A

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing a. a differentiation strategy. b. a cost leadership strategy. c. an integrated cost leadership/differentiation strategy. d. a single-product strategy.

A

When considering the relationships among the various characteristics a firm possesses, it is necessary to understand that _________ are the most numerous. A : resources B : capacities C : capabilities D : core competencies

A

Which of the following identified in an analysis of the general environment is an opportunity for an entrepreneur who wishes to open a business doing "Fitness for Life" physical conditioning services (strength, balance, and flexibility training) in a city of 100,000 people? a. the average age of the population in his community is high b. the level of unemployment in his community is high c. a chiropractor and two independent physical therapists are located in his community d. the average education level of the population in his community is low

A

Which of the following is NOT a value-creating activity associated with the differentiation strategy? a. develop policies to ensure efficient hiring and retention to keep costs low and implement traing to ensure high employee efficiency. b. provide accurate and timely delivery of goods to customers. c. ensure receipt of of high quality supplies (raw materials and other goods). d. develop flexible systems that allow rapid response to to customers' changing needs.

A

Which of the following is NOT one of the three main restructuring strategies? a. realigning b. downsizing c. downscoping d. leveraged buyouts

A

Which of the following is TRUE of Wal-Mart? a. Wal-Mart has an unusual amount of flexibility for a large firm. b. Wal-Mart's success is largely due to the fact it has little market commonality with other industry firms. c. Decision-making responsibility is centered at its Arkansas headquarters which allows the firm to respond quickly to competitive attacks. d. Wal-Mart's advantage lies in its ability to "think big."

A

Which of the following is a true statement about capabilities? A : Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing. B : Valuable capabilities are based almost entirely on tangible resources. C : Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated. D : The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.

A

Which pair of firms has the LEAST resource similarity? a. Small, family-owned Italian restaurant; Olive Garden b. Target; Wal-Mart c. HP; Dell d. FedEx; UPS

A

Global warming and energy consumption trends are aspects of the _____________ segment of the general environment that firms should monitor. a. technological b. physical c. sociocultural d. economic

B

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically-raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

A

Without effective due diligence the a. acquiring firm is likely to overpay for an acquisition. b. firm may miss its opportunity to buy a well-matched company. c. acquisition may deteriorate into a hostile takeover, reducing the value creating potential of the action. d. firm may be unable to act quickly and decisively in purchasing the target firm.

A

____ and ____ describe the situation in which organizations are direct competitors and are fully aware of the competition. a. High market commonality, high resource similarity b. High market commonality, low resource similarity c. Low market commonality, high resource similarity d. Low market commonality, low resource similarity

A

____ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival. a. Motivation b. Awareness c. Responsiveness d. Ability

A

__________ is an example of a capability that is based in the functional area of distribution. A : Effective use of logistics management techniques B : Effective control of inventories through point-of-purchase data collection C : Effective organizational structure D : Product and design quality

A

__________are the source of a firm's __________, which are the source of the firm's __________. A : Resources; capabilities; core competencies B : Capabilities; resources; core competencies C : Capabilities; resources; above-average returns D : Core competencies; resources; competitive advantage

A

internal analysis enables a firm to determine what it: A : can do. B : should do. C : will do. D : might do.

A

All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is that they a. are more likely to have organizational slack. b. can launch competitive actions more quickly. c. have more loyal and diverse workforces. d. can wait for larger firms to make mistakes in introducing innovative products.

B

All of the following are aspects of the political/legal segment of the general environment EXCEPT a. antitrust laws. b. attitudes and values. c. taxation laws. d. industries chosen for deregulation.

B

All of the following are implications of strategic groups EXCEPT a. the strength of the five forces differ across strategic groups. b. the strength of the five forces is the same across strategic groups. c. competitive rivalry within strategic groups is greater than between strategic groups. d. the closer the strategic groups are in terms of strategies, the greater is the likelihood of rivalry.

B

A firm successfully implementing a differentiation strategy would expect a. customers to be sensitive to price increases. b. to charge premium prices. c. customers to perceive the product as standard. d. to have high levels of power over suppliers.

B

A firm's core strategy is its ____ strategy. a. corporate b. business c. pricing d. international

B

A flexible manufacturing system is a. based on the use of temporary and part-time employees as well as outsourcing. b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention. c. based on a 360-degree view of the company's relationships with customers. d. a system that identifies "the one best way" to produce each product in the company's line.

B

A major U.S. manufacturer of children's toys believes its main competitive advantage lies in its continuing development of innovative toys and games. The company is facing increasing competition on price, and it is strongly considering outsourcing to offshore firms as a means of reducing costs. The LAST function this firm should consider outsourcing is: A : operations. B : research and development. C : supply-chain management. D : distribution.

B

A person who has made a successful decision when no obviously correct model or rule is available or when relevant data are unreliable or incomplete has exercised: A : foresight. B : judgment. C : effective strategic thinking. D : decisiveness.

B

A primary objective of corporate governance is to a. determine and control the strategic direction of an organization, so that the top ex-ecutives are focused on maximizing corporate profits. b. ensure that the interests of top-level managers are aligned with the interests of shareholders. c. lobby legislators to pass laws that are aligned with the organization's interests. d. resolve conflicts among corporate employees.

B

A primary reason for a firm to pursue an acquisition is to a. avoid increased government regulation. b. achieve greater market power. c. exit a hyper-competitive market. d. achieve greater financial returns in the short run.

B

A second mover a. is typically ineffective in its response to the first mover. b. attempts to provide a product with greater customer value than the first mover's product. c. usually incurs higher expenses than the first mover since it must engage in reverse engineering. d. typically has a higher survival rate than first movers which typically take greater risks.

B

A veterinary practice has added a pet boarding and grooming facility. Most of the practice's competitors also provide these services. The veterinary practice is gaining competitive: A : advantage. B : parity. C : disadvantage. D : neutrality.

B

A(an) ____ occurs when one firm buys a controlling, or 100% interest, in another firm. a. merger b. acquisition c. spin-off d. restructuring

B

Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is most likely to be TRUE? a. Agency costs at Amos Ball are high. b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO. c. At Amos Ball, the opportunity for managerial opportunism is high. d. The functions of risk-bearing and decision-making are separate at Amos Ball.

B

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must a. analyze the reach, richness, and affiliation the company must have with its customers. b. provide tax advice either in a different manner or provide a different kind of tax service than competitors. c. offer tax advice at a price lower than the cheapest competitor. d. offer tax advice at a higher quality than the best competitor.

B

An investor is analyzing two firms in the same industry. She is looking for long term performance from her investment. Both firms are basically identical except one firm is involved in substantial downsizing and the other firm is undertaking aggressive downscoping. The investor should invest in the a. downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. b. downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses. c. downsizing firm because it will be making decisions based on tactical strategies. d. downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.

B

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly regarded chef and many long-term kitchen and wait staff who work together smoothly. It has a reputation for dishes of consistently high quality and an appealing dining atmosphere. Which of the following should the investor consider when making a decision? A : The investor should realize that the success of this restaurant is so heavily based on human resources that the business will likely be subject to inertia in the future. B : The investor may find that the restaurants financial statements undervalue the true value of its resources. C : The investor should be aware that intangible assets are difficult to leverage into additional businesses. D : The investor should search for a firm that has competitive advantages based on tangible resources.

B

Apex Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Apex's owner should: A : concentrate on maintaining Apexs current core competencies. B : focus on developing Apexs future competitive advantages. C : place more emphasis on tangible resources, which are less vulnerable to obsolescence than intangible resources. D : recognize that core competencies derived from human resources are more subject to becoming core rigidities than are core competencies based on other types of resources.

B

As ownership of the corporation is diffused, shareholders' ability to monitor managerial deci-sions a. increases. b. decreases. c. remains constant. d. is eliminated.

B

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks. a. broader target market b. narrower target market c. increased use of primary activities to capture value d. increased use of support activities to capture value

B

At a manufacturing facility, which of the following would be categorized as an intangible resource? A : The forklift B : The quality control process C : The forklift driver D : The financial investment into building the warehouse

B

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(an) a. slow-cycle market b. standard cycle market. c. fast-cycle market. d. intermediate-cycle market.

B

Because firms combine tangible and intangible resources to create capabilities: A : these capabilities are fragile and subject to sudden loss of value. B : capabilities are often based on developing, carrying, and exchanging information and knowledge through the firms human capital. C : capabilities are easily transferred from one firm to another as employees change jobs. D : these types of capabilities are considered primary activities in the value chain.

B

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT a. who the firm should serve. b. when the customer's needs should be satisfied. c. what needs the firm should satisfy. d. what core competencies are needed to satisfy customer needs.

B

Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses. a. first-mover advantages, corporate size b. market commonality, resource similarity c. management capabilities, competitive analysis d. speed of management decisions, management actions

B

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in a. the selection of industries in which the firm will compete. b. specific product markets. c. primary value chain activities. d. particular geographic locations.

B

By linking companies with their suppliers, distributors, and customers, ____ provide a company with flexibility. a. Flexible manufacturing systems b. Information networks c. Total quality management systems d. Capabilities

B

Characteristics of the current economic segment include all of the following EXCEPT a. general uncertainty. b. a clear understanding of future economic opportunities and threats. c. inability of economists to provide valid and reliable predictions. d. an expanding economy in Vietnam.

B

Government agencies are known for having so many layers and rules that decisions are made slowly and inefficiently. In this case, the __________ resource is a detriment to taxpayers using and paying for the bureaucracy. A : financial B : organizational C : physical D : technological

B

Circuit Corp. is a manufacturer of a broad range of consumer electronics products. These consumer products are all highly profitable. The firm also manufactures a low-cost component which is an essential differentiating feature for most of their consumer products. The costs to manufacture this component have risen sharply in recent months. Internal cost accounting estimates now indicate the company is breaking even on the manufacture of this component. Which of the following is most likely? a. Circuit will likely continue to manufacture the component, even at a loss, due to low supplier power. b. Circuit will likely continue to manufacture the component, even at a loss, due to high strategic stakes. c. Circuit will likely discontinue manufacture the component due to low strategic stakes. d. Circuit will likely discontinue manufacture the component due to high supplier stakes.

B

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners a. resisted selling at any price. b. sold the company to the larger brewer. c. designed a poison pill to discourage a takeover. d. looked for smaller brewers to acquire instead of selling to the larger brewer.

B

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT a. the technology used is not proprietary. b. the prices of component parts tends to rise rapidly. c. product prices fall quickly in fast-cycle markets. d. counterattacks from rivals come quickly.

B

Compared to internal product development, acquisitions allow a. immediate access to innovations in mature product markets. b. more accurate prediction of return on investment. c. slower market entry. d. more effective use of company core competencies.

B

Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm.

B

Compared with downsizing, ____ has (have) a more positive effect on firm performance. a. reconfiguring b. downscoping c. leveraged buyouts d. acquisitions

B

Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestle, and Godiva) where firms package design (including package downsizing) and ease of availability is characteristic of a a. slow-cycle market b. standard cycle market. c. fast-cycle market. d. intermediate-cycle market.

B

Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of a. fast-cycle markets. b. standard-cycle markets. c. incremental-cycle markets. d. slow-cycle markets.

B

Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors. b. shareholders and managers. c. the board of directors and managers. d. none of the these.

B

Currently, the rationale for making an acquisition includes each of the following EXCEPT a. To increase market power. b. To decrease taxes paid by shareholders. c. To overcome entry barriers. d. To increase diversification.

B

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets. The main barrier to entry DWK is likely to encounter here is a. government licensing and permits. b. access to distribution channels. c. consumers' switching costs. d. cost disadvantages independent of scale.

B

Denver-based Kazoo Toys uses the __________ strategy to create value for parents and children interested in purchasing unique toys while simultaneously having access to unique services. a. cost leadership b. focused differentiation c. integrated cost leadership differentiation d. differentiation

B

Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for a. market discipline. b. innovation. c. risk analysis. d. international diversification.

B

Environmental scanning would be most important for which of the following organizations? a. a provider of hospice services for the terminally ill b. a web design company catering to small businesses c. a neighborhood sewer and water utility d. a manufacturer of household linens

B

Firms that achieve competitive parity can expect to: A : earn below-average returns. B : earn average returns. C : earn above-average returns. D : initially earn above-average returns, declining to average returns.

B

Firms that have strong positive relationships with suppliers and customers are said to have __________, an essential ingredient to creating value. A : customer value B : social capital C : effective marketing D : an attractive industry

B

Firms within strategic groups a. follow dissimilar strategies. b. follow similar strategies across certain dimensions. c. typically engage in greater amounts of intergroup rivalry than intragroup rivalry. d. exist almost exclusively in the manufacturing sector.

B

From a customer's point of view, for an organization's capability to be a core competence, it must be: A : inimitable and unique. B : valuable and unique. C : inimitable and nonsubstitutable. D : valuable and nonsubstitutable

B

Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor, for years. Gamma has gathered and analyzed large amounts of competitive intelligence about Ardent. It has observed as much of the firm's internal functioning and technology as it can legally, yet Gamma cannot understand why Ardent has a competitive advantage over it. The source of Ardent's success is: A : social complexity. B : causally ambiguous. C : organizational culture. D : historical conditions.

B

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(an) ____ director. a. lead independent b. inside c. related d. encumbered

B

The presence of barriers to entry in a particular market will generally make acquisitions ____ as an entry strategy. a. less likely b. more likely c. prohibitive d. illegal

B

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Iraq and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investiga-tions by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a. the director of food service for IFS b. the board of directors of IFS c. the employees directly involved in the wrongdoing d. the head of contract services for the Marines

B

Knowledge transfer and access to resources the firm does not own but needs to complete activities within the value chain are enhanced by: A : guidelines for sharing knowledge and resources. B : social capital. C : penalties for not sharing knowledge and resources. D : training employees on how to cooperate.

B

Managers in the U.S. receive ____ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

B

Managers may decide to invest ____ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets

B

Marin Industries is a U.S. company. It is exploring the possibility of offshoring in order to create value. Which of the following activities would be an example of offshoring? A : Building a manufacturing plant in South America B : Contracting with an Asian company to provide technical support C : Purchasing a competitor in the UK D : Selling its products in Europe

B

Market power is derived primarily from the a. core competencies of the firm. b. size of a firm and its resources and capabilities. c. quality of a firm's top management team. d. depth of a firm's strategy.

B

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that: a. Baby Boomers may find that they do not need well-fitting shoes, since they will become increasingly sedentary as they age. b. A competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit. c. Athletic shoes may go out of style. d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance's focus advantage.

B

On the whole there are more competitive responses to a. strategic actions than to tactical actions. b. tactical actions than to strategic actions. c. buyer pressures than to supplier pressures. d. the demands of the top management team than to industry structural pressures.

B

Organizational culture is: A : amorphous and changeable. B : not easily imitable. C : so difficult to analyze that most firms should choose to ignore it. D : typically fragile in the face of changes in the external environment

B

Ownership concentration is determined by both a. the number of stockholders and the parties they represent. b. the number of stockholders and total percentage of shares they own. c. the number of outside directors and the parties they represent. d. the number of outside directors and total percentage of shares they own.

B

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will _____________ until ________________. a. initiate more competitive actions; the firm returns to profitability b. initiate fewer competitive actions; the quality problems are corrected c. initiate more competitive actions; the quality problems are corrected d. advertise more; customers believe the quality had improved

B

Research suggests that a firm with greater multimarket contact is _______ likely to initiate and attack, and _____ likely to respond aggressively when attacked. a. more; more b. less; more c. less; less d. more; less

B

Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.

B

Reverse engineering is characteristic of a. first movers. b. fast-cycle markets. c. market leaders. d. price predators.

B

Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. A majority of the directors are concerned that while Mr. Leagreet has been re-sponsible for the firm's earning above-average returns, he has been displaying a tendency to-ward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet.

B

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a/an a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this market.

B

Subscriptions to the New York Times have been decreasing as more customers receive their news through other media. At the same time, advertisers have shifted portions of their spending to other media. The newspaper's managers are making decisions under: A : certainty. B : uncertainty. C : intraorganizational conflict. D : interorganizational conflict

B

The term "leverage" in leveraged buyouts refers to the a. firm's increased concentration on the firm's core competencies. b. amount of new debt incurred in buying the firm. c. fact that the employees are purchasing the firm for which they work. d. process of removing the firm's stock from public trading.

B

Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be? a. An industry-wide competitor decides that the market segment served by IKEA is worth entering. b. Focusing on a more narrowly defined segment and "outfocusing" the focuser. c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors. d. Experience can narrow customer's perceptions of value of the firm's differentiated features.

B

TQM is most helpful to firms following the ____ business strategy. a. cost-leadership b. integrated cost-leadership/differentiation c. focused cost-leadership d. focused differentiation

B

Tangible resources include: A : assets that are people-dependent, such as know-how. B : assets that can be observed and quantified. C : organizational culture. D : a firms reputation.

B

The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her inter-est-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behav-ior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers.

B

The Monteleone Company pays large fees to a highly-recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the a. focused cost-leadership strategy. b. focused differentiation strategy. c. integrated cost leadership/differentiation strategy. d. total quality strategy.

B

The New York Stock Exchange requires that the audit committee be a. available to comment to external analysts. b. headed by outside directors. c. liable for any illegal actions by the top management team. d. made up of CPAs with auditing experience.

B

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve poten-tially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.

B

The capabilities used to create the sustainability/green initiatives at Walmart and Target are __________ but less likely to be __________. A : rare; valuable B : valuable; rare C : socially complex; rare D : valuable; causally ambiguous

B

The concepts of Guanxi, Wa, and Inhwa all convey the general idea of a. entrepreneurial risk-taking. b. interpersonal relationships. c. the value of hard work. d. personal achievement.

B

The effectiveness of any of the generic business-level strategies is contingent upon a. customer needs and competitors' strategies. b. the match between the opportunities and threats in its external market and the strengths of its internal environment. c. the trends in the general consumer base and the robustness of the global and industry economy. d. the firm's competitive scope and its competitive advantage.

B

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b. it is difficult and time intensive for companies to develop products that differ from their current product line. c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.

B

The highest amount a firm can charge for its products is most directly affected by a. expected retaliation from competitors. b. the cost of substitute products. c. variable costs of production. d. customers' high switching costs.

B

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies: A : in a way that uniquely bundles and leverages the firms existing resources. B : while simultaneously developing new ones. C : and imitate the core competencies of successful competitors. D : in order to preserve and enhance them against the firms competitors.

B

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the ____ the response will be of these other firms. a. more fragmented b. slower c. larger d. more tactical

B

The longer the focus of managerial incentive compensation, the greater the ____ top-level man-agers. a. earnings potential for b. risks borne by c. incentives for d. potential tax burden for

B

The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned.

B

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following a business strategies? a. cost leadership. b. focused differentiation. c. integrated cost leadership/differentiation. d. differentiation.

B

The observation that in China, even though car sales surged 37% in 2010, it is expected that by 2015 they will reach production overcapacity and have a glut of extra cars is an aspect of the ____ segment of the general environment. a. demographic b. global c. physical d. technological

B

Which of the following represents a competitive intelligence practice that is both legal and ethical? a. A firm hires a competitor's employee and asks that employee to share the names and addresses of business contacts from his/her previous job. b. An executive attends a trade show solely to obtain a competitor's brochures, listen to sales pitches, and ask questions about the competitor's products. c. A city council member shares information about the decision process for selecting a contractor to build a new library wing with his wife, an executive with a construction firm bidding on the contract. d. A marketing manager at Smith-Phillips, Inc., sells confidential plans for the company's expansion into the Far East to a firm that is not a direct competitor.

B

Which of the following would NOT be identified in an analysis of the economic portion of the general environment? a. The willingness of Chrysler's buyers to purchase large vehicles due to an increase in oil prices. b. The ability of Ford to issue new debt due to their recent financial performance. c. The ability of BMW's buyers to finance car purchases due to a change in interest rates. d. The willingness of GM buyers to purchase new vehicles due to the threat of recession.

B

Without quality, the firm's products a. can compete effectively on the basis of low price. b. lack credibility among customers. c. must be exported to developing countries, because they are not competitive in the U.S. or developed countries. d. are associated with predatory competition.

B

____ markets are often described as volatile and innovative. a. Slow-cycle b. Fast-cycle c. Standard-cycle d. Sheltered

B

__________ is the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context. A : Strategic thinking B : A global mind-set C : Profit-pooling D : Competency-discovering

B

A company pursuing the differentiation or focused differentiation strategy would tend to a. build economies of scale and efficient operations. b. develop and maintain cost-effective MIS operations. c. develop flexible systems that allow rapid response to customers changing needs. d. have relationships with suppliers to maintain efficient flow of supplies for operations.

C

A company using a narrow target market in its business strategy is a. following a cost leadership business strategy. b. focusing on a broad array of geographic markets. c. limiting the group of customer segments served. d. decreasing the number of activities on its value chain.

C

A competitive action can be one of two types, either ____ or ____. a. aggressive, defensive b. quality-based, cost-based c. strategic, tactical d. market-based, resource-based

C

A financial management firm has existed for more than 70 years. Some of its original clients' grandchildren are now clients of the firm themselves. The partners and staff of the firm have spent most or all of their careers with the firm. Many have even married into each other's families. This firm has capabilities that would be costly to imitate primarily because of its: A : access to large amounts of financial capital. B : causally ambiguous core competencies. C : social complexity. D : unique historical conditions.

C

A firm seeking resources with the potential to be formed into core competencies as the foundation for creating value for customers should focus on assembling _________ resources. A : the most B : rigid C : the right D : dark side

C

A firm's core competencies, integrated with an understanding of the results of studying the conditions in the external environment, should: A : guarantee profits. B : lead to a first-mover advantage. C : drive the selection of strategies. D : increase the firms market share.

C

A friendly acquisition a. raises the price that has to be paid for a firm. b. enhances the complementarity of the two firms' assets. c. facilitates the integration of the acquired and acquiring firms. d. allows joint ventures to be developed.

C

A leveraged buyout refers to a. a firm restructuring itself by selling off unrelated units of the company's portfolio. b. a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background. c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. d. an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity.

C

A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu, based solely on organically raised chicken and beef, and organic seasonal produce. It has opened new locations in other cities, and these new locations are becoming highly profitable. Farm Fresh can expect that, at best, its competitive advantage will be: A : permanent. B : sustainable. C : temporary. D : defensible.

C

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room operations. It also does not allow academics to conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are: A : causally ambiguous. B : unobservable. C : imitable. D : common.

C

A marketing manager at GTA Technology wants the next generation of a particular application to include certain features. The product manager of that app insists that the feature would be costly to implement and could not be achieved by the desired release date unless additional resources, both financial and human, were directed to the app. The marketing manager insists that this is necessary, while the product manager feels that the inclusion of these features would not validate the extra investment. It is now up to the project manager to decide how to proceed. Which of the following conditions is most affecting the project manager's decision? A : Uncertainty B : Complexity C : Intraorganizational conflict D : Sustainability

C

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use a. the integrated cost leadership/differentiation strategy. b. either of the focus strategies. c. the cost-leadership strategy. d. any of the strategies except the focused differentiation strategy.

C

ACME Corp. is a leading provider of radios to the commercial market. Its products all rely on printed circuit-board technology. ACME has protected its market leadership with continued advancements in this technology, which it patents. A competitor has developed a radio for this market with equal performance but that uses a software-based technology instead of circuit boards. ACME's technology leadership fails which of the following capability tests? A : Value test B : Rareness test C : Substitutability test D : Costly-to-imitate test

C

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its traditional strategy and product characteristics over this time period. But, Acme has experienced declines in sales and profits over the last four quarters. The CEO of Acme should a. continue with the proven strategy because its returns over the long run are important. b. focus on improving efficiency of production and cost control. c. conduct an analysis of the external environment. d. immediately begin making incremental adjustments to the traditional business strategy in an effort to improve sales.

C

Agency costs reflect all of the following EXCEPT ____ costs. a. monitoring b. enforcement c. opportunity d. incentive

C

All of the following are consequences of the Sarbanes-Oxley Act EXCEPT a. some foreign firms have delisted on U.S. stock exchanges. b. internal auditing scrutiny has improved and there is greater trust in financial report-ing. c. an increased number of IPOs (initial public offerings) are expected. d. Section 404 creates excessive costs for firms.

C

All of the following are examples of differentiated products EXCEPT a. Toyota's Lexus. b. Caterpillar's heavy duty earth moving equipment. c. store brand beef and pork. d. McKinsey & Company.

C

All of the following are forces that create high rivalry within an industry EXCEPT a. numerous or equally balanced competitors. b. high fixed costs. c. fast industry growth. d. high storage costs.

C

All of the following are tangible resources EXCEPT: A : production equipment. B : distribution centers. C : a firms reputation. D : formal reporting structures.

C

All of the following are ways that a good or service can be differentiated EXCEPT a. Responsive customer service b. Perceived prestige and status c. Economies of scale and efficient operations d. Engineering design and performance

C

All of the following statements are correct EXCEPT a. immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. b. shareholders of acquired firms often earn above-average returns from an acquisition. c. the majority of acquisitions increase long-term value for the acquiring firm. d. shareholders of acquiring firms typically earn returns from the transaction that are close to zero.

C

Amazon built a new distribution facility in Robbinsville, New Jersey. It is immediately off the exit of a major road. This is an example of a(n) __________ resource. A : financial B : organizational C : physical D : technological

C

Analyzing income distribution would include all of the following EXCEPT a. the purchasing power of various age groups. b. the discretionary income of various ethnic groups. c. wage differentials between male and female employees working for a large manufacturer. d. how income is distributed among regions of the U.S.

C

Because acquisitions may become a substitute for innovation, Teva Pharmaceutical's acquisition of Cephalon should be driven by ___________ rather than _________________. a. defensive reasons (to gain sales revenue in the short run); strategic reasons (cost and revenue strategies) b. both strategic and defensive reasons; either one or the other c. strategic reasons; defensive reasons d. avoiding internal R&D expenditures; developing innovation capabilities

C

Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy, and would allow Clarissa's employer to gain many of the competitor's clients. a. There is no ethical or legal concern here for Clarissa. b. The ethical dilemma is not Clarissa's but her client's, since he passed on confidential information to her voluntarily. c. The ethical dilemma here is the right of competitors not to reveal certain information. d. This is an example of ethical competitor intelligence obtained as eavesdropping.

C

Compared to intangible resources, in terms of their value, tangible resources are __________ constrained because they are __________ to leverage. A : less; easier B : less; harder C : more; harder D : more; easier

C

Compared to tangible resources, intangible resources are: A : of less strategic value to the firm. B : less likely to be the focus of strategic analysis. C : a superior source of capabilities. D : more likely to be reflected on the firms balance sheet.

C

Competitive dynamics refers to the a. circumstances in which competitors are aware of the degree of their mutual interdependence resulting from market commonality and resource similarity. b. set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position. c. total set of actions and responses taken by all firms competing within a market. d. ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position.

C

Competitor intelligence is a. legally or illegally-gained data about competitors' internal strategic processes and competitive decisions. b. strategic information gained from industrial espionage targeting international competitors. c. the data that the firm gathers to understand competitors' objectives, strategies, assumptions, and capabilities. d. illegal to gather under the Sarbanes-Oxley Act.

C

Complete the following: In small firms, managers often own a ____ percentage of the firm, which means there is ____ separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large

C

Customer loyalty programs such as airline frequent flyer miles are an attempt to a. decrease competitors' access to distribution channels. b. develop a cost advantage independent of scale. c. increase customers' switching costs. d. overcome the perishability of the hotel "product."

C

Demographic changes include variations in income distribution. Which of the following statements is true? a. Firms are most interested in the consumers comprising the top ten percent of the household income. b. In general, living standards have deteriorated over time. c. The general loss in real income has been somewhat offset by the increase in dual-career couples. d. Workforce diversity is making the concept of average income obsolete.

C

Due diligence includes all of the following activities EXCEPT assessing a. differences in firm cultures. b. tax consequences of the acquisition. c. the level of private synergy between the two firms. d. financing for intended transaction.

C

Economies of scale refer to the fact that as the a. quantity of product produced in a given time period increases, the cost of manufacturing each unit increases. b. quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant. c. quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases. d. quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

C

Evidence suggests that firms using acquisitions as a substitute for internally developed innovations a. are able to offset the loss of research and development competencies by competencies in other areas. b. extend their time-to-market for new product launches. c. eventually encounter performance problems. d. can leverage their core competencies across a broader range of products.

C

Firms use the integrated cost leadership/differentiation strategy because a. other firms have established unassailable market dominance with the other four strategies. b. global markets allow for much broader competitive scope. c. most consumers want to pay a low price for products with somewhat highly differentiated features. d. one strategy is not enough for most large firms.

C

Firms with ______ market commonality and _____ resource similarity are direct and mutually acknowledged competitors. a. low; high b. low; low c. high; high d. high; low

C

Firms with few competitive resources are more likely to a. not respond to competitive actions. b. respond quickly to competitive actions. c. delay responding to competitive actions. d. respond to strategic actions, but not to tactical actions.

C

First movers are a. entrepreneurs who lead in the establishment of new industries. b. firms that are first to exit a declining industry. c. firms that take an initial competitive action. d. individuals who move frequently as employment opportunities change in a locale.

C

Focus strategies are a. sheltered from the risks associated with industry-wide strategies because of their niche focus. b. able to avoid global risk by focusing on niches in national or regional markets. c. faced with additional types of risks than are industry-wide strategies. d. more subject to failure than industry-wide strategies.

C

Given the demands for greater accountability and improved performance, which of the follow-ing is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance

C

One means that is considered to improve the effectiveness of outside directors is a. mandating that all outside directors be drawn from government or academia rather than industry. b. requiring that outside directors be former executives of the firm. c. requiring outside directors to own significant equity stakes in the firm. d. requiring that outside directors be truly objective by having no ownership interest in the firm.

C

Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is most likely to be TRUE? a. Ahrens will not respond aggressively since this is a strategic move and not a tactical action. b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not expend organizational slack on a major response. c. Ahrens will respond aggressively because of the high multimarket contact between Hilliard and Ahrens. d. Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle industry.

C

If a firm offers a service that is valuable, rare, and costly to imitate, but a substitute exists for the service, the firm will: A : achieve competitive parity. B : have a competitive disadvantage. C : have a temporary competitive advantage. D : gain a sustainable competitive advantage.

C

If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly-performing firms d. over-valued firms

C

In order to meet and exceed customer's expectations, firms must a. constantly manipulate customers' perceptions of their needs. b. answer the questions: who, what, when, where, how, and why as they apply to customers. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies from imitation by competitors.

C

In the U.S., a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.

C

In the airline industry, consolidation among fuel providers serving airport facilities would be considered as ____ factor in the five forces model of competition. a. a reduction of the airlines' abilities to enjoy economies of scale b. an increase in switching costs because the airlines have no choice but to use jet fuel and other oil products c. an increase in the bargaining power of suppliers of a critical input d. an increase in the intensity of rivalry among airlines for scarce resources

C

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G performs well and are examples of the company's: A : tangible resources. B : intangible resources. C : core competencies. D : capabilities.

C

Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm.

C

Intensified rivalry within an industry results in a. increased hiring across the industry. b. increased total revenues across the industry. c. decreased average profitability across the industry. d. increased entries into the industry.

C

Lawsuits over patent and copyright infringements are more common and intense in a. fast-cycle markets because the market is innovation-driven. b. standard-cycle markets because the firm's brand name is such an important competitive advantage. c. slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage. d. standard-cycle markets because innovation is rare, and so gives the innovating firm a significant competitive advantage.

C

Lobelia's Nursery and Garden Resource Center has long provided high quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to a. be unmotivated to respond because their market position is not threatened by a new competitor from out-of-town. b. respond with fierce attacks because of resource dissimilarity. c. respond aggressively because of high market dependence. d. take no competitive response because of the lack of mutual interdependence among the nurseries.

C

Magma, Inc., acquired Vulcan, Inc., three years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will a. go public through an IPO. b. review the due diligence information collected before the acquisition. c. restructure. d. review its tactical-level strategies.

C

Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dis-missed.

C

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately _______ percent of innovations are imitated within four years after patents are obtained. a. five b. ten c. sixty d. twenty

C

Many firms outsource the payroll function of paying employees to firms such as ADP. Payroll is a(n): A : value-chain activity. B : operation function. C : support function. D : supply-chain function.

C

McDonald's culture, with an emphasis on cleanliness, consistency, service, and the training that reinforces the value of these characteristics, illustrates which of the following criteria for sustainable competitive advantage? A : Valuable B : Rare C : Costly to imitate D : Nonsubstitutable

C

New entrants to an industry are more likely when a. it is difficult to gain access to distribution channels. b. economies of scale in the industry are high. c. product differentiation in the industry is low. d. capital requirements in the industry are high.

C

Once a firm has determined its competitor's future objectives, current strategy, assumptions, and strengths and weaknesses, its next step is to develop a. an environmental assessment. b. a marketing plan. c. a response profile. d. a task force to implement the plan.

C

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that a. a competitor's products can convey a product's differentiated features to a customer at a significantly reduced price. b. a product imitation can cause customers to perceive that competitors offer essentially the same good. c. experience can narrow a customer's perceptions of the value of a product's differentiated features. d. brand loyalty insulates a company from rivalry with competitors.

C

Research suggests that firms with ____ perform better, especially when collaboration among top management team members is important. a. greater emphasis on stock options b. larger proportion of insiders on the board of directors c. smaller pay gap between the CEO and other top executives d. benchmarking used for top executive pay

C

Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy than it does in the differentiation strategy. a. marketing and sales b. technology development c. logistics d. human resource management

C

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last two years. b. The board has been successful in reducing the percentage of CEO pay that is com-posed of stock options. c. The CEO/Chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.

C

Some research findings have shown that acquisitions typically ____ for shareholders in the acquiring firm. a. result in above-average returns b. provide approximately average returns c. result in returns near zero d. take some time to achieve private synergy, but eventually result in above-average returns

C

Southwest Airlines has a complex interrelationship between its culture and staff that adds value in ways that other airlines cannot, such as jokes on flights or the cooperation between gate personnel and pilots. These examples illustrate which of the following criteria for sustainable competitive advantage? A : Valuable B : Rare C : Costly to imitate D : Nonsubstitutable

C

Starbuck's determined that all of the following customer needs were important EXCEPT a. fast service. b. the experience associated with drinking coffee, not just the coffee. c. the actual product of service (e.g., a cup of coffee), not the experience. d. allowing customer to design their own drinks.

C

Strategic fit among many activities (in an activity map) is fundamental to a. the development of core competencies for a firm. b. the breadth of competitive scope for a firm. c. sustainability of a firm's competitive advantage. d. the integrity of the firm's value chain.

C

Suppliers are powerful when a. satisfactory substitutes are available. b. they sell a commodity product. c. they offer a credible threat of forward integration. d. they are in a highly fragmented industry.

C

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO a. realizes that he must understand competitors in order to predict their competitive actions and responses. b. understands that he is the market leader in his niche and thus has a sustainable competitive advantage. c. believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share. d. realizes his firm has such lower resources than other competitors that his chain is "competitively invisible" to them.

C

The ____ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions. a. pre-acquisition negotiations b. pre-acquisition due diligence c. post-acquisition integration d. post-acquisition restructuring

C

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how a. the organizational culture of Southwest Airlines is the key to the success of the organization. b. understanding of the profit pool in an industry indicates to companies where above-average returns can be earned. c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. d. the primary and support activities of a successful company capture value all along the value chain.

C

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because a. customers will seek out the lowest cost product. b. customers of non-differentiated products are sensitive to price increases. c. customers are loyal to brands that are differentiated in meaningful ways. d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.

C

The environmental segments that comprise the general environment typically will NOT include a. demographic factors. b. sociocultural factors. c. substitute products or services. d. technological factors.

C

The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that a. customers are relatively weak because of the high switching costs created by frequent flyer programs. b. the industry is moving toward differentiation of services. c. the competitive rivalry in the industry is severe. d. the economic segment of the external environment has shifted, but airline strategies have not changed.

C

The expenses incurred by firms trying to create synergy through acquisition are called ____ costs. a. differentiation b. diversification c. transaction d. interaction

C

The focused differentiation strategy differs from the differentiation strategy in that a. the focused differentiators have a broader competitive scope. b. the value-creating activities of focused differentiators are more constrained. c. focused differentiators target a narrower customer market. d. there are fewer risks with the focused differentiation strategy.

C

Which of the following statements is FALSE? a. Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios. b. Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm. c. Private synergy is easy for competitors to understand and imitate. d. Private synergy is more likely when the two firms in an acquisition have complementary assets.

C

Which of the following would be categorized as a support function? A : Developing an advertising campaign B : Handling customer orders C : Training employees D : Procuring raw materials

C

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy? a. Cost leadership b. Differentiation c. Integrated Cost Leadership/Differentiation d. Stuck-in-the-middle

C

____ typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving. a. Financial slack b. Private synergy c. Friendly acquisitions d. High compensation

C

__________ can be viewed as the capacity to take action. A : Strategic assets B : Human capital C : Core competencies D : Functional capabilities

C

___________ may be necessary because acquisitions create a situation in which the newly formed form has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management. a. Management buyout b. Leveraged buyout c. Downsizing d. Downscoping

C

A company in a ____ industry is LEAST likely to make heavy use of patents and copyrights. a. slow-cycle b. medium-cycle c. standard-cycle d. fast-cycle

D

A competitor analysis includes all of the following about competitors EXCEPT a. future objectives. b. current strategy. c. assumptions. d. traditions.

D

A decision that results in failure: A : is a career-ending event because it is so unusual. B : often results from lack of accountability. C : fosters organizational inertia. D : allows for learning.

D

A differentiation strategy can be effective in controlling the power of substitutes in an industry because a. customers have low switching costs. b. substitute products are lower quality. c. a differentiating firm can always lower prices. d. customers develop brand loyalty.

D

A firm that is LEAST likely to launch competitive actions is one that has a. organizational slack. b. advanced research and development. c. recently improved the quality of its products. d. large size.

D

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____. a. generate free cash flows, reduce the risk of total firm failure b. increase the price of the firm's stock, increase the dividends paid out from free cash flows c. reduce the risk of total firm failure, reduce their total portfolio risk d. reduce their employment risk, increase the company's value

D

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy. a. customer sensitive to price differentials b. threat by the cost leader c. customer experience d. counterfeiting

D

A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general economy has taken a downturn. The company is likely to a. raise prices on washing machines to offset lost sales. b. be vulnerable to new entrants to an attractive market. c. suffer from intense rivalry from international manufacturers. d. offer rebates and incentives for customers who purchase washing machines.

D

A takeover defense wherein preferred stock in the merged firm is offered to shareholders at a highly attractive rate of exchange is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

D

Aardvark Corp. has three products. Two products together make up two-thirds of revenues and constitute 50 percent of company profits. Aardvark's third product makes up one third of sales. With profitability far above the industry average, this product is responsible for one half of Aardvark's profits. Which of the following statements regarding assessment of the general environment is accurate for Aardvark? a. The company should monitor the general environment for changes that might effect the revenue of all products. b. The company should monitor the general environment for changes that might effect the profitability of the most profitable products. c. The company should monitor the general environment for changes that might effect the profitability of all products. d. The company should monitor the general environment for changes that might effect the revenue and profitability of all products.

D

Acquisitions can become a time sink for top level managers for all the following reasons EXCEPT a. the integration process after acquisition requires managerial attention. b. they must prepare for acquisition negotiations. c. managers are involved in the search for viable acquisition candidates. d. only top managers can perform the required due diligence.

D

Each of the following is a rationale for acquisitions EXCEPT a. achieving greater market power. b. overcoming significant barriers to entry. c. increasing speed of market entry. d. positioning the firm for a tactical competitive move.

D

Agricultural Chemicals, Inc., was the target of a hostile takeover six months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE? a. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. They are more a function of general market conditions. b. The fact that a hostile takeover has occurred is proof that the firm was un-der-performing. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. d. The CEO and top executives should not consider their jobs secure.

D

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, what would be Akamai's likely response? a. raise its prices b. do nothing since it is the market leader c. exit the industry d. lower its prices

D

All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. defense tactics are usually beneficial for the executives of the target firm. b. defense tactics are opposed by institutional investors. c. defense tactics vary in their effectiveness as a defense to takeovers. d. defense tactics make the costs of a takeover lower.

D

All of the following were traditional sources of competitive advantage EXCEPT: A : labor costs. B : access to financial resources. C : protected markets. D : a highly educated labor market

D

All the following are ethical sources of data for external analysis EXCEPT a. trade shows. b. competitor's annual reports. c. competitor's help wanted advertisements d. a competitor's confidential memos.

D

Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will be most likely to be secure if a. Ambrose's research is in a non-core activity. b. the acquisition has been financed by junk bonds. c. Ambrose is in a position to take a poison pill. d. Ambrose is a key employee in the firm's primary business.

D

An analysis of the economic segment of the external environment would include all of the following EXCEPT a. interest rates. b. trade deficits or surpluses. c. inflation rates. d. the move toward a contingent workforce.

D

An industry is defined as a. a group of firms producing the same products or services. b. firms producing items that sell through the same distribution channels. c. firms that sell the same products or services to the same customer base. d. a group of firms producing products that are close substitutes.

D

An organization's loyalty to its own product is a competitive disadvantage in a ____ market. a. slow-cycle b. standard cycle c. intermediate cycle d. fast-cycle

D

As customers come to believe that a firm's product is unique, this allows the firm to a. decrease its advertising expenditures. b. customize its product. c. force other companies out of the market by lowering prices. d. obtain loyal customers.

D

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(an) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

D

Capabilities typically come from: A : individual resources. B : one unique resource. C : several outstanding resources used independently. D : combining resources

D

Charmed by Claire is a successful retail boutique that sells women's accessories. Claire, the owner/manager, knows that women have many options when buying jewelry. When customers enter her store, they are greeted by name and given prompt, friendly attention. Customers return to the store because the service is excellent. Claire says the most important decision she makes is hiring the best staff because customer service is vital to her business. Customer service is a(n): A : human resource. B : organizational resource. C : rare resource. D : core competency.

D

Competitor intelligence could ethically come from all the following EXCEPT a. court records. b. financial reports. c. trade show discussions. d. eavesdropping.

D

Competitors are more likely to respond to competitive actions that are taken by a. differentiators. b. larger companies. c. first movers. d. market leaders.

D

Cross-border acquisitions are critical to U.S. firms competing internationally a. if they are to develop differentiated products for markets served. b. when market share growth is the focus. c. where consolidated operations are beneficial. d. if they wish to overcome entry barriers to international markets.

D

Cross-border acquisitions are primarily made to a. reshape the firm's competitive scope. b. reduce the cost of new product development. c. take advantage of higher education levels of labor in developed countries. d. overcome barriers to entry in another country.

D

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, while Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes. b. Durable will be unable to absorb the lower cost, and will go out of business. c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile. d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

D

If Southwest Airlines employees lost their high enthusiasm and commitment to the company, a. the airline could continue without problems because its cost-leadership strategy is dependent on its efficient internal procedures. b. replacement employees could be hired from rival airlines that are laying off employees easily merged into the Southwest culture. c. there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees. d. Southwest would have lost one of its competitive advantages and its performance would be threatened.

D

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT a. age structure. b. ethnic mix. c. distribution of income. d. cultural values.

D

In general, firms are more aware of competitors who have similar resources and who a. have low market dependence. b. are late movers. c. have low market commonality. d. compete against the firm in multiple markets.

D

In order to compete effectively, standard-cycle firms need all of the following EXCEPT a. large market share. b. customer loyalty through brand name. c. careful control of operations to preserve consistency for customers. d. rapid and continuous product introductions.

D

In the chapter Strategic Focus, the weakness of corporate boards was exemplified by ___________________. a. significant pay reductions for many corporate CEOs b. the appointment by EasyJet of a new chairman of the board c. Borders' decision to increase the size of its board d. The firing by President Obama of the CEO of General Motors because the board had failed to act in previous years

D

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(an) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

D

Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors.

D

Multimarket competition occurs when firms a. sell different products to the same customer. b. have a high level of awareness of their competitors' strategic intent. c. simultaneously enter into an attack strategy. d. compete against each other in several geographic or product markets.

D

One capability that can be learned from failure is when to: As live streaming and downloading of digital content increased, a manufacturer of CD and DVD players experienced a downturn. The managers felt that the firm's capability in producing these players was a core competence. They increased their investment to improve the playback quality, add more playback features, and change the design of the players to make them more appealing to the eye. Even with these investments, the firm had to lower prices, and was still unable to maintain sales volume. Clearly, mistakes were made in managing the firm's resources. What should the firm have learned from this failure? A : When to change marketing strategy B : When to add more resources C : When to outsource D : When to quit

D

One problem with becoming too large is that large firms a. tend to have less market power. b. have less potential for economies of scale. c. become attractive takeover targets. d. usually increase bureaucratic controls.

D

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT a. Pappelbon did not fully evaluate the target. b. Pappelbon overpaid. c. Pappelbon's due diligence was not fully effective. d. Pappelbon's management was overly focused on acquisitions.

D

Problems associated with acquisitions include all of the following EXCEPT a. Managers overly focused on acquisitions. b. Integration difficulties. c. Large or extraordinary debt. d. Excessive time spent on the due diligence process.

D

Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. a. greater experience in a wider range of industries, lessening of managerial employ-ment risk b. the manager frequently invests in the acquired firm which allows him or her exten-sive profits, the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered, the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth, a reduction in mana-gerial employment risk

D

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod a. are direct mutually-acknowledged competitors. b. have high resource similarity. c. have high market commonality. d. are probably not engaged in intense competitive rivalry.

D

Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. b. the board includes employees as voting members. c. the board is homogenous in composition. d. outside directors own significant equity in the organization.

D

Rivalry between Dell, Hewlett-Packard, and other computer manufacturers is intense in part because a. low geographic saturation of the market. b. the high differentiation among competing products. c. the low threat of supplier forward integration. d. these companies are trying to find ways to differentiate their products.

D

Shareholder value is a. the firm's free cash flow. b. the total revenue of the firm. c. determined by the size of the firm. d. reflected in the price of the stock.

D

Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

D

The owner of a store that sells fine-quality fabrics for home seamstresses bemoans the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-than-average returns. This case is an example of: A : the hazard of competitors being able to imitate a firms core competency. B : the need for firms to stick to their core competencies through temporary downturns in market demand. C : the lack of intangible resources undermining the core competencies of the firm. D : core competencies that have become core rigidities.

D

The ownership of major blocks of stock by institutional investors have resulted in all of the fol-lowing EXCEPT a. making CEOs more accountable for their performance. b. increasing the concentration of ownership of large U.S. firms. c. focusing attention on ineffective boards of directors. d. tying the compensation of CEOs to measurable financial criteria.

D

The term "stuck in the middle" a. means adhering to a middle of the road strategy in the face of negative outcomes. b. indicates that the customers of the firm are willing to pay only a mid-range price for the product. c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality. d. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

D

The typical risks of a differentiation strategy do NOT include which of the following? a. Customers may find the price differential between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features. c. Counterfeit goods are widely available and acceptable to customers. d. Suppliers of raw materials erode the firm's profit margin with price increases.

D

The use of the Internet by Netflix to collect data on customer preferences is an example of a. assessing. b. monitoring. c. forecasting. d. scanning.

D

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are a. Flexible Manufacturing Systems, Reengineering, and Total Quality Management. b. Outsourcing, Reengineering, and Flexible Manufacturing Systems. c. Outsourcing, Total Quality Management, and Information Networks. d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.

D

Traditionally, the music industry signed multi-year contracts with artists and sold copyright protected music through established distribution channels. A shift to the digital format and the rise of Internet technology has resulted in the sharing of music over peer-to-peer networks, a practice the industry called "piracy." In recent years, the music industry has seen a rapid decline in the number of CDs sold. At the same time, the ownership of the distribution rights of musical content under copyright laws remains clear. Attempts at innovation by individual record labels to offer music as direct downloads to consumer are quickly copied by other labels. Based on these factors, the best assessment is that the music industry has shifted from a ____ to a ____ cycle market. a. slow; fast b. slow; standard c. standard; slow d. standard; fast

D

Transaction costs include all of the following EXCEPT a. charges from investment bankers who complete due diligence for the acquiring firm. b. the loss of key employees following the acquisition. c. managers' time spent evaluating target firms. d. managers' time spent planning the diversification strategy of the firm.

D

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances a. the reach of the company toward the customer. b. the ability to identify the customer. c. the richness of the relationship with the customer. d. affiliation with the customer.

D

When a firm acquires its supplier, it is engaging in a(an) a. merger. b. unrelated acquisition. c. hostile takeover. d. vertical acquisition.

D

When implementing a focus strategy, the firm seeks to a. offer products that are both differentiated and low cost. b. move into the global market. c. target the typical customer in an industry. d. serve the specialized needs of a market segment.

D

When selecting a business level strategy, the firm must determine all of the following EXCEPT a. How will the customer's needs be satisfied? b. Who is the customer? c. What are the customers' needs? d. Why should these customers' needs be satisfied?

D

When the costs of supplies increase in an industry, the low-cost leader a. may continue competing with rivals on the basis of product features. b. will lose customers as a result of price increases. c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.

D

Which of the following intelligence gathering techniques is most likely to be legal and ethical? a. hiring investigators to examine the competitor's trash b. entering a competitor's production plant without authorization c. redirecting a competitor's emails to one's own company d. attending trade show presentations given by a competitor's employees

D

Which of the following is NOT a factor affecting sustainability of a competitive advantage? A : Availability of substitutes for a firms core competence B : Rate at which obsolescence of the core competence occurs because of environmental changes C : Imitability of a core competence D : Length of time the core competence has existed

D

Which of the following is NOT an attribute of a successful acquisition? a. The acquiring firm has a large amount of financial slack. b. The acquired and acquiring firms have complementary assets and/or resources. c. Innovation and R&D investments continue as part of the firm's strategy. d. Investments in advertising and image building are made quickly.

D

Which of the following is NOT an entry barrier to an industry? a. expected competitor retaliation b. economies of scale c. customer product loyalty d. bargaining power of suppliers

D

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data.

D

Which of the following would be an example of the application of next major technological opportunity for organizations? a. Boeing's Dreamliner. b. Toyota's hybrid vehicles. c. Philip Morris International's smokeless tobacco. d. Amazon's Kindle.

D

Which of the following would be categorized as a value chain activity? A : Hiring new employees B : Securing financial capital C : Investing in organizational functions D : Conducting customer feedback surveys

D

Which organization has the highest market dependence? a. a chain of rapid-service oil change shops b. a manufacturer of chemicals for the international pharmaceutical industry c. a regional department store having 26 locations in the Northwest d. a company that specializes in making replacement tiles for the space shuttle

D

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT a. large debt and increased financial risk. b. failure to invest in R&D. c. risk-averse management. d. inefficient operations.

D

Why is trust necessary to build social capital? A : Contracts between a firm and its suppliers cannot be enforced. B : Firms must be reassured that they will be reimbursed for their expenses. C : Contracts do not exist between a firm and its customers. D : Partners must be confident that neither party will take advantage of the other

D

____ are unsecured obligations that are not tied to specific assets for collateral. a. Bearer bonds b. No-load stocks c. Penny stocks d. Junk bonds

D

_________ refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business. a. Downsizing b. Hostile takeovers c. Shakeouts d. Downscoping

D

___________ is often used when the acquiring firm paid too high a premium to acquire the target firm. a. Management buyout b. Leveraged buyout c. Downscoping d. Downsizing

D

A company pursuing vertical integration can gain market power over its competitors through all of the following EXCEPT a. improved adjustment to technological changes. b. savings on operations costs. c. improved product quality. d. avoidance of market costs.

a

A noted professional art academy has founded an "artists and friends" travel company specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In addition, the art academy has purchased a framing company to both make frames for academy art works, but also to sell museum-quality framing services to the public. The art academy is engaging in diversification based on ______ relatedness. a. operational b. corporate c. intellectual d. constrained

a

An ability to efficiently allocate capital through an internal market may help the firm protect the competitive advantages it develops a. through reduced disclosure to outside parties. b. by the ability to not report losses to investors. c. by the ability to increase pay to managers without shareholders being aware. d. through the ability to reinvest cash in dividends to shareholders.

a

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and through unique training programs for staff. It has recently acquired a firm specializing in providing management services for veterinary practices. The office management firm is hoping to a. achieve economies of scope. b. implement vertical integration. c. achieve financial economies through an unrelated acquisition. d. acquire specialized talent from the veterinary management company.

a

Backward integration occurs when a company a. produces its own inputs. b. owns its own source of distribution of outputs. c. is concentrated in a single industry. d. is divesting unrelated businesses.

a

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition? a. This is a horizontal acquisition. b. This is an example of virtual integration. c. Dragonfly is beginning to build a conglomerate. d. Economies of scope are unlikely to result from this acquisition.

a

Free cash flows are a. liquid financial assets for which investments in current businesses are no longer economically viable. b. liquid financial assets that for tax purposes must be reinvested in the firm if not distributed as dividends to shareholders. c. the profits resulting after a restructured firm has been sold. d. dividends that have been distributed to shareholders that are taxed as capital gains.

a

In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify? a. economies of scope b. desire for increased compensation c. reduced managerial risk d. low performance

a

Procter & Gamble (P&G) has a paper towel and baby diaper business, both of which use paper products. The firm's paper production plant produces inputs for both businesses. P&G most likely uses the ______ diversification strategy to create a. related constrained; operational relatedness. b. related linked; corporate relatedness. c. related constrained; corporate relatedness. d. related linked; operational relatedness.

a

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel has decided to buy one of these brick plants. This is an example of a. backward integration. b. forward integration. c. horizontal integration. d. virtual integration

a

Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely achieve the high temperatures needed for the unusually strong steel it produces. The clay to make this brick is very rare and only two brick plants in the United States make this type of brick. Specialty Steel owns one of these brick plants and buys all of its production. The other brick manufacturer has recently developed an inexpensive new technology whereby ordinary clay can be used to make this fire brick. This significantly reduces the production cost of this type of brick. a. Specialty Steel has less flexibility now than if it were not vertically integrated. b. This is an example of a capacity balance problem. c. This is a result of conflicts of interest between the managers of the brick plant and the executives of Specialty Steel. d. The market power of Specialty Steel has been de-integrated.

a

Successful unrelated diversification through restructuring is typically accomplished by a. focusing on mature, low-technology businesses. b. a "random walk" of good luck in picking firms to buy. c. seeking out high technology firms in high-growth industries. d. a top management team that is not constrained by pre-established ideas of how the firm's portfolio should be developed.

a

The Publicis Groupe uses the digital technology from its digital business to enhance the advertising products in its advertising group. This sharing of activities is characteristic of the ______ diversification strategy. a. related constrained b. related linked c. unrelated d. dominant

a

The lowest level of diversification is the ______ level. a. single-business b. dominant business c. related constrained d. unrelated

a

The term "conglomerates" refers to firms using the ______ diversification strategy. a. unrelated b. related constrained c. related linked d. global

a

The value of the assets of a firm using a diversification strategy to create both operational and corporate relatedness tend to be a. discounted by investors. b. inflated by investors. c. completely ignored by investors. d. highly valued by investors.

a

What is the similarity between high-technology firms and service-based firms that makes them risky as restructuring candidates? a. They are human-resource dependent. b. They have few tangible assets. c. Both types of firm rely on financial economies. d. The demand for their products is highly sensitive to economic downturns.

a

When a firm simultaneously practices operational relatedness and corporate relatedness, a. it is difficult for investors to observe the value created by the firm. b. the firm is likely to be overvalued by investors. c. the firm will suffer from diseconomies of scope that outweigh cost savings generated. d. the firm is seeking to create value through financial economies.

a

Wm. Wrigley Jr. Company once made only chewing gum. When Wrigley bought Life Savers (a line of candy mints) and Altoids (a line of breath mints) from Kraft, chewing gum then constituted less than 95 percent of revenues. Thus, Wrigley a. was moving away from its traditional single-business strategy toward a dominant strategy. b. was moving away from its traditional dominant strategy toward a related linked strategy. c. became a conglomerate since Life Savers and Altoids are unrelated businesses. d. probably planned to restructure these companies and sell them off.

a

Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to transfer one of its key managers from its plant in St. Louis to Ireland. What is the major threat to Xanadu's plan to transfer competencies from itself to the Irish firm? a. The St. Louis manager may quit Xanadu in order to remain in St. Louis. b. American pharmaceutical manufacturing techniques may not transfer to Ireland. c. Irish managers will refuse to take direction from a foreign executive. d. The cost of transferring U.S. managers overseas is usually not cost-effective.

a

A firm that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses is engaging in ______ diversification. a. unrelated b. related constrained c. related linked d. dominant business

b

Acquisitions to increase market power require that the firm have a(n) ______ diversification strategy. a. unrelated b. related c. dominant-business d. single-business

b

As the threat of corporate failure increases due to relatedness between a firm's business units, firms may decide to a. increase the firm's level of retained resources. b. diversify into less risky environments. c. reduce the level of diversity in its investments. d. pursue unproven product lines.

b

Because of the tax laws of the 1960s and 1970s, when dividends were taxed more heavily than capital gains, shareholders preferred that corporations a. pay dividends annually. b. keep free cash flows for investment in acquisitions. c. distribute capital gains regularly. d. increase managerial salaries.

b

Compared with diversification based on intangible resources, diversification based on financial resources is a. less imitable and less likely to create value on a long-term basis. b. more imitable and less likely to create value on a long-term basis. c. less imitable and more likely to create value on a long-term basis. d. more imitable and more likely to create value on a long-term basis.

b

Corporate-level strategy is concerned with ______ and how to manage these businesses. a. whether the firm should invest in global or domestic businesses b. what product markets and businesses the firm should be in c. whether the portfolio of businesses should generate immediate above-average returns or should be troubled businesses which will create above-average returns only after restructuring d. whether to integrate backward or forward.

b

During the 1990s top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. The Titanic executives may not be worried about their impending job loss if they a. plan to take poison pills. b. have golden parachutes. c. have silver handcuffs. d. have ironclad contracts.

b

Firms that have selected a related diversification corporate-level strategy seek to exploit a. control shared among business-unit managers. b. economies of scope between business units. c. the favorable demand of buyers. d. market power.

b

Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors a. understand that the financial efficiencies of this strategy automatically make these stocks worth more than their current market valuation. b. believe that the value of conglomerates is less than the value of the sum of their parts. c. increase the expected future earnings of conglomerates. d. have found that over time, conglomerates earn more than the component companies would have earned independently

b

One method of facilitating the transfer of competencies between firms is to a. virtually integrate the two firms. b. transfer key people into new management positions. c. share support activities, such as purchasing practices. d. restructure the weaker firm to mirror the structure of the more successful firm.

b

Operational relatedness is created by ______ of a. sharing; core competencies. b. sharing; activities. c. transferring; core competencies. d. transferring; activities.

b

PorkPride Foods produces hams and other meat products. It owns hog raising operations. This is an example of a ______ business. a. de-integrated b. vertically integrated c. totally integrated d. horizontally integrated

b

Revenues for United Parcel Service (UPS) come from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. Which best describes the corporate level strategy of UPS? a. single business b. dominant business c. related constrained d. related linked

b

The Cherrywood Fine Furniture Company finds itself with excess capacity in its plant and equipment for furniture manufacturing. This excess capacity will be useful in a. unrelated diversification. b. related diversification projects. c. corporate restructuring. d. multipoint competition

b

The Publicis Groupe has three major groups of business (advertising, media, and digital) that share resources and capabilities. Publicis Groupe is using a diversification strategy. a. related linked b. related constrained c. unrelated d. dominant

b

The curvilinear relationship of corporate performance and diversification indicates that a. dominant-business corporate strategies tend to be higher performing than related constrained or unrelated business strategies. b. the highest performing business strategy is related constrained diversification. c. the less related the businesses acquired, the higher performing the organization. d. none of the strategies consistently outperforms the others.

b

The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT a. the people involved may not want to move. b. managerial competencies are not easily transferable to different organizational cultures. c. managers with these skills are expensive. d. top-level managers may resist having these key people transferred.

b

The main difference between the related constrained level of diversification and the related linked level of diversification is a. the percentage of total organizational profitability that comes from the dominant business. b. the level of resources and activities shared among the businesses. c. whether the diversification is vertical or horizontal. d. whether the diversification is value-creating or value-neutral.

b

The more sharing of resources and activities among businesses, the more diversification. a. linked b. constrained c. integrated d. intense

b

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent. a. 99 b. 95 c. 90 d. 70

b

Walt Disney Company has successfully used related diversification to create value by a. sharing activities. b. sharing activities and transferring core competencies. c. transferring core competencies. d. efficient internal capital allocation and restructuring.

b

Which of the following is a value-reducing reason for diversification? a. enhancing the strategic competitiveness of the entire company b. expanding the business portfolio in order to diversify managerial employment risk c. gaining market power relative to competitors d. conforming to antitrust regulation

b

Which of the following reasons for diversification is most likely to increase the firm's value? a. increasing managerial compensation b. reducing costs through business restructuring c. taking advantage of changes in tax laws d. conforming to antitrust regulation

b

Which of the following resources are more likely to create value in the diversification process? a. plant and equipment b. tacit knowledge c. excess capacity d. financial resources

b

A firm practicing unrelated diversification can make better capital allocations to its subsidiary businesses than the external capital market can for all the following reasons EXCEPT a. corporate headquarters can allocate capital according to more specific criteria than is possible with external market allocations. b. corporate headquarters has more complete information about the subsidiary businesses than the external capital market. c. the firm can acquire other firms with innovative products instead of allocating capital to research and development. d. corporate headquarters can more effectively discipline underperforming management teams through resource allocation than can the external market.

c

Isidore Crocker, CEO of Gotham Engines, is strongly in favor of acquiring Carolina Textiles, a firm in an unrelated industry. Some members of the board of directors are questioning Crocker's motives for the acquisition. They argue that it is not uncommon for CEOs to push for acquisitions because a. a successful acquisition will increase the CEO's power over the board of directors. b. making an acquisition is an easier route to increased firm value than is improving the firm's core competencies. c. higher CEO pay is related to larger organization size. d. CEOs nearing retirement seek to create empires to continue their legacy.

c

Multipoint competition occurs when a. firms have multiple retail outlets. b. firms have multiple products in their primary industry. c. diversified firms compete against each other in several markets. d. firms have diversified portfolios of companies.

c

Of the value-neutral incentives to diversify, all of the following are internal firm incentives EXCEPT a. overall firm risk reduction. b. uncertain future cash flows. c. stricter interpretation of antitrust laws. d. low performance

c

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain ______ because it could sell its products above the market level or reduce its costs below the market level. a. multipoint competition b. virtual integration c. market power d. vertical integration

c

The ______ diversification strategy creates value in two ways. First, since the core competence has already been developed in one business, the firm does not have to allocate resources to develop it. Second, since the resource is intangible, competitors cannot easily imitate it. a. related constrained b. unrelated c. related linked d. dominant business

c

The basic types of operational economies through which firms seek value from economies of scope are a. synergies between internal and external capital markets. b. the leveraging of individual tangible resources. c. the sharing of value chain activities and support functions. d. joint ventures and outsourcing.

c

The more "constrained" the relatedness of diversification, a. the fewer the linkages between the businesses within the portfolio owned by the firm. b. the wider the variation in the portfolio of businesses owned by the firm. c. the more links there are among the businesses owned by an organization. d. the lower the proportion of total organizational revenue derived from the dominant business.

c

The ultimate test of the value of a corporate-level strategy is whether the a. corporation earns a great deal of money. b. top management team is satisfied with the corporation's performance. c. businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership. d. businesses in the portfolio increase the firm's financial returns.

c

Virgin Group successfully transfers its marketing core competence across airlines, cosmetics, music, drinks, mobile phones, health clubs, and a number of other businesses. Virgin follows a(n) ______ diversification corporate strategy. a. dominant-business b. related constrained c. related linked d. unrelated

c

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called ______ competition. a. multiple b. multiportal c. multipoint d. multiplicit

c

Which of the following firms would be the most likely to be a successful candidate for acquisition and restructuring? a. a medical practice b. a management consulting firm that has a tradition of long term client-consultant relationships c. a tire manufacturer established in 1910 d. a start-up communications technology firm

c

Which of the following is NOT a governance mechanism that may limit managerial tendencies to over-diversify? a. the market for corporate control b. the Board of Directors c. surveillance technologies d. executive compensation practices

c

Which type of diversification is most likely to create value through financial economies? a. related constrained b. operational and corporate relatedness c. unrelated d. related linked

c

Which of the following is TRUE? a. Conglomerates no longer exist in the U.S. business scene, but are common in emerging markets. b. Unrelated diversified firms seek to create value through economies of scope. c. The sharing of intangible resources, such as know-how, between firms is a type of operational sharing in related diversifications. d. Related constrained firms share more tangible resources and activities between businesses than do related linked firms.

d