Strat Mgmt - Exam #3

Building capabilities in organizational design that allow a company to develop a competitive advantage starts at the functional level. Select one: True False

True

The globalization of production has been decreasing as companies face lower barriers to international trade and location economies. Select one: True False

False

A company should first choose a corporate-level strategy and then look at how changes will affect a companys current business model and strategies. Select one: True False

False

An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream. Select one: True False

False

Effective organizational design can allow a company to obtain a competitive advantage but it has no impact on profitability. Select one: True False

False

A joint venture allows a company to share the risks and costs associated with establishing a new business unit with another company. Select one: True False

True

An advantage of related diversification is that it allows a company to quickly gain entry into a new industry where barriers are high. Select one: True False

True

Diversification is the process of a company entering new industries distinct from its core industry, using a multibusiness model. Select one: True False

True

Factor endowments-the cost and quality of factors of production-are a prime determinant of the competitive advantage that certain countries have in certain industries. Select one: True False

True

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources. Select one: True False

True

Most manufacturing companies begin their global expansion by exporting. Select one: True False

True

Vertical integration can raise costs if, over time, a company continues to purchase inputs from company-owned suppliers when independent suppliers can supply the same inputs at lower cost. Select one: True False

True

When a company licenses its technology it can quickly lose control over it. Select one: True False

True

Which of the following is not one of the advantages of a geographic structure? Select one: a. Cost inefficiencies from issues of scope b. Responsiveness to the needs of regional customers c. Lower transportation costs d. More coordination and control than a functional structure e. Centralization of key activities and functions that allow leveraging skills across regions

a. Cost inefficiencies from issues of scope

Under which of the following circumstances is vertical integration hazardous? Select one: a. When the technology involved in different stages of production is changing rapidly b. When the companys competitors are also following a strategy of vertical integration c. When the value added by successive stages of production is declining d. When the industries involved are undergoing rapid expansion e. When vertical integration involves moving downstream into retailing

a. When the technology involved in different stages of production is changing rapidly

New ventures Select one: a. are often preferred by technology-based companies. b. are less risky than acquisitions. c. are best when the company is entering the industry on a small scale. d. should be killed if they dont make a profit within three years. e. are preferred compared to acquisitions when entry barriers are high.

a. are often preferred by technology-based companies.

Control systems Select one: a. enable a company to evaluate its performance. b. help managers determine which generic strategy to pursue. c. are used only at the business level. d. allow firms to control the external environment. e. are most effective for firms pursuing cost leadership.

a. enable a company to evaluate its performance.

A typical matrix organizational structure is Select one: a. flat and decentralized. b. flat and centralized. c. tall and decentralized. d. tall and centralized. e. none of these.

a. flat and decentralized.

Diversity helps companies grow by: Select one: a. improving marketplace understanding b. complying with federal law c. avoiding conflict between employee groups d. creating a homogeneous workplace e. preventing discrimination

a. improving marketplace understanding

Which of the following statements concerning research and development is correct? Select one: a. Development research is more important than exploratory research. b. Companies with a strong record of internal new venturing excel at both types of research. c. Development research advances basic science. d. Exploratory research is directed toward commercialization of a new technology. e. Exploratory research is more important than development research.

b. Companies with a strong record of internal new venturing excel at both types of research.

A company with a business-level strategy of cost leadership should pursue which of the following global expansion strategies? Select one: a. Simple b. Global standardization c. Localization d. International e. Transnational

b. Global standardization

Restructuring is Select one: a. a rethinking and redesign of a firms business processes. b. a radical readjustment of the organizations staffing and hierarchy. c. a philosophy that states that mistakes, defects, and poor-quality materials are not acceptable and should be eliminated. d. the shift that firms make from a functional to a more complex structure as the firm grows in complexity and size. e. employed when a firm needs help in improving its functional strategies.

b. a radical readjustment of the organizations staffing and hierarchy.

A diversification strategy based on resource sharing Select one: a. entails a company creating value by applying the distinctive competencies it developed in one line of business to another line of business. b. can help a company to realize economies of scope. c. increases the accountability of units. d. is a valid way of supporting the generic business-level strategy of differentiation. e. requires the development of new business-level strategies.

b. can help a company to realize economies of scope.

A global strategy Select one: a. involves an appropriate mix of centralization and decentralization. b. centralizes all functions at the optimal global locations. c. centralizes only the research and development (R&D) and marketing functions. d. is the most complex strategy. e. maximizes local responsiveness.

b. centralizes all functions at the optimal global locations.

Control through organizational culture is so powerful because Select one: a. it reduces the costs of organizational control in a large company. b. self-control develops through the establishment of an internal system of organizational values. c. it results in maximum decentralization and the elimination of bureaucracy. d. it achieves increased performance through the alignment of organizational goals with societal expectations. e. it achieves external control through motivated coworkers.

b. self-control develops through the establishment of an internal system of organizational values.

A drawback of the functional structure is Select one: a. that each worker must report to more than one superior. b. the difficulty in communicating and coordinating across functions. c. too much decentralization of decision-making authority. d. its lack of flexibility. e. the need to downsize before implementing this structure.

b. the difficulty in communicating and coordinating across functions.

A matrix structure would be the most appropriate for which of the following firms? Select one: a. A large multinational company with a distinctive competence in marketing b. A company operating in the maturity stage of the industry life cycle c. A medium-sized technological firm with an objective of fast product development time d. A company with a high level of vertical differentiation e. A company pursuing a cost-leadership strategy

c. A medium-sized technological firm with an objective of fast product development time

Which of the following problems is (are) associated with a strategy of vertical integration? Select one: a. None of these b. An increasing cost structure c. All of these d. Marketing disadvantages that arise when demand is unpredictable e. Manufacturing disadvantages that arise because of rapidly changing technology

c. All of these

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue? Select one: a. Changing industry conditions b. Increasing bureaucratic costs of diversification c. All of these d. Changing firm-specific conditions e. Diversification for the wrong reasons

c. All of these

Which of the following actions would you expect to see in a company that is undergoing a reengineering? Select one: a. Hiring more managers b. Hiring more workers c. Examining activities from a customers point of view d. Investing more in product research and development (R&D) e. Centralizing decision-making authority

c. Examining activities from a customers point of view

In which of the following circumstances does a localization strategy make the most sense? Select one: a. Global market standardization is possible, and there are significant economies of scale to be realized from centralizing global manufacturing. b. Global market standardization is possible, but there are no significant economies of scale to be realized from centralizing global manufacturing. c. Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing. d. Consumer tastes and preferences differ among national markets, and economies of scale are substantial. e. Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing.

c. Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing.

What is perhaps the most important reason why acquisitions made by a company fail? Select one: a. Incompetence on the part of workers in the acquired firm b. Difficulties in coordinating manufacturing activities c. The expense of the acquisition d. Managements unwillingness to expend the necessary effort to make the acquisition work effectively e. The timing of the acquisition

c. The expense of the acquisition

Global economies of scale can be realized by Select one: a. better utilization of production facilities. b. expansion of overseas sales. c. all of these choices. d. boosting bargaining power with suppliers. e. increasing cost savings through learning effects.

c. all of these choices.

Matrix structures Select one: a. have many hierarchical levels. b. are appropriate for companies with many low-skilled workers. c. group activities vertically by function and horizontally by product or project. d. are appropriate for a firm pursuing a low-cost strategy. e. have many hierarchical levels and two forms of horizontal differentiation.

c. group activities vertically by function and horizontally by product or project.

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself Select one: a. able to sell its products at continually lower prices. b. none of these choices. c. locked into an old, inefficient technology. d. all of these choices. e. increasing returns on its assets.

c. locked into an old, inefficient technology.

Transfer pricing is used most commonly in a Select one: a. functional structure. b. product team structure. c. multidivisional structure. d. matrix structure. e. geographic structure.

c. multidivisional structure.

Horizontal integration may be thought of as Select one: a. giving control to suppliers. b. gaining control of distributors. c. staying inside the industry in which the company currently operates. d. moving into a new unrelated industry. e. combining functional units within the company.

c. staying inside the industry in which the company currently operates.

The two main innovations in a multidivisional structure (over a functional or product structure) are Select one: a. a matrix structure at the divisional level and a flat structure at the corporate level. b. a product structure at the divisional level and a functional structure at the corporate level. c. the organization of business units or companies in each industry in which it competes into one or more divisions and the creation of corporate-level positions to oversee the activities of divisional managers. d. self-contained divisions with operating responsibility and a group of divisional managers with collective strategic responsibility. e. a matrix structure at the divisional level and a functional structure at the corporate level.

c. the organization of business units or companies in each industry in which it competes into one or more divisions and the creation of corporate-level positions to oversee the activities of divisional managers.

An organization that has an adaptive culture is an organization that is Select one: a. innovative. b. resistant to major changes. c. supportive of managers who take the initiative and make changes on their own. d. A and C. e. B and C.

d. A and C.

A functional organizational structure offers a company which of the following advantages? Select one: a. Specialization of activities leading to greater productivity b. More efficient production activities c. Greater control of activities by managers d. All of these e. None of these

d. All of these

Which of the following is required by a restructuring? Select one: a. Eliminating business units b. Rethinking business processes c. Creating more business units d. Flattening the organizational hierarchy e. Broadening the span of control

d. Flattening the organizational hierarchy

Which of the following factors increases pressures for cost reductions? Select one: a. Increasing national wealth b. High switching costs c. Great transportation needs d. Price as the main competitive weapon in a market e. Differences in distribution channels

d. Price as the main competitive weapon in a market

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity? Select one: a. A restructuring strategy b. Total diversification c. A taper diversification strategy d. Related diversification e. A technology acquisition strategy

d. Related diversification

The ability to realize cost economies from global volume is greatest in the case of Select one: a. companies competing in industries where they face a large number of multinational competitors. b. products that can be economically manufactured in small batches. c. low-weight, high-value products that can be differentiated by global companies. d. commodity-type products that serve universal needs. e. products that need to be customized to local requirements.

d. commodity-type products that serve universal needs.

In a multidivisional structure Select one: a. support functions, such as accounting, are centralized at the top of the organization. b. corporate headquarters staff have operating responsibility over the divisional managers. c. divisional managers have overall corporate strategic responsibility. d. corporate headquarters is responsible for overseeing the companys long-term multibusiness model and for providing guidance for interdivisional projects. e. financial controls are necessarily weak given the resource duplication from one division to another.

d. corporate headquarters is responsible for overseeing the companys long-term multibusiness model and for providing guidance for interdivisional projects.

Horizontal integration in an industry tends to Select one: a. have little effect on rivalry among firms. b. reduce the number of consumers buying the products. c. increase rivalry among firms. d. reduce rivalry among firms. e. none of these choices.

d. reduce rivalry among firms

A key to making a strategic alliance work is Select one: a. reducing investment in the alliance to a minimum. b. enforcing one culture for both partners. c. sharing all knowledge. d. selecting the right partner. e. having one partner handle daily operations.

d. selecting the right partner.

To a large degree, any organizations tasks are a function of its Select one: a. market area. b. labor supply. c. supervisors. d. strategy. e. compensation plan.

d. strategy.

A localization strategy is based on which of the following ideas? Select one: a. There are substantial economies of scale to be realized from centralizing global production. b. There are cost advantages associated with manufacturing a standard product for global consumption. c. Competitive strategy should be centralized at the world head office. d. There is a convergence in the tastes of consumers in different nations of the world. e. Consumer tastes and preferences differ among national markets.

e. Consumer tastes and preferences differ among national markets.

Which of the following factors increases pressures for local responsiveness? Select one: a. Persistent excess capacity b. Trade barriers c. Low-cost competitors d. Powerful buyers e. Differences in customer tastes and preferences

e. Differences in customer tastes and preferences

Product bundling refers to Select one: a. preparation of products for shipment. b. a method of stocking products efficiently. c. an inventory procedure for ensuring effective counting of products. d. a package of unrelated products. e. a complete package of related products.

e. a complete package of related products.

Host government demands generally Select one: a. increase pressures for cost reductions. b. impede a companys ability to minimize its transaction costs. c. discourage foreign companies from operating in the home country. d. impede a companys ability to differentiate its product offering across national borders. e. increase pressures for local responsiveness.

e. increase pressures for local responsiveness.

A localization strategy Select one: a. involves an appropriate mix of centralization and decentralization. b. centralizes all functions. c. centralizes only the research and development (R&D) and marketing functions. d. is the most complex strategy. e. is oriented toward local responsiveness.

e. is oriented toward local responsiveness.

Disadvantages of a global strategy include Select one: a. lack of control over quality. b. inability to engage in global strategic coordination. c. failure to exploit experience curve effects. d. inability to realize location economies. e. lack of local responsiveness.

e. lack of local responsiveness.

Strategic alliances are Select one: a. short-term agreements between two companies to jointly develop new products. b. short-term partnerships between two companies. c. long-term commitments between two companies to share research and development activities. d. short-term agreements between two companies to jointly market new products. e. long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance.

e. long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance