Strategic Management Final

5) As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? A) first-mover advantages B) social benefits C) network externalities D) fringe benefits

A

A new product often has a high price when it is launched because of a A) large investment in designing a product while producing small quantities. B) large investment in marketing a product while producing small quantities. C) large investment in designing a product while producing large quantities. D) large investment in marketing a product while producing large quantities.

A

A primary advantage of organizing economic activity within firms is the A) ability to coordinate highly complex tasks to allow for specialized division of labor. B) low administrative costs because of reduced bureaucracy .C) eradication of the principal-agent problem. D) high-powered incentive to work as salaried employees for an existing firm.

A

Anthonia is a senior manager at Buxley Corp., a motorcycle manufacturer. Buxley has entered an equity alliance with Supremo, a moped manufacturer. "Don't worry, Anthonia," her counterpart at Supremo tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set." What else should Anthonia request from Supremo? A) personnel exchanges to share tacit knowledge B) a gradual change from an equity alliance to a non-equity alliance to show greater commitment C) nothing, because the information transfer described is complete and appropriate D) a licensing agreement so that Buxley can exchange codified knowledge with Supremo

A

As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as A) entrepreneur. B) category captain. C) franchisor. D) early adopter.

A

Which of the following descriptions best exemplifies adverse selection? A) A manager cannot ascertain the contributions of individual team members in team production. B) A research scientist uses the organization's resources to conduct personal research. C) An employee spends time on social networking sites during work hours. D) An interview candidate lists his qualifications in chronological order.

A

Ayesha is a strategist for the firm Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Ayesha to suggest? A) Optiks should acquire Expert Technology. B) Optiks should form a short-term agreement with Expert Technology. C) Optiks should form a long-term agreement with Expert Technology. D) Optiks should enter into co-opetition with Expert Technology.

A

Ben is a manager at Unique Accessories Inc. and is friends with the company's CEO. This privilege gives Ben the information that Unique Accessories is in the midst of talks to take over a leading rival. Ben buys stocks of Unique Accessories with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of Unique Accessories depreciate in the following months. Are Ben's actions unethical? Why or why not? A) Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome. B) Yes. It is illegal and unethical for Ben to possess any kind of insider information. C) No. Ben did not ask the CEO to disclose such information to him. D) No. Ben did not make any profits from trading stocks using this information.

A

Burnley and Co., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Emma Burnley, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Emma Burnley as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true? A) Emma Burnley has a wide span of control. B) Burnley and Co. has a tall hierarchical structure. C) Emma Burnley is underworked. D) Burnley and Co. is a mechanistic organization.

A

InSeason Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, InSeason defined and measured it success by financial metrics, with a focus on short- term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, InSeason developed a A) resistance to change. B) innovative approach. C) significant value gap. D) holacratic system.

A

Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next? A) increased competition from imitators B) a prolonged period of uncontested success C) a sharp decline in demand for the product D) a difficult struggle to move from invention to innovation

A

Marika received a tip from a close friend who is an executive manager of a publicly traded company called MicroGreen Inc. The manager received some inside information about how to trade MicroGreen stock to get a huge profit. He shared this information with Marika. This scenario is an example of A) information asymmetry. B) adverse selection. C) stakeholder strategy. D) shared value creation.

A

Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate? A) information asymmetry B) principal-agent problem C) experience-curve effect D) learning-curve effect

A

Sunset Foods relies on a highly centralized functional structure to ensure consistency in the quality and taste of its products and to drive down costs via process innovations. However, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. With the launch of its new line of breakfast foods coming up, how can Sunset improve its ability to collaborate without sacrificing the benefits of its current structure? A) by establishing cross-functional teams B) by switching to a simple structure C) by switching to a competitive M-form structure D) by decreasing managers' span of control

A

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A) by having higher performance in another sector B) by sharing their market power C) by increasing the firm's risk in another sector D) by motivating managers

A

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should A) be prepared to restructure as the landscape changes. B) stick with the structure that brought it success no matter what happens. C) attempt to implement an unstructured organization. D) switch to whichever structure is most common in the industry.

A

What most likely happens when a firm optimizes its organizational structure to its current situation? A) It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur. B) It achieves superior performance. C) It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution. D) It transforms strategy into actions and business models.

A

Which of the following could be used as an example of why a stakeholder strategy approach to business has shortcomings? A) the nonsustainable debt levels incurred by sovereign governments to fund social programs B) the financial crisis in Europe brought about by money lenders seeking to make quick money C) the collapse of the economy in the United States brought about by the housing crisis D) the rise of GDP in countries that do not believe in Milton Friedman's philosophy

A

A firm is said to be pursuing a polycentric innovation strategy when A) its research facility is situated in the headquarters and all other business activities are located around the world. B) it draws from multiple, equally important research facilities located throughout the world. C) it restricts its innovation to Western economies and production to developing markets. D) its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of A) geographic diversification. B) product diversification. C) vertical integration. D) horizontal integration.

B

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands? A) one that is much poorer than the country where Badlands has its headquarters B) one that is in the same trading bloc as Badlands' home country C) a country that does not share the same currency as Badlands' home country D) the country that is the greatest physical distance from existing Badlands facilities

B

CPA Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Joaquin. The stockholders expect Joaquin to make decisions that will benefit the company. However, Joaquin begins to find ways to maximize his total compensation, which hinders CPA's performance. This scenario reflects A) value creation problems. B) principal-agent problems. C) inside director-outside director problems. D) adverse selection problems.

B

Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low- cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because A) it overestimated its need to protect its intellectual property. B) it underestimated its liability of foreignness when entering the Balalaika market. C) it underestimated its dwindling reputation before it enters the Balalaika market. D) it overestimates the geographic and cultural distance between Vandevar and Balalaika.

B

Downshift Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Downshift Autos Inc. is reaping the benefits of A) economies of scope. B) location economies. C) resource immobility. D) resource ambiguity.

B

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should A) continue to outsource production. B) vertically integrate. C) exit the laptop industry. D) diversify its activities.

B

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A) diseconomies of scale B) principal-agent problem C) experience-curve effects D) information asymmetries

B

Showstopper Inc. dominates the ladies' wig market and wants to expand into men's toupees. How can Showstopper's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm? A) To protect themselves, Showstopper's managers should choose the option that leads to the largest company with the most managerial positions. B) The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do. C) The managers must determine whether wig making and toupee making require substantially different skills. If so, the company should pursue internal development. D) Unless the market for toupees is booming, Showstopper should stick to what it knows and focus on creating the best ladies' wigs in the industry.

B

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers? A) licensing some of its newest designs to overseas competitors B) acquiring an airplane-parts manufacturer in another country C) beginning a brownfield project in its home country D) exporting airplane parts to many other countries

B

Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A) a break-even analysis. B) a real-options perspective. C) credible commitment. D) transaction cost economics.

B

Sven is a senior vice president at a textile manufacturer that wants to move from being 20 percent globalized to 70 percent globalized in the next 10 years. What are some possible drawbacks that Sven's company must anticipate? A) None. All political and economic factors point to the rise of globalization. B) Rising wages may cancel out cost savings of access to low-cost input factors. C) Governments may lower barriers to international trade. D) Improved communication technology may lead to longer production cycles.

B

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will A) decrease. B) increase. C) become external transaction costs. D) be eliminated.

B

The leading producer of cell phone backup batteries, Jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Jumpstart. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Jumpstart has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the A) introduction stage. B) growth stage. C) shakeout stage. D) maturity stage.

B

Tina is the inventor of a personal fitness tracking device, and she is in the process of hiring employees after receiving investment funding. When considering how to structure her company, she should A) emulate the structure of the leading firm in the industry. B) first establish a strategy and let that be her guide. C) choose the structure that will give her the most control. D) ask employees what structure they are most comfortable with.

B

When Turbo Autos Inc. wanted to sell its cars in the country of Sylvanistan, it lacked access to distribution channels and marketing expertise in the country. Thus, Turbo Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well- established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) increasing competitive intensity B) accessing critical complementary assets C) procuring additional capital investments D) reducing differentiation of product and service offerings

B

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? A) Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals B) Whichever company is larger should acquire the smaller one and impose its management system on the acquired company. C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power. D) For data security reasons, both companies should remain separate and refrain from sharing information.

C

Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? A) The firm will be protected against the principal-agent problem. B) The firm's administrative costs will be low because of necessary bureaucracy. C) The firm will have more flexibility in purchasing and comparing prices of goods and services. D) The firm will have high-powered incentives, such as hourly wages and salaries.

C

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A) employing celebrity spokespeople B) implementing automated burger-making machinery C) purchasing competitors D) increasing executive salaries

C

Calabash Inc. is located in the nation of West Fenwick near the nation of East Fenwick. Calabash is considering expanding into East Fenwick. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, West Fenwick rules this land. Which of the following would most likely prevent Calabash from expanding into East Fenwick? A) geographic distance B) economic distance C) political distance D) cultural distance

C

Edna Gomez is the founder of the restaurant chain Good and Green. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Edna's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Edna Gomez? A) headhunter B) category captain C) social entrepreneur D) trade creditor

C

Juno LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juno's owners or managers to take? A) Quickly build downstream complementary assets. B) Enter multiple learning races within strategic alliances. C) Seek an alliance with a company or companies that will complete the value chain. D) Pursue managerial hubris at all levels of development.

C

Milk Benefits Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Andrew Products Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A) While Andrew's competitive advantage will lie in its high local responsiveness, Milk Benefits Inc. will lack such competencies. B) Andrew Products Inc. will face greater pressure for cost reductions than Milk Benefits Inc. due to strategy choice. C) Both Milk Benefits Inc. and Andrew Products Inc. will have to duplicate key business functions in multiple host countries. D) While Milk Benefits Inc. will require a global matrix structure, Andrew Products Inc. will require a traditional headquarters model.

C

Nirvana Shoes Inc. and StepOut Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Nirvana Shoes entered the strategic alliance to acquire the production system pioneered by StepOut Shoes. Similarly, StepOut Shoes agreed to the strategic alliance to study the design process of Nirvana Shoes. However, Nirvana Shoes was more successful and faster than StepOut Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) network effects B) economies of scope C) learning races D) time compression diseconomies

C

RHC Pharmaceuticals Inc., Lawrence Pharma Inc., and Quincy Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A) takeover B) buyout C) co-opetition D) acquisition

C

Telescopic Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Telescopic Inc. can be said to have a(n) A) organic organizational structure. B) decentralized organizational structure. C) tall hierarchical structure. D) flat hierarchical structure.

C

The managers at Speed Automobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Speed Automobile is most likely a result of A) time compression diseconomies. B) experience-curve effects. C) principal-agent problems. D) resource ambiguity.

C

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) adopting a narrow shareholder perspective B) separating economic interests and social needs C) practicing effective corporate governance D) adopting the principles of shareholder capitalism

C

Why does a functional structure rely on a flat organizational structure? A) The work in the organization is centrally coordinated by the CEO. B) It allows for a higher degree of specialization and domain expertise. C) It allows for efficient bottom-up and top-down communication. D) It allows for the implementation of a differentiation strategy.

C

Angie owns and runs Archana, a private start-up company with a current value of $1.3 billion. Archana is interested in going public to fund future growth. Which action should Angie take before Archana's initial public offering? A) Angie should come up with a business plan for what Archana will do once it is no longer publicly traded. B) She and senior managers should write down their code of ethics. C) Angie should not embark on an IPO until Archana's value is higher. D) She should investigate Archana's existing or potential problems with ethics or the law, if such problems exist.

D

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make? A) whether to pursue a differentiation or cost leadership strategy B) which customer segments to target C) how to achieve the highest levels of customer satisfaction D) what range of products the firm should offer

D

As a start-up company, DigiWrist entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation

D

BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, BioCure Inc. is most likely an organization that is A) formalized. B) mechanistic. C) centralized. D) organic.

D

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation

D

Gary owns shares in a company called Archibald Industries Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Gary wants to proactively cut his losses and therefore sells his shares. Anneke, a trading enthusiast, buys shares in Archibald Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A) separation of legal ownership and management control B) legal personality C) limited liability for investors D) transferability of investor ownership

D

How has Apple been able to sustain its competitive advantage in the smartphone industry? A) by reducing its network effects B) by targeting its new products and services toward laggards C) by driving the price for the end user to zero D) by regularly introducing incremental improvements in its products

D

Managers at Durkmunder, a firm in West Feenistan, want to make their company a global leader in business process outsourcing (BPO). What should the Durkmunder managers look for as they decide where to locate their BPO facilities? A) large, undeveloped plots of land for greenfield projects B) plentiful natural resources C) many uneducated workers who are highly trainable D) an abundance of well-educated English speakers

D

Sirhan is president of a medium-sized bank. What can he do to lessen the chances of employees or board members taking part in insider trading? A) Forbid managers and executives from having access to private information. B) Forbid board members from having access to private information. C) Work with analysts and customer-facing employees to root out information asymmetry. D) Create a strict code of ethics and explain that inside traders will be fired.

D

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance. A) political B) geographic C) administrative D) cultural

D

Which of the following is a competitive benefit experienced by the first mover firm in an industry? A) The first mover will be able to achieve a less steep learning curve. B) The first mover will be able to reduce the switching costs. C) The first mover will not have to patent its products or technology. D) The first mover will be able to reduce costs through economies of scale.

D

Which of the following statements is true of strategy in an organization? A) Strategy implementation is considered unsuccessful if it requires changes within an organization .B) To implement a strategy successfully, an organization's structure must be rigid. C) Strategy implementation does not affect resource allocation and power distribution within an organization. D) Organizational structure must follow strategy in order for firms to achieve superior performance.

D

Yelena, the CEO of Andron Inc., reports to the board of directors appointed by the shareholders of Andron. Based on shareholder suggestions, the board ties Yelena's compensation to the performance of Andron. Due to this pressure, Yelena begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Yelena's compensation to firm performance is to overcome A) shareholder capitalism scenario. B) inside director-outside director conflict. C) fiduciary responsibility oversight. D) principal-agent problem.

D