Strategic Management Quiz 20-23

Which of the following perspectives best supports the Shared Value creation framework?

Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Which of the following is an advantage offered by a functional structure?

It allows for a higher degree of specialization and deeper domain expertise.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

While working a night job at a call center, Neville creates an app called FastServe, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on FastServe. He creates a startup called TYOP and hires three people to help him improve FastServe and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure.

Simple

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

The expectation that the agent will act in the principals' best interest

W.L. Gore & Associates (Strategy Highlight 11.2) is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has:

a low level of formalization.

Johan is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan's team leader realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies _____.

adverse selection

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure.

global matrix

A company that is using extrinsic motivation as an output control mechanism will most likely:

threaten to lay off employees if they do not achieve targets.

Postrupe Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant and based on information in Strategy Highlight 12.1, how many outside directors in total should serve on Postrupe's board to achieve board independence?

7

Which of the following types of groups is most susceptible to groupthink?

A cohesive group

Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup?

Mechanistic

Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use?

Multidivisional

Which of the following statements is true of strategy in an organization?

Organizational structure must follow strategy in order for firms to achieve superior performance.

Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?

Separate legal existence

What does "limited liability for investors" imply in a public stock company?

Shareholders who provide the risk capital are liable only to the capital specifically invested.

GE's board (Strategy Highlight 12.1) has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as CEO duality. Which of the following statements represents the best argument for this duality in GE?

The CEO possesses invaluable inside information that can help an individual chair the board effectively.

Which of the following terms or phrases best characterizes Zappos' organizational structure (Chapter Case 11)?

Extremely flat

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

It cannot effectively address a higher level of diversification.

Which of the following best supports the notion that Goldman Sachs was unethical in the Abacus deal (Strategy Highlight 12.2)?

It knew that Paulson had bundled high-risk mortgages into the collateralized debt obligation.

_____ define appropriate employee attitudes and behaviors.

Norms

Which of the following is an unintended side-effect of a high degree of specialization in an organization?

Reduced employee satisfaction due to repetition of tasks

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

Shareholders own stocks but do not run the company.

Employees learn about an organization's culture through the process of _____.

Socialization

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

Their culture reflects complex relationships with their employees, customers, and suppliers.

Which of the following statements is true of shareholders in a public stock company?

They legally own the company as represented by their ownership of shares of its stock.

When a firm diversifies into different product lines and geographies, a _____ structure is preferred.

multidivisional

Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of _____.

on-the-job consumption

According to the perspective of shareholder capitalism, _____.

shareholders in public stock companies have the most legitimate claim on profits

A high degree of formalization in an organization is most likely to _____.

slow down decision-making

In a public stock company, senior executives, such as the CEO, face agency problems when:

they delegate authority of strategic business units to general managers.

Outside directors are more likely to watch out for the interests of shareholders of the firm on whose board they serve because:

they have more independence than inside directors.

Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through _____.

input controls

McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of _____.

Formalization

Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company?

Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

Which of the following best exemplifies the use of input controls?

McDonald's use of standard operating procedures

An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) _____.

principal

Why did W.L. Gore reorganize itself into a functional structure from a simple structure?

A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

The _____ is the centerpiece of corporate governance and is composed of inside and outside members.

board of directors

W. L. Gore & Associates is the inventor of path-breaking new products such as breathable GORE-TEX fabrics, Glide dental floss, and Elixir guitar strings. Which of the following would be most likely to hinder its intention of fostering employee satisfaction, retention, and creativity?

An extremely formalized organizational structure

Which of the following do NOT serve as additional external-governance mechanisms?

Board of directors

Which of the following is NOT true of corporate governance in public stock companies?

Corporate governance seeks to create a separation between ownership and control.

Why does Michael Porter recommend expanding the customer base of an organization in terms of the Shared Value creation framework?

Doing so could yield significant business opportunities that could improve the standard of living of the poor.

The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database.

EDGAR

If a firm pursues only a differentiation strategy, it is most likely a(n) _____ organization.

Organic

Who has legal authority to appoint the board of directors in a public stock company?

Shareholders

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

To align incentives between shareholders and management

Which of the following is a feature of an organic organization?

Wide span of control

At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. The recommendation of Darius for promotion at Opnic Corp. is a typical consequence of _____.

adverse selection

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies _____.

core rigidity

One of the ways to foster ethical behavior in employees is to:

create a control system that encourages desired values

The conflict in a principal-agent relationship arises when:

the goals of the principals and agents are not aligned with each other.

Organizational design is:

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

Zappos established its unique organizational culture:

through explicitly stated values that are connected to its reward system.