Strategies and Policies ch 9-12

A typical matrix organizational structure: a. groups employees in two ways simultaneously to maximize the rate at which different kinds of products can be developed. b. breaks up a company's growing product line into a number of smaller, more manageable subunits. c. groups people on the basis of their common expertise and experience or because they use the same resources. d. is a way of grouping employees into separate customer groups so that each group can focus on satisfying the needs of a particular customer group. e. is a way of grouping employees to best satisfy the needs of customers within different regions.

A

Essentially, centralization or decentralization are concepts that refer to the: a. levels where decisions are made in the hierarchy of an organization. b. number of hierarchical levels existing in an organization. c. tools that allow an organization to monitor and evaluate if its strategies and structure are working as intended. d. business models oriented at expanding nationally and managing a wide range of products. e. strategies implemented by an organization to create, market and distribute its products

A

In a successful company, the purpose of a control system is to: a. provide managers with a set of incentives to motivate employees to work toward company goals. b. allow the managers to use punishments as a tool to ensure that the employees meet the company targets. c. collect values, norms, beliefs, and attitudes and share them with people and groups in an organization. d. decide how a company should create, use, and combine organizational structure and culture. e. assign employees to specific value creation tasks and roles and specify how these tasks and roles are to work together.

A

Organizational culture is: a. the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. b. the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers. c. the process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully. d. the clear and unambiguous chain of command that defrnes each manager's relative authority from the CEO down through top, middle, to first-line managers. e. the principle that a company should design its hierarchy with the fewest levels of authority necessary to use organizational resources effectively.

A

Organizational structure can be defined as: a. the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers. b. the blueprint that states how managers intend to use organizational resources to most efficiently achieve organizational goals. c. the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.. d. the degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable. e. the process of redesigning business processes to achieve dramatic improvements in performance, such as cost, quality, service, and speed.

A

The purpose of a(n) is to provide managers with incentives for employees as well as feedback on how the company performs. a. control system b. adaptive culture c. organizational design d. span of control e. hierarchy of authority

A

To reduce costs, cost leaders prefer to use to closely monitor and evaluate functional performance. a. output controls b. personal controls c. behavioral controls d. cultural controls e. input controls

A

Which of the following is not one of the advantages of a geographic structure? a. Promotion of innovation and product development due to intensive cross-functional integration 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

Which of the following strategic control systems do managers use to shape and influence the behavior of employees in face-to-face interactions? a. Personal control b. Output control c. Behavior control d. Input control e. Process control

A

Which of the following structures requires centralization of value chain support activities? a. The product structure b. The product team structure c. The matrix structure d. The functional structure e. The innovative structure

A

In which of the following cases are bureaucratic costs likely to be lowest? a. A vertically integrated company with five divisions that pursues full integration b. A company with five divisions that pursues related diversification based on economies of scope c. A company with five divisions that pursues related diversification based on transferring competencies d. A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring e. A company with twenty divisions that pursues taper integration

A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring

New ventures are a more attractive strategy than acquisitions when: a. entry barriers are high. b. exit barriers are high. c. a company's business model is based on using its technology to innovate new kinds of products for related markets. d. it needs to move fast to establish a presence in an industry, commonly an embryonic or growth industry. e. the company must make the huge investment necessary to develop the set of value-chain activities required to make and sell products in the new industry.

A company's business model is based on using its technology to innovate new kinds of products for related markets

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

A complete package of related products

Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create: a. a new business unit in the same industry. b. a new business unit in a different industry. c. lower costs in various business units. d. differentiation in various business units. e. new customers in the same industry.

A new business unit in a different industry

All of the following are benefits of horizontal integration except:

A. Higher cost structure

A company pursuing a strategy of vertical integration may expand its operations

A. backward into an industry that produces inputs for the company's products. C. laterally into an industry that competes with the company's products

Companies invest in specialized assets becuase these assets allow them to...

A.Lower their cost structure & C.better differentiate their products

balance scorecard

According to the balanced scorecard model, managers have traditionally emphasized financial measures such as ROIC to gauge and evaluate organizational performance. Based on multiple perspectives, such as: The financial perspective: for example, the return on capital, cash flow, and revenue growth The customer perspective: for example, satisfaction, product reliability, on time delivery, and level of service Internal perspective: efficiency, timeliness, and employee satisfaction innovation and learning: the number of new products introduced, the percentage of revenues generate from new products in a defined period

In 2007, Google bought YouTube. This is an example of which of the following? a. Partnership b. Strategic alliance c. Joint venture d. Acquisition e. Merger

Acquisition

Which of the following entry strategies should be used when speed is an important consideration? a. Internal new venture b. Acquisition c. Joint venture d. Unrelated diversification e. Related diversification

Acquisition

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies? a. Joint ventures b. New ventures c. Acquisitions d. Long-term contracting e. Taper integration

Acquisitions

The three main types of diversification strategies are: a. acquisitions, joint ventures, and divestments. b. acquisitions, mergers, and buy outs. c. acquisitions, internal new ventures, and joint ventures. d. related acquisitions, unrelated acquisitions, and mergers. e. joint ventures, strategic alliances, and long-term contracts.

Acquisitions, internal new ventures, and joint ventures

In which of the following industry environments are acquisitions most likely to be favored over new ventures? a. An embryonic industry b. An industry in its later stages of growth c. An industry passing through the shakeout stage d. A mature industry e. A declining industry

An embryonic industry

Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition? a. Low management turnover b. Poor commercialization of the product c. An inability to realize potential gains from synergies d. The stock of highly diversified companies is valued lower e. Risks are shared by all

An inability to realize potential gains from synergies

Joint ventures: a. are an alternative to new ventures. b. are attractive when speed is important. c. are attractive when entry barriers are high. d. should be done on a small scale. e. reduce the risk of loss of proprietary knowledge.

Are an alternative to new ventures

New ventures: a. should be killed if they don't make a profit within three years. b. are often preferred by technology-based companies. c. are more attractive compared to acquisitions when entry barriers are high. d. are less risky than acquisitions. e. are best when the company is entering the industry on a small scale.

Are often preferred by technology-based companies

A drawback of the functional structure is: 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 in decision-making. e. the need to downsize before implementing this structure.

B

A hospital examines its processes closely and then changes them radically to become more patient-centered. Among the changes are new ways of doing tasks and new groupings of workers. This is an example of: a. restructuring. b. reengineering. c. total quality management. d. benchmarking. e. downsizing.

B

Companies choose the number of hierarchical levels they need on the basis of their strategies and the functional tasks necessary to: a. achieve diseconomies of scale. b. create distinctive competencies. c. enhance employee productivity. d. enhance cross-departmental coordination. e. attract skilled employees

B

Control through organizational culture is so powerful because: a. it eliminates the need for managers in large companies. b. it makes employees follow organizational values, after they've internalized them, without thinking about them. c. it results in maximum decentralization and the elimination of bureaucracy. d. it achieves increased performance through the alignment of organizational goals with external societal expectations. e. it achieves external control through motivated coworkers.

B

Restructuring is: a. a rethinking and radical redesign of a firm's business processes. b. a radical readjustment of the organization's staffrng 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 finn grows in complexity and SIZe. e. employed when a finn needs help in improving its functional strategies

B

The specific collection of values, norms, beliefs, and attitudes shared by people and groups in a company is commonly referred to as: a. organizational fit. b. organizational culture. c. organizational development. d. organizational positioning. e. organizational design.

B

Which form of control would you most likely frnd in a voluntary or charity organization? a. Bureaucratic control through rules and procedures b. Control through norms and values c. Financial control through accurate frnancial statements d. Output control, since it is the cheapest e. Incentive systems to motivate employees

B

Adam's boss tells him that their company is pursuing a strategy of horizontal integration, which means that the company will

B. buy one of its rivals

Horizontal integration in an industry tends to

B. reduce rivalry among firms

A matrix structure would be the most appropriate for which of the following fmus? a. A company in which each employee is required to have only one boss b. A company operating in the maturity stage of the industry life cycle c. A company which is dependent on rapid mobilization of resources for competitive success d. A company with a high level of vertical differentiation e. A company in which the speed of product development is not crucial

C

At LittleHippo, an online retail company, the work environment is playful. Employees often get their pictures taken wearing silly wigs and masks. This atmosphere is part of the company's: a. organizational density. b. organizational structure. c. organizational culture. d. strategic control systems. e. competitive envirornnent.

C

At Silica Dustcloud Inc., rules are published at the cubicle of all employees stating what is expected of them regarding time to arrive, time for lunch, when to take breaks, and when to socialize. Which of the following is this an example of? a. Output control b. Personal control c. Behavior control d. Conversion activities e. Strategic competencies

C

Companies that are innovative and able to deal with environmental change with new strategies and structures probably have: a. weak cultures. b. strong functional cultures. c. adaptive cultures. d. prescriptive cultures. e. cost-conscious culture.

C

Control through organizational culture: a. is less expensive than output control. b. reduces mutual adjustment. c. involves employees internalizing the norms and values of the organization. d. includes setting individual goals. e. includes obtaining specific feedback to help managers evaluate performance

C

Flat organizational structures are characterized by: a. many levels of management compared to the size of the company. b. slower repose to changes in the competitive environment. c. a relatively wide span of control. d. reduced flexibility in decision-making strategies. e. an increase in bureaucratic costs.

C

In any organization, for-profit or not-for-profit, span of control refers to the: a. number of managers at the highest levels in the organization. b. CEO and his or her management team. c. number of subordinates who report directly to one manager. d. number of supervisors in a specific segment of a manufacturing activity. e. number of members elected or appointed to be the board of directors.

C

Matrix structures: 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 several product group hierarchies and two forms of horizontal differentiation.

C

Natalie and Shay are both employees at Silica Dustcloud Inc. Natalie, the marketing manager, often meets with Shay, the production manager, in order to solve specific mutual problems. Which of the following is this an example of? a. Organizational culture b. Liaison roles c. Direct contact d. Diverging mechanisms e. Strategic control

C

The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as: a. uniformity of output. b. conformity. c. standardization. d. maximization of effort. e. behavioral control.

C

The process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully is referred to as: a. organizational behavior. b. organizational norm. c. organizational design. d. organizational ecology. e. organizational density

C

When a company engages in restructuring, it may be necessary to: a. increase its basic business operations. b. increase the number of organizational levels. c. lay off employees. d. add to the operating costs. e. retain the functional processes.

C

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

C

Which of the following advantages does a functional organizational structure offer a company? a. Diversification of activities leading to greater productivity b. Lesser communication problems c. Reduction in manufacturing costs and increase in operational flexibility d. Ease in gauging the contribution of products to overall profitability e. Faster servicing of customers

C

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products refers to

C. Transferring pricing

Antitrust authorities

C. are concerned with companies' abuse of their market power to raise prices for consumers above the level that would exist in more competitive situations.

Vertical integration can be disadvantageous when

C. industry technology is changing rapidly.

Free cash flow is defined as: a. money in a company's bank account. b. government funds given to a company for meeting Environmental Protection Agency (EPA) regulations. c. additional funds donated by stockholders. d. cash in excess of that required to fund investments in the company's industry and to meet any debt commitments. e. cash borrowed by the company that requires no interest payments.

Cash in excess of that required to fund investments in the company's industry and to meet any debt commitments

When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?

Competitive bidding

GM typically solicits bids from global suppliers to produce a particular component and awards a 1-year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for competitive bid, and once again the lowest cost supplier is most likely to win the bid. GM is using which of the following?

Compettive bidding

When a company decides to expand into new industries, it must....

Construct its business models at two levels

A company should pursue related diversification instead of unrelated diversification when the company's: a. core skills are applicable to a wide variety of industrial and commercial situations. b. core skills are highly specialized and have few applications outside the core business. c. top managers are skilled at acquiring and turning around poorly run enterprises. d. main objective is to maximize its growth. e. free cash flow is high enough that it has funds available for investment.

Core skills are applicable to a wide variety of industrial and commercial situations

To be commercially successful, new products must be developed with ____ in mind. a. manufacturing requirements b. engineering technology c. customer requirements d. sales techniques e. technical requirements

Customer requirements

All employees part of a project team within a structure are known as two-boss employees. a. functional b. geographic c. market d. matrix e. product

D

An effective organizational design: a. always follows a centralized structure. b. keeps the number of employees to a minimum. c. increases the cost structure. d. economizes on bureaucratic costs. e. maintains a tall hierarchical structure.

D

The organization structure that organizations most commonly adopt to solve control problems that result from producing many different kinds of products for many different market segments is the: a. functional structure. b. process structure. c. matrix structure. d. product structure. e. differentiated structure.

D

To a large degree, any organization's tasks are a function of its: a. market area. b. labor supply. c. supervisors. d. strategies. e. compensation plan.

D

When decision-making responsibilities are decentralized, benefits include all of the following except: a. increased motivation and accountability. b. lower bureaucratic costs from flattened hierarchy. c. reduced information overload. d. easier coordination of functions. e. flexibility in decision-making.

D

Which of the following does restructuring involve? 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

Which of the following problems is (are) associated with a strategy of vertical integration?

D. All of these

Which of the following is not a benefit of vertical integration?

D. Increasing the cost structure

Acquisitions often fail because of: a. poor commercialization. b. pre-acquisition screening that increases the time it takes to enter a market. c. large-scale entry. d. differences in corporate culture. e. slowness in establishing significant market presence.

Differences in corporate culture

The managers of most companies often consider _____ when they are generating free cash flow. a. taper integration b. full integration c. diversification d. long-term contracts e. strategic alliances

Diversification

When McDonald's introduced the McCafe, it began offering a new product that was not available in traditional McDonald's stores. The introduction of the McCafe is an example of which of the following? a. Transferring competencies b. Diversification c. Commonality d. Economies of scope e. Bureaucratic costs

Diversification

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue? a. Steady industry conditions b. Varying firm-specific conditions c. Diversification for pooling risks d. Decreasing bureaucratic costs e. Greater differentiation of products

Diversification for pooling risks

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley? a. Diversify through acquisition b. Do not diversify at all c. Diversify with an internal new venture d. Diversify with a joint venture e. Diversify through vertical integration

Diversify with a joint venture

Eva Studio, an audio company, manufactures a wide range of sound systems such as noise-canceling headsets, loudspeakers, and amplifiers. Employees in EvaStudio are grouped such that each group works only on one type of sound system. Which of the following structures is EvaStudio is most likely to have employed? a. Matrix b. Multidivisional c. Geographic d. Functional e. Product

E

If a firm fmds that its functional structure is becoming too complex as the firm grows in size, the firm can tum to: a. a simple structure. b. downsizing. c. reengmeerrng. d. restructuring. e. outsourcing.

E

Organizations strive to control employees' behavior by linking systems to their control systems. a. disciplinary b. disincentive c. reporting d. administrative e. reward

E

Standardization is a form of: a. output control. b. fmancial control. c. organizational inertia. d. organizational culture. e. behavior control.

E

The term used to describe how people learn an organization's culture and way of behaving in the organization is: a. organizational structure. b. organizational development. c. organizational design. d. organizational behavior. e. organizational socialization.

E

When Hewlett Packard and Compaq merged, the combined firm was larger and therefore could negotiate lower prices from suppliers. This benefit of horizontal integration is called

E. Market Power

Vertical integration is based on a company entering industries that add ____ to its core products.

E. Value

Which of the following statements concerning research and development is correct? a. Exploratory research is more important than development research. b. Development research is more important than exploratory research. c. Exploratory research is directed toward commercialization of a new technology. d. Development research advances basic science. e. Exploratory research and development research are needed for internal new venturing.

Exploratory research and development research are needed for internal new venturing

T or F Transfer pricing refers when a company is taken advantage of by another company it does business with after it has made an investement in expensive specialized assets to better meet the needs of the other company.

False

T or F A company seeking to form a long-term strategic alliance needs to enter the agreement with total trust in its partner to live up to its end of the agreement

False

T or F A strategic alliance is a substitute for horizontal integration

False

T or F Horizontal integration almost always increases rivalry in an industry.

False

T or F Horizontal integration can lead to low cost advantages but rarely to differentiation advantages

False

T or F Oracle Corp., based in Reno, Nevada, has become the world's largest maker of database software largely through a strategy of acquisition.

False

T or F Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products. Tina's Technologies is utilizing horizontal integration.

False

T or F When a company outsources its NON-CORE activities to specialists, it looses its capabilities to differentiate its final products.

False

T or F Even though companies may invest in specialized assets to build competitive advantage, it is seldom necessary that suppliers do so.

False

T or F Unfortunately, horizontal integration can not be accomplished by acquisitions or mergers.

False

When Citibank offers home mortgages and credit cards to its checking account customers, it is using horizontal integration strategy.

False

The final part of the strategy formulation process is.....

Formulation of corporate-level stratgy

When an intermediate manufacturer moves into final assembly, it is pursuing

Forward Integration

General organizational competencies are found: a. in the skills of a company's top managers and functional experts. b. at low levels among workers and other employees in the organization. c. exclusively among technology professionals. d. in feedback given by customers. e. in changes occurring within an industry.

In the skills of a company's top managers and functional experts

A strategy based on diversification may fail to add value because companies: a. seek to achieve differentiation instead of low cost. b. diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas. c. make acquisitions rather than develop new technologies on their own. d. incur bureaucratic costs that exceed the value created by the strategy. e. seek to achieve a low-cost position instead of differentiation.

Incur bureaucratic costs that exceed the value created by the strategy

What is the process of transferring resources to and creating a new business unit in a new industry called? a. External new venturing b. Exportation of resources c. Intrapreneuring d. Risk avoidance e. Internal new venturing

Internal new venturing

A company should pursue unrelated diversification instead of related diversification when: a. its core skills are highly specialized and have few applications outside its core business. b. the company's top managers are skilled at acquiring and turning around poorly run enterprises. c. its core technological skills are applicable to a wide variety of industrial and commercial situations. d. it wants to maximize growth. e. the bureaucratic costs of implementation do not exceed the value that can be created by realizing economies of scope.

Its core skills are highly specialized and have few applications outside its core business

Which of the following statements is false? a. Joint ventures are preferable to acquisitions when the new business is related to the existing business. b. Acquisitions are preferable to new ventures when speed is important. c. Joint ventures are generally preferable to acquisitions when entry barriers are high. d. Acquisitions can be both a reason for corporate decline and part of a turnaround strategy. e. New ventures are preferable to acquisitions in the embryonic stage of the industry life cycle.

Joint ventures are generally preferable to acquisitions when entry barriers are high

Which of the following seems to be a major determinant of a new venture's success? a. Large-scale entry into the target industry is designed to build market share, even when entry involves significant short-term losses b. Cautious small-scale entry into the target industry is used so that the company can assess the probable outcome of the venture without losing too much money c. A low level of integration between the marketing and the research and development functions of the venturing company d. Supporting many new venture projects in the hope that one will succeed e. Killing the new venture if it does not show a profit after the end of the third year

Large-scale entry into the target industry is designed to build market share, even when entry involves significant short-term losses

In 1999, Glaxo Wellcome and SmithKline Beecham came together to create a single firm known as GlaxoSmithKline. This is an example of a(n)

Merger

The greater the number of business units in a company's portfolio, the ____ it is for corporate managers to understand the complexities of each business. a. easier b. more difficult c. less important d. less expensive e. more meaningless

More difficult

Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it? a. Poor post-acquisition integration b. Overestimation of the potential gains to be derived from synergy c. The high cost of making acquisitions d. Lack of pre-acquisition screening e. Overestimation of the potential costs of realizing synergies

Overestimation of the potential costs of realizing synergies

Companies can maintain market discipline over suppliers by.....

Parallel sourcing

At its simplest level, a joint venture may be thought of as: a. a merger of two companies. b. an acquisition of a smaller company by a larger company. c. a form of strategic outsourcing. d. a sign of weakness on the part of one of the companies. e. pooling of resources by two or more firms to create new business.

Pooling of resources by two or more firms to create new business

Rachel is a new mom who was shopping for products to use on her baby. She noticed that the company Johnson & Johnson often packaged together baby shampoo, baby lotion, and other similar products such as bottles and baby wipes. Johnson & Johnson is utilizing which of the following?

Product bundling

Which of the following is not a general organizational competency? a. Entrepreneurial capabilities b. Capabilities in organizational design c. Superior strategic capabilities d. Product bundling e. Commonality

Product bundling

Which of the following is not necessary for a successful acquisition? a. A good bidding strategy b. A clear strategic rationale for making the acquisition c. Quick completion of the acquisition d. Thorough pre-acquisition screening e. Post-acquisition audit to review the process and discuss ways to improve it

Quick completion of the acquisition

Company leaders that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities. a. unrelated b. not comparable c. opposed d. related e. identical

Related

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue? a. Unrelated diversification b. Related diversification c. A focus strategy d. Taper integration e. Backward integration

Related diversification

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? a. A technology acquisition strategy b. Related diversification c. A restructuring strategy d. Total diversification e. A taper diversification strategy

Related diversification

Diversification may dissipate value if it is wrongly based on: a. realizing economies of scope. b. rescuing core business. c. transferring competencies. d. acquisitions and restructuring. e. leveraging existing competencies.

Rescuing core business

If a company is to increase the probability of a new product's commercial success, the company must foster close links between: a. marketing and sales. b. engineering and advertising. c. quality assurance and inventory management. d. research and development (R&D) and marketing. e. accounting and industrial engineering.

Research and development (R&D) and marketing

Economies of scope typically involve: a. sharing resources by business units. b. acquiring resources from outside a company. c. utilizing resources in limited quantities by specific business units. d. acquiring resources from another business unit in a company. e. utilizing resources to develop a new business unit.

Sharing resources by business units

Another name for long-term cooperative relationships between two or more companies who agree to commit resources to develop new products is

Strategic Alliance

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification? a. The company has to achieve coordination between business units. b. The company has narrow organizational competencies. c. The company has superior strategic management and organizational design. d. The company has no bureaucratic costs that arise from the number of businesses in its portfolio. e. The company has no difficulty in keeping its corporate managers informed about the complexities of each business.

The company has superior strategic management and organizational design

What is perhaps the most important reason why acquisitions fail? a. The expense of the acquisition b. The timing of the acquisition c. Management's unwillingness to make the necessary effort to make the acquisition work effectively d. Incompetence on the part of workers in the acquired firm e. Difficulties in coordinating manufacturing activities

The expense of the acquisition

An internal new venture is the most appropriate strategic choice when: a. an industry is mature. b. the firm will enter on a small scale. c. the firm has competencies that can be leveraged. d. speed of entry is the most important consideration. e. there is strong pressure for quick profitability.

The firms has competencies that can be leveraged

Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope? a. The strategy requires the head office to evaluate each business unit as a stand-alone operation. b. The strategy allows a company to realize cost economies among business units. c. The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale. d. The strategy requires managers to be aware of the costs of coordination. e. The strategy requires close coordination among different business units.

The strategy requires the head office to evaluate each business unit as a standard-alone operation

Economies of scope can be defined as: a. competencies that result from the skills of a company's top managers that help every business unit within a company perform at a higher level than it could if it operated as a separate or independent company. b. some kind of skill or competency that when shared by two or more business units allows them to operate more effectively and create more value for customers. c. the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry. d. the process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry. e. the synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

The synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

Miller Brewing, which was acquired by Philip Morris, was related to the parent company's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following? a. Transferring competencies b. Leveraging competencies c. General organizational competencies d. Economies of scope e. Organizational design skills

Transferring competencies

_____ involves taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry. a. Sharing resources and capabilities b. Leveraging competencies c. Transferring competencies d. Product bundling e. Strategic management capabilities

Transferring competencies

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.

True

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources.

True

One outcome of horizontal integration is industry consolidation, leading to more bargaining power over buyers and suppliers.

True

Product bundling occurs when a firm offers a range of products that are sold together at a single price.

True

T or F Vertical integration can strengthen a company's differentiation advantage.

True

T or F When a company stays inside one industry, the problems of sustaining a successful business model and strategies over time can be difficult because of changing conditions in the environment.

True

T or F At the time of the merger of Hewlett Packard and Compaq, Dell Computer's competitive advantage over Hewlett Packard was based on Dell's cost-leadership business model.

True

T or F Companies that outsource most or all of their value creation activities are often referred to as virtual corporations.

True

T or F Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies.

True

T or F An advantage of horizontal integration is that by staying in one industry, a firm can focus its resources and capabilities on competing successfully in just one area.

True

T or F Managers use corporate-level strategy to identify which industries a company should compete in to maximize long-run profitability.

True

Vertical integration is undertaken to support the competitive position of a company's core business.

True

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is

Unpredictable

Which of the following strategies facilitates the implementation of a just-in-time inventory system?

Verticle Integration

anticompetitive behavior

a range of actions aimed at harming actual or potential competitors, most ofter using monopoly power, and thereby enhancing the long run prospects of the firm

information asymmetry

a situation when an agent has more information about resources he or she is managing than the principal has

information asymmetry

a situation where an agent has more information about resources he or she is managing than the principal does

greenmail

a source of gaining wealth by corporate raiders who benefit by pushing companies to either change their corporate strategy to one that will benefit stockholders or by charging a premium for these stocks when the company wants to buy them back

on job consumption

a term used by economist to describe the behavior of senior managements is of company funds to acquire perks that will enhance their status, instead of investing to increase stockholder returns

When is vertical integration hazardous?

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

Under a competitive bidding strategy, independent component suppliers compete with each other to be the company that will be chosen to supply

a. a particular part for a particular manufacturer.

Credible commitments

a. are believable promises or pledges to support the development of a long-term relationship between companies.

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself

a. locked into an old, inefficient technology.

John's surfboard shop has a long-term relationship with two surfboard makers. John is using

a. parallel sourcing.

Ethics

accepted principles of right and wrong that govern the conduct of a person, the members of a profession, or the actions of an organization

business ethics

accepted principles of right or wrong governing the conduct of business people

Agency problem

although agency relationships ofter work well problems may arise if agents and principals have different goals and if agents take actions that are not in the best interests of their principals

external stakeholders

are all other individuals and groups that have some claim on the company

Stakeholders

are individuals or groups with an interest, claim, or stake in the company, in what it does, and how well it performs

Outside directors

are not full time employees of the company, needed to provide objectivity to the monitoring and evaluating of processes

Internal stakeholders

are stockholders and employees, including executive offices, other managers, and board members

substandard working conditions

arise when managers underinvest in working conditions, or pay employees below market rates, in order to reduce their production cost

Ownership of retail outlets may be important for a manufacturer if

b. after-sales service is required for complex products.

To build trust in a cooperative relationship, both firms can

b. make mutual investments in specialized assets.

A hospital supply company invests in training for a team of sales associates to learn the details of each hospital chain's operations. In return, the hospital chain invests in a computer system that supports supply ordering. The supply company and the hospital chain are working to ensure the success of their long-term relationship by

b. making a credible commitment.

Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?

b.Better realization of economies of scale

corruption

can arise in a business context when managers pay bribes to gain access to lucrative business contracts

Risk capital

capital that cannot be recovered if a company fails or goes bankrupt

Outsourcing occurs when a firm

d. hires another firm to perform value creation activities.

Outsourcing

d. moves some value chain activities outside the firm.

Horizontal integration may be thought of as

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

In which of the following is a firm most likely to lose direct control over value creation activities?

e. Outsourcing

Google bought Clever Sense, a mobile app company. This is an example of a(n)

e. acquisition.

Long Term Contracts

e. are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.

Strategic alliances are

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

code of ethics

formal statement of the ethical priorities to which a business adheres

personal ethics

generally accepted principles of right and wrong governing the conduct of individuals

Many industries have experienced increased consolidation over the last decade due to an increase in

horizontal integration

board of directors

is the centerpiece of the corporate governance system Board members are directly elected by stockholders, and under corporate law, they represent the stockholders interest in the company. Hence, the board can be held legally accountable for the company actions The board has the legal authority to hire, fire, and compensate corporate employees, including, most importantly the CEO

Agency theory

looks at problems that can arise in a business relationship when one person delegates decision making authority to another

self dealing

managers using company funds for their own personal consumption,

environmental degradation

occurs when a company's actions directly or indirectly result in pollution or other forms of enviromental harm

inside directors

senior employees of the company such as the CEO

ethical dilemmas

situations where there is no agreement over exactly what the accepted principles or right and wrong are, or where none of the available alternatives seems ethically acceptable

stock options

the right to purchase stock at a predetermined price at some point in the future usually within 10 years of the grant date

takeover constraint

the risk of being acquired by another company

opportunistic exploitation

unethical behavior sometimes used by managers to unilaterally rewrite the terms of a contract with a suppliers, buyers, or complement providers in a way that is more favorable to the firm

information manipulation

when managers use their control over corporate data to distort or hide information in order to enhance their own financial situation or competitive position in the firm