Strategy Exam 3

Research indicates that most corporate ethics problems are caused by a few "bad apples" rather than an unethical culture.

FALSE

Eyenima Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? A) Frieda, a shareholder, can legally sell shares of Eyenima in the stock market. B) Tabitha is a shareholder of Eyenima but does not have any managerial duties. C) Edward, an employee at Eyenima, is not responsible for any losses that Eyenima incurs. D) Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well.

D

Fine Lines Inc. is a notebook manufacturing company based in Ohio. Fine Lines' main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Fine Lines Inc. likely to use if it has functional setup? A) organic B) simple C) matrix D) mechanistic

D

Which of the following organizational structures matches best with an international strategy? A) simple B) matrix C) multidivisional D) functional

D

Which of the following perspectives best supports the shared value creation framework? A) Markets are more often than not defined by societal needs rather than economic needs. B) Failing to create value for society almost always reflects on the bottom line. C) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

D

Which of the following global strategies best matches with a multidivisional structure? A) international B) multidomestic C) global-standardization D) transnational

B

Which of the following is a disadvantage of a functional strategy? A) It frequently lacks the tools required to pursue a cost-leadership strategy. B) It does not facilitate rich communication between members of the same department. C) It cannot effectively address a higher level of diversification. D) It does not allow organizations to be flexible or innovative.

C

Which of the following is a major issue at the forefront of CEO compensation in recent years? A) a comparison of the performance of the organization before and after the CEO's tenure B) the performance of the CEO as an employee versus the performance as a board member C) the absolute size of the CEO pay package compared with the pay of the average employee D) a comparison of the compensation of senior management hired during and before the CEO's tenure

C

Which of the following types of organizations best helps match a differentiation strategy to a functional structure? A) ambidextrous organization B) mechanistic organization C) organic organization D) rigid organization

C

David and Fred are customer care employees at JPN Care. In between calls, David and Fred spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior A) is neither unlawful nor unethical; hence, David and Fred cannot be reprimanded. B) typically exemplifies the agency problem of adverse selection. C) demonstrates the dangers of information asymmetry. D) can be stopped by implementing performance incentives and strict control mechanisms.

D

Which of the following statements best supports the view that GE's Ecomagination strategy is in line with the shared value creation framework? A) The Ecomagination strategy is the brainchild of the founder of the company. B) The Ecomagination strategy helps GE spend more on research and development than other similar companies. C) The Ecomagination strategy generated $3 billion in revenues for GE during 2012. D) The Ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

D

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. A) norm B) culture C) structure D) control

C

A company that is using extrinsic motivation as an output control mechanism will most likely A) organize training sessions for employees. B) cut budgets during recessions. C) implement a peer review system. D) threaten to lay off employees if they do not achieve targets.

D

Angelica is the CEO of Sandhaven Ltd., a publicly traded company. The shareholders want Angelica on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Angelica is A) a board member of a major client. B) more likely than other board members to take care of the stockholders. C) also the CEO of other companies. D) likely to provide the board with valuable inside information.

D

A detergent manufacturer decides to clean up the waterways it uses even though no federal, state, or local laws require the firm to do this. The firm's managers believe that the cleanup will improve the company's image and benefit the environment. This scenario is an example of shareholder capitalism.

FALSE

An open innovation model reduces a firm's absorptive capacity.

FALSE

A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

TRUE

Adverse selection in a public stock company occurs when A) information asymmetry increases the likelihood of selecting inferior alternatives. B) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. C) a principal is not aware of the context from which information from an agent is derived. D) an agent manipulates information to benefit stockholders.

A

Arnold is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Arnold most likely to agree? A) Businesses can use their resources to create profit as long as they do so within the rules of the game. B) Firms must go beyond their economic responsibility and act in socially responsible ways. C) Firms should define value creation broadly in terms of environmental impact. D) Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.

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

Butterfly Technologies produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Butterfly devices. In this scenario, Butterfly would be best served to embrace A) open innovation. B) closed innovation. C) disruptive innovation. D) radical innovation.

A

Delores recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Delores to undertake to help safeguard the company's financial health? A) Request and review a copy of the firm's risk assessment plan, if such a plan exists. B) Take part in the annual reviews of employees in the financial department. C) Draft and circulate a statement that the firm's board members serve at the pleasure of the CEO. D) Determine how to postpone or evade the firm's compliance with local, regional, and national regulations.

A

Ethics is A) not synonymous with law. B) impossible to codify into law. C) universal and cannot differ between cultures. D) the minimum acceptable standard in business practice.

A

In a public stock company, senior executives, such as the CEO, face agency problems when A) they delegate authority of strategic business units to general managers. B) they decide to get involved in the day-to-day operations of a company. C) the board of directors possesses more information about the company than they do. D) the firm designs work tasks, incentives, and employments that minimize opportunism.

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

Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy? A) M-Form with centralized decision-making power (cooperative multidivisional) B) M-Form with decentralized decision-making power (competitive multidivisional) C) functional with centralized decision-making power D) functional with decentralized decision-making power

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

One of Waterfall Apparel's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "True to You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Waterfall's competitors. Although the campaign has resulted in a 10 percent decline in profits, Waterfall has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Waterfall's culture, exemplified by the "True to You" campaign, fail to support a competitive advantage? A) It does not increase economic value creation for the firm. B) It is not a rare resource. C) Waterfall lacks founder imprinting. D) The culture is not difficult to imitate.

A

Organizational design is A) the process of creating, implementing, and modifying the structure of an organization. B) primarily focused on replacing a firm's competitive advantage with competitive parity. C) a process that always functions independently of strategy formulation. D) primarily focused on formulating effective strategies, not implementing them.

A

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by A) introducing results-only-work-environments to tap intrinsic motivations. B) refining the budgeting process to encourage more department collaboration. C) updating standard operating procedures to allow more process flexibility. D) using output controls only when the goal is to ensure a predictable outcome.

A

Ruby, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Ruby? A) Once the firm starts growing and attracting more customers she is likely to feel overloaded. B) Hiring more employees will result in loss of intellectual property. C) People are highly unlikely to buy clothes from a store run by a fashion design student. D) The online admiration of her designs will not translate into sales.

A

Sanjaya was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically? A) Observe executives at the company, and see whether they model ethical behavior and demand it of others. B) Research the results of the ethics violations. If the perpetrators were fired or jailed, then the rest of the company is sound. C) Check the company's mission statement to make sure that it guarantees respect and integrity. D) Ignore the alleged ethics violations because there is no one standard of ethical behavior.

A

Shareholders of public companies need to appoint a board of directors to represent their interests because A) of the separation of ownership and control. B) employees of a company cannot be shareholders. C) the board of directors itself is made up of shareholders. D) the shareholders want tighter control over day-to-day operations of a company.

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 root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A) informational advantage of the lower-level employees. B) higher number of lower-level employees than senior executives. C) knowledge of employees regarding day-to-day tasks. D) operational expertise of lower-level employees in concentrated areas of a particular field.

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 best exemplifies the use of input controls? A) McDonald's use of standard operating procedures B) GM's use of the multidivisional strategy C) Zappos' use of monitoring-free customer service calls D) Southwest Airline's use of employee friendliness

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

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

Which of the following is a common result of a hostile takeover of a company? A) The new owner sells the company in pieces. B) The new owner keeps the company intact. C) The new owner keeps the board of directors of the company the same. D) The new owner enhances the reputations of the company's management.

A

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy? A) It allows a cost-leader to upgrade core competencies in manufacturing and logistics. B) It enables a cost-leader to build products that are different from its competitors' offerings. C) It enables a cost-leader to increase costs above that of its competitors. D) It allows a cost-leader to operate in a decentralized organizational structure.

A

Which of the following is true of business ethics? A) Certain notions such as fairness, honesty, and reciprocity are universal norms. B) Business ethics is an agreed-upon code of conduct in business, based on laws. C) The perception of what is ethical and what is not is similar across different cultures. D) Business ethics needs to be codified into law in order to be followed.

A

Which of the following is true of the board of directors in a public stock company? A) Votes at shareholder meetings determine whose representatives are appointed to the board of directors. B) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. C) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. D) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.

A

Which of the following is true of the codes of conduct of an organization? A) They detail how the organization expects an employee to behave and to represent the company in business dealings. B) They are a reiteration of the laws pertaining to business dealings in a corporate environment. C) They are a guide to determine what is lawful and what is unlawful. D) They help the board of directors and the CEO implement shareholder capitalism.

A

Which of the following is true of the process of organizing for competitive advantage? A) To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes. B) Strategy formulation and strategy implementation are independent activities. C) Organizing for competitive advantage is a static and not a dynamic process. D) Formulating an effective strategy is a necessary and sufficient condition for gaining and sustaining competitive advantage.

A

Which of the following provides an example of a common drawback of a functional strategy? A) Bert had a difficult time communicating efficiently with the manager of another department. B) Marietta was surprised about the inflexibility of her firm when it rejected her marketing plan. C) Juan's manager dismissed his idea because it was too innovative. D) Mary did not accept the position with the firm because it has an ineffective cost-leadership strategy.

A

While working a night job at a call center, Eric creates an app called EatOut, 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 EatOut. He creates a start-up called BestApps and hires three people to help him improve EatOut and maintain the servers that run it. In this scenario, BestApps most likely has a ________ structure. A) simple B) matrix C) mechanistic D) functional

A

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework? A) Doing so could yield significant business opportunities that could improve the standard of living of the poor. B) Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization. C) Doing so could be the only way to meet stockholder expectations in a highly competitive market. D) Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains.

A

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos? A) Their culture reflects complex relationships with their employees, customers, and suppliers. B) They produce products that cannot be copied easily because of their complex designs. C) The employees in the organization themselves are unaware of the factors contributing to their organizational culture. D) It is not commercially viable for other companies to implement the same culture.

A

Why is the optimal organizational structure a multidivisional structure? A) Its focus is on driving down costs. B) Its focus is on producing differentiated products. C) Its focus is on retaining activities within a single geographic area. D) Its focus is on establishing a flat hierarchy operated in a decentralized fashion.

A

A functional structure is recommended when a firm A) has a broad focus in terms of its product/service offerings. B) has a low level of diversification. C) has a low degree of specialization. D) diversifies into different product lines and geographies.

B

A high degree of formalization in an organization is most likely to A) improve customer service. B) slow down decision making. C) produce inconsistent results. D) increase creativity and innovation.

B

ABX Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as A) competition. B) co-opetition. C) exploitation. D) exploration.

B

According to Michael Porter, which of the following is a problem with many publicly traded companies? A) Shareholders of publicly traded companies do not have a legitimate claim on profits. B) They have defined value creation too narrowly in terms of financial performance. C) There is no transferability of stock ownership in publicly traded companies. D) Publicly traded companies have no legal standing and are not responsible for their debts.

B

According to the perspective of shareholder capitalism, shareholders in public stock companies A) are restricted from buying shares of two competing companies. B) have the most legitimate claim on profits. C) have significant decision-making power. D) have unlimited financial liability.

B

Andrew is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders? A) Andrew needs to focus on the company's earnings because that is what shareholders care about. B) He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price. C) He should discourage pension funds from investing because they are interested in safety at the expense of growth. D) He should make the company stock available only to hedge funds so he will have the freedom to take risks as the firm expands.

B

At Agile Ltd., a cross-functional team is formed to work on a project for a new client. The team consists of Charles and four other members. At most of the team's presentations to senior management, Charles takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Charles is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Charles did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Agile Ltd. is a typical consequence of A) moral hazard. B) adverse selection. C) shared value creation. D) corporate governance.

B

Barrett is the ethics officer at Exton Corp., a publicly traded company. She wants to make sure that on-the-job consumption at Exton stays within legal and ethical bounds. Which action should she and the Exton board of directors take? A) Forbid high-cost items such as executive office decoration, but permit lavish parties and celebrations because they are essential for morale. B) Set strict limits on what executives can spend on office redecoration or work-related celebrations. C) Do nothing. On-the-job consumption is a necessary part of hiring and retaining key executives. D) Permit on-the-job consumption but cancel executive bonuses.

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

Galaxy Toys Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Galaxy Toys for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario? A) Galaxy Toys Inc. is a mechanistic organization. B) Galaxy Toys Inc. has a flat organizational structure. C) Galaxy Toys Inc. has a high degree of centralization. D) Galaxy Toys' organizational culture is governed by codified rules.

B

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)? A) Uber promised a large donation to NREC but then reneged on the offer when NREC would not provide Uber with researchers. B) Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC. C) Uber allegedly stole ideas from the NREC research team and then claimed that these ideas were generated by their own researchers. D) Uber bribed NREC officials to give permission for building an extension to the NREC facility that focuses solely on Uber research.

B

Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda'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? A) transferability of investor ownership B) legal personality C) limited liability for investors D) separation of legal ownership and management control

B

Jen works as a front-line employee for a nationwide retail store. She reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store? A) flat structure B) tall structure C) centralized structure D) decentralize structure

B

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's A) is organic in nature. B) is mechanistic in nature. C) has an informal structure. D) has a decentralized structure.

B

Megan is a graduate student pursuing a course in business. Presented with the case of a company's unethical behavior, Megan wonders if the company's board of directors should ask the CEO to step down. Having a strong belief in Michael Porter's idea of value creation, Megan is most likely to conclude that company's board of directors A) should not ask the CEO to step down because doing so would cause a profit dip that would affect its shareholders. B) should ask the CEO to step down because it has a greater obligation toward society. C) should not ask the CEO to step down because he was responsible for an almost 90 percent appreciation of the company's stock. D) should ask the CEO to step down because agents, unlike principals, are disposable.

B

Nate 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 start-up recruits Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies A) moral hazard. B) adverse selection. C) shared value creation. D) corporate governance.

B

One way to foster ethical behavior in employees is to A) avoid codifying organizational culture. B) create a control system that encourages desired values. C) view clients as counter parties to transactions. D) align the vision statement of the organization with its informal culture.

B

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and A) eventually gives way to core rigidity. B) obeys the VRIO principles. C) does not demonstrate causal ambiguity. D) displays an absence of social complexity.

B

Spiderweb Inc. is an apparel manufacturer. The management at Spiderweb 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 A) output controls. B) input controls. C) multidivisional strategy. D) centralization.

B

Starling Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that public companies A) often do not keep economic needs and societal needs separate from each other, thereby contributing to low value creation. B) have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events. C) do not focus enough on increasing firm profits, thereby contributing to low value creation. D) have defined value creation too narrowly and as a result have ignored political lobbying, thereby contributing to black swan events.

B

The board of directors of a public stock company consists of A) managers appointed by the owners of a company to run its day-to-day operations. B) individuals who formally represent the firm's shareholders and oversee the work of executives. C) the legal owners of a publicly traded company that was purchased in a leveraged buyout. D) employees of a company who belong to the senior management and directly report to the CEO of the firm.

B

Three months ago, Darren became a board member at Runswell, a publicly traded company. Two weeks ago, the board members discovered that Runswell's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Darren and the other board members hold the CEO? A) They should hold her to the same ethical standards that they would expect of any Runswell employee—no more, no less. B) They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny. C) If the board members are able to determine that the CEO is not a "bad apple," then they should give her their full support. D) The board members must wait until the lawsuit results in a settlement or a guilty verdict.

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

W. L. Gore & Associates 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) a formalized structure. B) a decentralized structure. C) organizational inertia. D) a top-down management style.

B

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies? A) It gives the managers greater control of the performance of the organization in the long term. B) It reduces the trust of shareholders in the organization as a vehicle for value creation. C) It helps companies increase firm profits by creating shared value. D) It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.

B

Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A) Very few corporate-governance mechanisms can be effective in addressing the principal-agent problem. B) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. C) Leading by ethical example often has a lesser effect on employee behavior than words do. D) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.

B

Which of the following is the source of the principal-agent problem in publicly traded companies? A) the law of legal personality B) the separation of ownership and control C) limited liability for investors D) transferability of investor ownership

B

Which of the following real-world scenarios best exemplifies formalization? A) Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts B) McDonald's use of standard operating procedures across the world C) W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses D) Yahoo's decision to fire its CEO after incurring huge losses

B

Which of the following statements is true of organizational culture? A) Changes in culture are too frequent to have any impact on strategic implementation. B) It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages. C) It is always better to focus on output control and performance than on organizational culture. D) According to research, more than 50 percent of firms change culture successfully.

B

Which of the following statements is true of shareholders in a public stock company? A) They directly supervise and coordinate the manufacture of products and delivery of services. B) They are granted a charter of incorporation by the state and legally own company stock. C) They are the centerpiece of corporate governance. D) They are appointed by a board of directors to oversee the company's management.

B

Which of the following types of groups is most susceptible to groupthink? A) a diverse group B) a cohesive group C) a heterogeneous group D) a decentralized group

B

Why does strategy implementation often require changes within an organization? A) Strategy implementation is less important than strategy formulation. B) Strategy implementation transforms strategy into actions and business models. C) Strategy always follows structure. D) Strategy implementation does not affect resource allocation and power distribution within an organization.

B

Because of poor management, the stock price of Orange Dolphin Inc. falls and many investors sell their shares. Soon Orange Dolphin becomes the target of a hostile takeover, during which Hans buys enough shares to exert control over the firm. In this scenario, Hans performs the role of a(n) A) inside director. B) outside director. C) corporate raider. D) corporate consultant.

C

Bernard is a board member at Lopez Electronics Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Stanley Motors. According to this scenario, Bernard A) cannot serve on the board of any other organization. B) is more likely than Ernest to take care of stockholder interests. C) is an inside director of Lopez Electronics. D) can use information from board meetings to trade stocks of Lopez Electronics.

C

Cheetah, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so? A) decision-making power distributed throughout the organization B) a wide span of control for managers C) dedication to a cost-leadership business strategy D) flexible job descriptions for employees

C

Elvira is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical? A) What are the chances that her decision to accept the opportunity will be made public? B) How much profit would be made if she decided to accept the opportunity? C) How would the media report her decision to accept the opportunity if it were to become public? D) How long lasting would the competitive advantage be if she decided to accept the opportunity?

C

GameGo is a publicly traded manufacturer of home electronics. Based on what you have read, which of these actions would be wisest for GameGo's board of directors to take to be sure that the company's new CEO is as motivated as possible? A) Encourage the CEO to take all of her compensations in stock options, which will motivate her to keep the stock price high. B) Offer the largest bonus possible to prevent the CEO from leaving to go a rival firm. C) Link the CEO's pay to her performance, but avoid high-powered incentives that may cause reckless behavior. D) Encourage her to emulate Warren Buffett and to take a lower salary than she might command elsewhere.

C

General Electric's board has only one inside director, John Flannery, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A) A CEO is likely to be more responsible because he or she is setting his or her own performance targets. B) The CEO might be able to influence the board through setting the meeting agendas. C) The CEO possesses invaluable inside information that can help him or her chair the board effectively. D) Any CEO will suggest board appointees who are friendly toward him or her.

C

Harvey's, 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 Harvey's use? A) basic B) simple C) multidivisional D) functional

C

Ignacio Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? A) Employees of Ignacio are legally permitted to invest their capital in the company's stock. B) Employees of Ignacio are also the owners of the company. C) Shareholders of Ignacio are responsible to the company only to the capital they have invested. D) Shareholders of Ignacio are not permitted to trade their company stock at the New York Stock Exchange (NYSE).

C

Mona sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Mona's business? A) a firm that relies on high input controls to tap into intrinsic motivation B) a firm that relies on high input controls to tap into extrinsic motivation C) a firm that relies on high output controls to tap into intrinsic motivation D) a firm that relies on high output controls to tap into extrinsic motivation

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 MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after A) Level-5 leadership. B) the Sarbanes-Oxley pledge. C) the Hippocratic oath in medicine. D) the Goldman Sachs code.

C

The informational advantage that agents possess over principals is often based on the fact that A) the information is extremely secure and protected from exposure to anyone outside the company. B) public stock companies are characterized by information symmetry. C) insiders are the first to learn about important developments before the information is released to the public. D) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.

C

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly A) formalized. B) specialized. C) organic. D) mechanistic.

C

Tony's Tacos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Tony's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's? A) Tony's has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy. B) Tony's has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy. C) Tony's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy. D) Tony's has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy.

C

Turquoise Games relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Turquoise should A) offer bonuses to employees whose ideas go into production. B) threaten to fire employees who do not come up with at least one new idea per week. C) give employees a "free day" every two weeks to pursue ideas for new educational toys. D) distribute a list of standard operating procedures for employees to follow.

C

Two leading home appliance companies, Redwood Inc. and Boxer Technologies, are in competition for market share. In their quest for exciting new products, Redwood employs an open innovation model, while Boxer pursues a closed innovation model. Which of the following statements is most likely true? A) Redwood has a greater chance of capturing market share. B) Boxer has a superior absorptive capacity. C) Boxer will protect its intellectual property with patents and trade secrets. D) Redwood is most concerned with securing first-mover advantages.

C

Uptown Office Systems recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision? A) Employees will have less power and autonomy, resulting in a loss of morale. B) Internal communications and decision-making processes will be slower. C) The increased span of control for remaining managers may lead to higher levels of stress and possible burnout. D) Employees will be forced to take on more specialized roles and may become bored by repetitive tasks.

C

What do we call the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance? A) investors B) outside directors C) inside directors D) auditors

C

What helps notions such as fairness, honesty, and reciprocity to be codified into law? A) The notions are synonymous with law. B) The notions differ to some degree in different cultures around the globe. C) The notions are universal norms. D) The notions are characteristics inherited by each person irrespective of the culture.

C

When a firm diversifies into different product lines and geographies, a ________ structure is preferred. A) simple B) functional C) multidivisional D) network

C

Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A) to reduce the transferability of stocks between stockholders B) to bring about a separation of CEO/chair duality C) to align incentives between shareholders and management D) to change the liability of shareholders from limited to unlimited

C

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal? A) It was given a "triple A" rating for Abacus even though Abacus should have gotten a low rating. B) It made no effort to ascertain the stability of the real estate market, even though it had the resources and time to do so. C) It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation. D) It lost $100 million in the Abacus fiasco and endured negative treatment in the media.

C

Which of the following is an advantage offered by a functional structure? A) It allows for an efficient top-down communication chain and thus relies on a relatively tall structure. B) It facilitates a lower division of labor, which is linked to higher productivity. C) It allows for a higher degree of specialization and deeper domain expertise. D) It facilitates a lower level of specialization.

C

Which of the following is an unintended side effect of a high degree of specialization in an organization? A) decreased trade-off between breadth and depth of knowledge B) decreased opportunities for the division of labor C) reduced employee satisfaction due to repetition of tasks D) reduced productivity

C

Bellhaven Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about Bellhaven's board of directors? A) Bellhaven's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments. B) Bellhaven's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions. C) Bellhaven's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO. D) Bellhaven's board of directors has a minority number of inside directors and it evaluates the firm's strategic initiatives.

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

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 A) decentralization. B) founder imprinting. C) groupthink. D) core rigidity.

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

Gino is the CEO of a financial services firm. What action should Gino take to be sure the firm avoids moral hazards? A) He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. B) Gino must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." C) He must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company. D) Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.

D

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that A) managers need to keep economic needs and societal needs disconnected from each other. B) a firm should expand its internal value chain to include nontraditional partners. C) businesses should focus on creating regional clusters such as Silicon Valley in the U.S. D) the largest but poorest socioeconomic group can yield significant business opportunities.

D

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A) the expectation that the agent will follow the country's laws and regulations B) the expectation that the agent will go above and beyond the call of duty C) the expectation that the agent will reconnect economic and social needs D) the expectation that the agent will act in the principal's best interest

D

In which of the following ways does Zappos achieve organizational control? A) It continually changes the organizational values that guide its employees. B) It refrains from monitoring its employees' calls. C) It encourages employees to be creative and innovate and to go the extra mile to deliver a wonderful customer experience. D) It enforces that each group member's compensation depends in part on the group's overall productivity.

D

Keyhole Corporation is the parent company of Inspire.com and Roker Inc. To cut costs, Keyhole integrated InSpire.com's and Roker Inc.'s management functions with Keyhole's management, while keeping other functions such as product development independent. Keystone has encourage the senior teams at both Inspire and Roker to exploit the success of their existing products while exploring new products for the future. This scenario best exemplifies a(n) A) multidivisional structure. B) organic organization. C) simple structure. D) ambidextrous organization.

D

Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is a(n) ________ for Anderssen and a(n) ________ for EEC. A) CEO; COO B) COO; CEO C) outside director; inside director D) inside director; outside director

D

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of A) shareholder capitalism. B) adverse selection. C) shared value creation. D) moral hazard.

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

Sorenson LLC, a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company—including 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, how many outside directors should the shareholders appoint to Sorenson's board to achieve board independence? A) 1 B) 3 C) 5 D) 7

D

Stella accepts a job as vice president for human resources at a technology startup. She discovers that the startup believes that teamwork is so important that it plans to award all raises and bonuses by splitting them equally within a team rather than presenting them to individual employees. What action should Stella take regarding this plan? A) Interview new candidates extensively to avoid adverse selection. B) Expand the plan by allowing teams to make hiring decisions and eventually firing decisions as well. C) Make sure the plan goes into place only after the company has corrected information asymmetry. D) Cancel the plan because under it, opportunistic employees will do little or no work.

D

The name for an agreed-upon code of conduct in business, based on societal norms, is A) fiduciary responsibilities. B) poison pills. C) strategic business points. D) business ethics.

D

What are poison pills? A) Shareholders use them to prevent the founder of a company from taking the company private through a leveraged buyout. B) They are unspecified conditions in the contract between stakeholders in an organization. C) Companies use them in a bid to perform a hostile takeover of competing firms. D) They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

D

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change? A) The firm's original core competency can turn from a liability into an asset. B) The firm's organizational inertia can turn into its core rigidity. C) The firm's competitive parity can turn into its competitive advantage. D) The firm's culture can turn from a core competency into a core rigidity.

D

Which of the following accurately describes an organic organization? A) an inflexible organization that fosters slow decision making and high employee motivation B) an inflexible organization that fosters fast decision making and high employee motivation C) a flexible organization that fosters slow decision making and high employee motivation D) a flexible organization that fosters fast decision making and high employee motivation

D

Which of the following features helps match a cost-leadership strategy to a functional structure? A) decentralization B) process and product innovations C) flexibility and mutual adjustment D) focus on economies of scale

D

Which of the following statements best describes groupthink? A) It is a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure. B) It is a situation in which organizations compete with one another for resources, but they also need to cooperate to share competencies. C) It is a process whereby employees internalize an organization's values and norms through immersion in its day-to-day operations. D) It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

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

________ define appropriate employee attitudes and behaviors. A) Values B) Artifacts C) Appraisals D) Norms

D

________ refers to the degree to which decision making is concentrated at the top of the organization. A) Specialization B) Formalization C) Naturalization D) Centralization

D

Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

FALSE

A change in company culture is most commonly accompanied by a change in leadership.

TRUE

Dinesh is a senior manager at a large, publicly traded corporation. He has access to insider information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks.

TRUE

If a privately held company has a history of legal and ethical problems, those problems can prevent a successful initial public offering (IPO) from taking place.

TRUE

The most important yet least visible element of organizational culture is A) values. B) norms. C) laws. D) artifacts.

A

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) ________ in the context of a principal-agent problem. A) adverse selection B) stakeholder strategy C) moral hazard D) shared value creation

C

A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

FALSE

A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

FALSE

It can be difficult for shareholders of publicly traded companies to determine how much money those companies are making or losing because these companies use different accounting firms, and each accounting firm follows different rules.

FALSE

It is up to shareholders to make certain that the financial statements that their firms release are correct and not misleading.

FALSE

One of the most challenging aspects of principal—agent problems is that firms have almost no defenses against them.

FALSE

Corporate codes of conduct go beyond what the law requires, imposing higher standards of honesty and fairness.

TRUE

A bank, CQC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A) The bank knows that the customer will be unable to pay the loan if the interest rate rises. B) The bank is not aware of the investments made by the customer. C) The bank has the financial statements of the customer, but it is not aware of each source of income. D) The bank is depending on the customer to pay back the loan before term completion.

A

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. A) global matrix B) multidivisional C) functional D) simple

A

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? A) legal but not ethical B) ethical but not legal C) legal and ethical D) neither legal nor ethical

A

According to the agency theory, A) conflicts that arise in corporations should be addressed in the legal realm. B) corporations are more than a set of contracts between parties. C) companies should focus on generating profits for stockholders. D) principals and agents have interchangeable roles.

A

Employees learn about an organization's culture through the process of A) socialization. B) exploitation. C) co-opetition. D) acculturation.

A

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A) Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. B) GE knew that it could create a profitable venture out of producing green products, so it rolled out the Ecomagination strategy. C) Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. D) Goldman Sachs followed through with the Abacus deal despite knowing its shortcomings.

A

Which of the following scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Rigoletto Inc.? A) The owner of another company buys all the outstanding shares of Rigoletto in order to take it private. B) A private equity firm, Stormcloud Inc., buys a large number of shares of Rigoletto in order to publicly trade it under a new name. C) Rigoletto sells all its shares and declares bankruptcy. D) Rigoletto buys back a large amount of its own shares from the stock market.

A

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization? A) It allows a high level of integration. B) It helps contain the core competencies within a strategic business unit (SBU). C) It leads to competition between SBUs. D) It helps evaluate each SBU as a stand-alone profit-and-loss center.

A

Which of the following characteristics of a public stock company deals with principals and agents? A) limited liability of investors B) transferability of investor ownership C) separation of legal ownership and management control D) legal personality

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

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure. A) functional B) multidivisional C) matrix D) simple

C

Successful ________ requires managers to design and shape structure, culture, and control mechanisms. A) strategy innovation B) strategy formulation C) strategy implementation D) strategy diversification

C

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage? A) W. L. Gore & Associates organizes its employees into project-based teams. B) Apple develops high-tech products that are preferred by consumers across the world. C) Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D) GM offers compensation if its products do not meet a consumer's expectations.

C

Why are controls like budgets and operating procedures that McDonald's implements known as input controls? A) They are independent of an organization's culture. B) They are implemented by corporate headquarters. C) They are considered before employees make any decisions. D) They are ad hoc and not codified.

C

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? A) It allows the firm to create incentives to foster process innovation in order to drive down cost. B) It allows the firm to reduce its cost below that of competitors while offering acceptable value. C) It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. D) It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.

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

________ describes the collectively shared values and norms of an organization's members. A) Competitive advantage B) Organizational structure C) Organizational culture D) Core competency

C

________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure. A) PESTEL factors B) Formalization C) Organizational inertia D) Centralization

C

Jeannette was a manager at Fabco. Instead of working full-time on Fabco's projects, she used Fabco's tools, employees, computers, and other resources to work on a research project that she hopes might help her start her own firm. This is an example of adverse selection.

FALSE

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

Avalanche operates as a strategic business unit (SBU) under Snowfall Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that A) Avalanche does not have its own profit and loss responsibility. B) Avalanche is dependent on the other SBUs in Snowfall Inc. C) Avalanche has a matrix organizational structure. D) Avalanche is led by its own CEO (or equivalent general manager).

D

Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

FALSE

Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

TRUE

Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

TRUE

Linda owns and runs her own firm. She also serves on the boards of several companies. Although she does not work for these companies, she attends board meetings, analyzes information, and tries to act in the best interests of their shareholders. Linda is an example of an outside director.

TRUE

Organizational design involves establishing a firm's structure, culture, and control mechanisms.

TRUE