4final

Usually, large-block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

a. 5

Which of the following is TRUE of trends in Japan's corporate governance structure? a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals. b. Increased regulation in the financial sector has increased the cost of mounting hostile takeovers. c. Banks' influence over corporations is increasing. d. The gap in compensation between CEOs in public and private companies is increasing.

a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals.

____ is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification

a. Formalization

Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received a. a golden parachute. b. a poison pill. c. greenmail. d. a silver handshake.

a. a golden parachute.

Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to a. align financial institutions' actions with society's interests. b. increase the number of foreign firms listing on US stock exchanges. c. require CEOs to attest to the accuracy of their companies' financial reports. d. increase consumer protection in pharmaceutical products.

a. align financial institutions' actions with society's interests.

Historically, ____ have been at the center of German corporate governance structure. a. banks b. institutional shareholders c. public pension funds d. government agencies

a. banks

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's a. brand name. b. capital resources. c. access to a consolidated market. d. geographic locations.

a. brand name.

Dynamic alliance networks work best in industries a. characterized by frequent product innovations and short product life cycles. b. that are mature and stable in nature. c. where the coordination of product and global diversity is critical. d. that are characterized by predictable market cycles and demand.

a. characterized by frequent product innovations and short product life cycles.

The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all-important at Transector. Transector probably uses the ____ structure. a. competitive form of the multidivisional b. SBU form of the multidivisional c. worldwide geographic area d. distributed strategic network

a. competitive form of the multidivisional

The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____. a. cooperative; economies of scope b. competitive; cost efficiencies c. functional; sensitivity to cultural diversity d. SBU; quick response to local customer needs

a. cooperative; economies of scope

A ____ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both. a. corporate-level b. business-level c. national-level d. industry-level

a. corporate-level

Walmart's effective strategy/structure configuration is a. cost leadership/functional. b. differentiation/functional. c. related-constrained/multidivisional. d. related-linked/multidivisional.

a. cost leadership/functional.

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach. a. cost minimization b. trust but verify c. opportunity maximization d. pragmatic realism

a. cost minimization

The two basic approaches to successfully manage cooperative strategic alliances involve ____ and ____. a. cost minimization, opportunity maximization b. monitoring systems, multiple management approaches c. contractual systems, financial systems d. equity approaches, nonequity approaches

a. cost minimization, opportunity maximization

The Microsoft/Nokia alliance (Chapter 9 Strategic Focus) which had hundreds of pages to specify each partner's responsibilities would be closest to the _______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Strategic Focus) was based on trust, respect and transparency and is an example of the ________ approach to managing cooperative ventures. a. cost minimization; opportunity maximization b. opportunity maximization; cost minimization c. cost maximization; opportunity minimization d. bureaucratic; organic

a. cost minimization; opportunity maximization

An agency relationship exists when one party delegates a. decision making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party.

a. decision making responsibility to a second party.

The integrated cost leadership/differentiation strategy is difficult to implement mostly because a. different primary and support activities are emphasized when using cost leadership and differentiation strategies. b. this strategic approach demands more flexibility than most firms can manage. c. the dual reporting relationships required for this strategy slow organizational decision-making. d. the cost leadership strategy requires less structured job roles than does the differentiation strategy.

a. different primary and support activities are emphasized when using cost leadership and differentiation strategies.

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are a. engaging in tacit collusion. b. following uncertainty reducing strategies. c. monitoring business competitors for opportunistic behaviors. d. following a competitive response strategy.

a. engaging in tacit collusion.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(an) a. equity strategic alliance. b. joint venture. c. nonequity strategic alliance. d. cooperative arrangement.

a. equity strategic alliance.

The repurchase at a premium of the target firm's shares that were acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

a. greenmail.

A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure.

a. high executive turnover.

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry.

a. increased diversification of Sierra Infusion.

In the competitive form of the multidivisional structure, the focus of headquarters is on all the following EXCEPT a. integration. b. performance appraisal. c. resource allocation. d. long range planning.

a. integration.

Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with whom Toyota has contracts for services. This results in the suppliers and the Toyota (the strategic center firm) being more a. interdependent. b. rivalrous. c. creative. d. complementary.

a. interdependent.

Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to a. make the partners' true loyalties and intentions unclear . b. make the role of the strategic center firms more critical to alliance success. c. distribute the alliances along several segments of the airline industry value chain. d. be most effective when the alliances are with airlines headquartered in different nations.

a. make the partners' true loyalties and intentions unclear

Reduction of competition can be accomplished through all of the following EXCEPT a. predatory alliances. b. explicit collusion. c. tacit collusion. d. mutual forbearance.

a. predatory alliances.

All of the following are considered generic business-level strategies EXCEPT a. product diversification. b. cost leadership. c. focused differentiation. d. integrated cost leadership/differentiation.

a. product diversification.

The ________dimension of relationships with customers is particularly important for social networking sites such as Facebook and MySpace. a. reach b. richness c. affiliation d. social

a. reach

After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to a. reduce transaction costs. b. increase negotiating leverage with suppliers. c. become less dependent on its suppliers. d. move toward horizontal alliances with its suppliers.

a. reduce transaction costs.

The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is a. setting the option strike price substantially higher than the current stock price. b. insuring that the strike price value of the options can be lowered if the organizational environment becomes more risky. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope.

a. setting the option strike price substantially higher than the current stock price.

In most cases, the focus strategy is best managed using a ____ structure. a. simple b. functional c. multidivisional d. vertical

a. simple

In a cross-border alliance, the local partner is often a useful source of information about a. sources of capital. b. the strengths of the foreign firm's technology. c. market synergies. d. long-term planning.

a. sources of capital.

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple functions. a. synergistic b. opportunistic c. horizontal d. diversifying

a. synergistic

All of the following are business-level cooperative strategic alliances EXCEPT a. synergistic strategic alliances. b. uncertainty reduction strategic alliances. c. complementary strategic alliances. d. competition response strategic alliances.

a. synergistic strategic alliances.

Boards of directors are now becoming more involved in a. the strategic decision making process. b. selecting new CEOs. c. the firm's tax issues. d. governmental relations.

a. the strategic decision making process.

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT a. to enhance the compensation packages of top managers. b. to leverage core competencies in new markets. c. to operate within government restrictions in the local country. d. to escape limited domestic growth opportunities.

a. to enhance the compensation packages of top managers.

Implementing the multidomestic strategy requires decentralization a. to facilitate the tailoring of products to the demand in local markets. b. to develop economies of scale. c. in order to achieve economies of scope. d. to reduce bureaucracy and speed up decision-making.

a. to facilitate the tailoring of products to the demand in local markets.

IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as __________ and the appropriate organizational structure to implement this strategy is the __________ structure. a. transnational; combination b. global; worldwide product divisional c. multidomestic; worldwide geographic area d. competitive; strategic business unit multidivisional

a. transnational; combination

When a corporation pursues a related-constrained diversification strategy, financial controls may not add value to strategy implementation efforts since it is difficult to a. use them without reducing cooperation among divisional managers. b. transfer capital between units. c. maintain an arms-length relationship between headquarters and the divisions. d. identify which objective criteria to monitor.

a. use them without reducing cooperation among divisional managers.

The two types of complementary strategic alliances are a. vertical and horizontal. b. macro and micro. c. outsourcing and insourcing. d. network and complementary.

a. vertical and horizontal.

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(an) ____ strategy. a. vertical complementary b. horizontal complementary c. uncertainty reduction d. network

a. vertical complementary

Which of the following is a TRUE statement about organizational structures for implementing business-level strategies? a. A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles. b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions. c. An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision-making, and vertical coordination. d. A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions.

Corporate governance is all of the following EXCEPT a. Mechanisms used to determine and control the strategic direction and performance of organizations. b. A means to establish and maintain harmony between owners and top managers whose interests may conflict. c. Ensuring that top managers' interests are aligned with the interests of stockholders. d. Resolve conflicts among corporate employees.

b. A means to establish and maintain harmony between owners and top managers whose interests may conflict.

Which of the following statements is TRUE? a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies. b. As many as 50% of cooperative strategies fail. c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources. d. Problems with international cooperative strategies usually concern financial-system differences between the partners.

b. As many as 50% of cooperative strategies fail.

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.

b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan.

____ is the degree to which decision making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification

b. Centralization

____ is an important influence in Japanese corporate governance structures. a. Innovation b. Consensus c. Competition d. Individualism

b. Consensus

Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is most likely to be TRUE? a. Agency costs at Amos Ball are high. b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO. c. At Amos Ball, the opportunity for managerial opportunism is high. d. The functions of risk-bearing and decision-making are separate at Amos Ball.

b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO.

James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision-making is based on authority and few conflicts emerge. d. Mr. Abercrombie should find significant need for his services in companies in transitional economies.

b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level.

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension? a. Reach b. Richness c. Affiliation d. None of the these

b. Richness

Which of the following statements is about corporate governance in Germany is FALSE? a. The Vorstand (management board) of a German corporation makes decisions about strategy and management. b. The Vorstand is elected by the firm's employees. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock.

b. The Vorstand is elected by the firm's employees.

Megaline, Inc., follows the competitive form of the multidivisional structure. It has five divisions. One division has not met the rate-of-return goals for the past year. One division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office is making decisions about where to allocate capital in the next year. Which scenario is the MOST likely? a. The poorest performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year. b. The highest performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year. c. The average performing divisions which met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements. d. All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.

b. The highest performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year.

What is the main lesson learned from investor Carl Icahn's bid to purchase Clorox Co.? a. Boards will only defend against takeover attempts if their companies are performing poorly. b. The situation demonstrates two possibilities. First, Clorox was underperforming and the market for corporate control disciplined managers to improve performance. The second possibility was that investors sometimes take over companies that are performing well. c. Boards commonly make mistakes in rejecting takeover bids as shown in the case of Icahn's bid for Clorox Co. d. Clorox was clearly underperforming and Icahn's bid was a good example of the efficiency of the market for corporate control.

b. The situation demonstrates two possibilities. First, Clorox was underperforming and the market for corporate control disciplined managers to improve performance. The second possibility was that investors sometimes take over companies that are performing well.

Mutual forbearance is a. illegal in the U.S. b. a type of competition reducing strategy. c. a variety of risk-sharing by firms in highly fragmented industries. d. exercised when alliance partners refrain from opportunistic behaviors.

b. a type of competition reducing strategy.

The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers.

b. a weak board of directors.

Stable alliance networks will most often a. be used to enhance a firm's internal operations. b. appear in mature industries where demand is relatively constant and predictable. c. emerge in industries with short product life cycles. d. emerge in declining industries as a way to increase process innovations.

b. appear in mature industries where demand is relatively constant and predictable.

Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet.

b. appoint another individual as chairperson of the board of directors.

According to the Chapter 10 Opening Case, Apple's _______ recently used that firm's succession plan to appoint Tim Cook CEO following Steve Job's resignation. a. stockholders b. board of directors c. employees d. CEO

b. board of directors

A firm's core strategy is its ____ strategy. a. corporate b. business c. pricing d. international

b. business

To successfully implement a cost leadership strategy, there is a need for a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.

b. centralization of authority.

Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the ____ structure. a. matrix b. competitive multidivisional c. hybrid combination d. horizontal complementary strategic alliance

b. competitive multidivisional

The fewest integrative devices are used in the ____ structure. a. simple b. competitive multidivisional c. SBU d. network

b. competitive multidivisional

____ strategic alliances have stronger focus on value creation than do ____ alliances. a. competition reducing, complementary b. complementary, competition reducing c. uncertainty reducing, complementary d. collusive, uncertainty reducing

b. complementary, competition reducing

In general, cross-border alliances are more ____ and ____ than domestic alliances, especially in emerging markets. a. uncertainty reducing, diversifying b. complex, risky c. highly leveraged, tightly monitored d. flexible, trust-based

b. complex, risky

Successful implementation of the differentiation strategy requires a structure that a. has specialized jobs. b. decentralizes decision-making. c. focuses on the finance function. d. is dominated by the operations function.

b. decentralizes decision-making.

As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions a. increases. b. decreases. c. remains constant. d. is eliminated.

b. decreases.

In an SBU structure, ____ is/are evaluated using strategic controls, whereas ____ is/are evaluated using financial controls. a. each SBU, divisions within the SBUs b. divisions within the SBUs, each SBU c. managers of the SBUs, headquarters staff d. headquarters staff, managers of the SBUs

b. divisions within the SBUs, each SBU

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of ____ resulting from an alliance. a. explicit collusion b. economies of scale c. opportunistic behavior d. distribution opportunities

b. economies of scale

Firms entering into synergistic strategic alliances expect to attain a. technological complexity. b. economies of scope. c. monopolistic market power. d. learning curve efficiencies.

b. economies of scope.

Corporate governance is important to nations because a. shareholders want large stock returns. b. firms seek to invest in nations with national governance standards that are acceptable to them. c. company boards have lobbied for strong governance. d. The United States requires that other nations adopt its governance practices.

b. firms seek to invest in nations with national governance standards that are acceptable to them.

Managers may decide to invest ____ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets

b. free cash flows

The ____ structure is the most appropriate structure for implementing the integrated cost leadership /differentiation strategy. a. simple b. functional c. multidivisional d. strategic business unit

b. functional

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to a. get venture capital from Pet Resort. b. gain access to Pet Resort's tacit knowledge. c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta. d. join in a vertical complementary alliance with Pet Resort.

b. gain access to Pet Resort's tacit knowledge.

The New York Stock Exchange requires that the audit committee be a. available to comment to external analysts. b. headed by outside directors. c. liable for any illegal actions by the top management team. d. made up of CPAs with auditing experience.

b. headed by outside directors.

Managers in the U.S. receive ____ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

b. higher

Within the Renault Nissan alliance (Chapter 9 Opening Case), both Renault and Nissan have each formed ____________ strategic alliances at the business-unit level with other companies. a. vertical complementary b. horizontal complementary c. synergistic d. diversifying

b. horizontal complementary

A multidomestic strategy would be associated with a. high levels of coordination. b. informal coordination among units. c. many integrative mechanisms. d. interdependent divisions.

b. informal coordination among units.

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(an) ____ director. a. lead independent b. inside c. related d. encumbered

b. inside

The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned.

b. internal controls have failed.

A cooperative strategy a. is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. b. is a strategy in which firms work together to achieve a shared objective. c. is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. d. specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

b. is a strategy in which firms work together to achieve a shared objective.

Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm which would create skin care treatments based on innovative chemical formulations which would be marketed both in Asia and in the U.S. Beyond being a cross-border alliance, this partnership can be called a(an) a. nonequity strategic alliance. b. joint venture. c. horizontal complementary alliance. d. equity strategic alliance.

b. joint venture.

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50%. (Chapter 9 Strategic Focus). This collaboration is an example of a ________ which is effective at transferring ___________. a. nonequity strategic alliance; explicit knowledge b. joint venture; tacit knowledge c. joint venture; explicit knowledge d. equity strategic alliance; tacit knowledge

b. joint venture; tacit knowledge

Which type of strategic alliance is best at passing tacit knowledge between firms? a. primary cooperative strategic alliances b. joint ventures c. equity strategic alliances d. nonequity strategic alliances

b. joint ventures

In the U.S., cooperative strategies to reduce competition may result in ____ if they are explicit. a. increased tax liabilities b. litigation c. government takeover of the firms d. dissolution of the firm

b. litigation

Firms seeking to compete on the basis of cost leadership particularly need support from the ____ and ____ functions. a. finance, accounting b. manufacturing, process R&D c. product R&D, marketing d. management information, finance

b. manufacturing, process R&D

In the U.S., the fundamental goal of business is to a. ensure customer satisfaction. b. maximize shareholder wealth. c. provide job security. d. generate profits.

b. maximize shareholder wealth.

Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.

b. may not have a direct effect on firm performance.

Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the ____ strategy. a. network b. multidomestic c. global d. transnational

b. multidomestic

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT a. a host nation may forbid a merger or acquisition. b. opportunistic behaviors are less likely. c. cooperative strategies require fewer resources. d. cooperative strategies allow greater flexibility in diversifying the firm's portfolio .

b. opportunistic behaviors are less likely.

Which of the following is NOT a variation of the multidivisional structure? a. competitive form b. regional form c. cooperative form d. strategic business unit form

b. regional form

In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets.

b. returned to them as dividends.

Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm.

b. riskier strategies with more focused diversification for the firm.

The longer the focus of managerial incentive compensation, the greater the ____ top-level managers. a. earnings potential for b. risks borne by c. incentives for d. potential tax burden for

b. risks borne by

Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors. b. shareholders and managers. c. the board of directors and managers. d. none of the these.

b. shareholders and managers.

Firms in ____ markets cooperate to pool resources and gain market power. a. slow-cycle b. standard-cycle c. fast-cycle d. hyper-cycle

b. standard-cycle

A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems and the top administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the organizational ____ structure. a. network b. strategic business unit multidivisional c. functional d. matrix

b. strategic business unit multidivisional

McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(an): a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.

b. strategic network.

The Renault Nissan alliance discussed in the Opening Case is an example of a ________ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. a. joint venture. b. synergistic alliance. c. horizontal complementary alliance. d. dynamic alliance network.

b. synergistic alliance.

A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance. a. joint venture b. synergistic strategic alliance c. diversifying strategic alliance d. dynamic alliance network

b. synergistic strategic alliance

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a. the director of food service for IFS b. the board of directors of IFS c. the employees directly involved in the wrongdoing d. the head of contract services for the Marines

b. the board of directors of IFS

In free market economies, ____ must decide how rivals can collaborate with their competitors without violating established regulations. a. the invisible hand b. the government c. consumers d. the business community

b. the government

Ownership concentration is determined by both a. the number of stockholders and the parties they represent. b. the number of stockholders and total percentage of shares they own. c. the number of outside directors and the parties they represent. d. the number of outside directors and total percentage of shares they own.

b. the number of stockholders and total percentage of shares they own.

To increase the likelihood of success between partners assuming that trust exists, ____ approach(es) should be used to manage cooperative strategies. a. the cost minimization b. the opportunity maximization c. both the cost minimization and opportunity maximization d. none of the these

b. the opportunity maximization

The need for the organization to combine local responsiveness and efficiency is most critical in a ____ strategy. a. multidomestic b. transnational c. global d. focus

b. transnational

A nonequity strategic alliance exists when a. two firms join together to create a new company . b. two or more firms have a contractual relationship to share resources and capabilities. c. two partners in an alliance own unequal shares in the combined entity. d. the partners agree to sell bonds instead of stock in order to finance a new venture.

b. two or more firms have a contractual relationship to share resources and capabilities.

It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.

b. vertical complementary strategic alliances.

Of the various business-level strategic alliances, ____ alliances have the most probability of creating sustainable competitive advantage, and ____ have the lowest. a. horizontal complementary, vertical complementary b. vertical complementary, competition reducing c. competition reducing, horizontal complementary d. uncertainty reducing, competition reducing

b. vertical complementary, competition reducing

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture? a. BPM will own more than 50 percent of the venture and a new company will be formed. b. J3 will own more than 50 percent of the venture and a new company will be formed. c. BPM and J3 will both own 50 percent of the venture and a new company will be formed. d. BPM and J3 will both own 50 percent of the venture but no new company will be formed.

c. BPM and J3 will both own 50 percent of the venture and a new company will be formed.

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this? a. Joint venture b. Equity strategic alliance c. Nonequity strategic alliance d. Competition reduction alliance

c. Nonequity strategic alliance

All of the following are correct about the Chapter 10 Strategic Focus about Rio Tinto EXCEPT: a. The firm's size and complexity have increased the difficulty of achieving effective corporate governance. b. Large-block stockholders exerted influence on both strategic and operating decisions at the company. c. Rio Tinto recognized by large-block shareholders for its effective use of CEO pay as a corporate governance mechanism. d. Rio Tinto has been criticized for having poor governance because it has given executives generous rewards for hitting unchallenging targets.

c. Rio Tinto recognized by large-block shareholders for its effective use of CEO pay as a corporate governance mechanism.

Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance? a. Functional structure b. Cooperative M-Form c. SBU Form d. Competitive M-Form

c. SBU Form

Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy? a. competitive form with related constrained strategy b. cooperative form with unrelated strategy c. SBU form with related linked strategy d. competitive form with related linked strategy

c. SBU form with related linked strategy

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last two years. b. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. c. The CEO/Chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.

c. The CEO/Chairperson of the board has been suspected of opportunistic behavior.

In the Chapter 10 Strategic Focus, all of the following are issues in executive compensation EXCEPT: a. Many CEOs are rewarded for short-term rather than long-term performance. b. CEO pay is frequently not tied to performance. c. The Dodd-Frank Act stipulates that stockholders have no say in the compensation packages of top executives. d. When using stock options as part of executive compensation, it is recommended that those options cannot be exercised for five years to avoid opportunistic behavior by executives.

c. The Dodd-Frank Act stipulates that stockholders have no say in the compensation packages of top executives.

Which of the following is FALSE about corporate governance in China? a. The Chinese governance system may be tilting towards the Western model. b. With increasing frequency, the compensation of top executives of Chinese companies is closely related to prior and current financial performance of the firm. c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more volatility in those values over time.

c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms.

The separation between firm ownership and management creates a(n) ____ relationship. a. governance b. control c. agency d. dependent

c. agency

Which of the following is NOT a preliminary task of the strategic center firm in a strategic network? a. strategic outsourcing b. encouraging friendly rivalry among network members c. allocating internal capital d. supporting development of new core competencies

c. allocating internal capital

All of the following are consequences of the Sarbanes-Oxley Act EXCEPT a. a decrease in foreign firms listing on U.S. stock exchanges. b. internal auditing scrutiny has improved and there is greater trust in financial reporting. c. an increased number of IPOs (initial public offerings) are expected. d. Section 404 creates excessive costs for firms.

c. an increased number of IPOs (initial public offerings) are expected.

Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules a. use integrative mechanisms to share core competencies among themselves. b. compete with one another in Olympia's internal capital markets. c. are not necessarily related to one another in terms of products or markets. d. are network member firms while Olympia is the strategic center firms.

c. are not necessarily related to one another in terms of products or markets.

Firms in a standard-cycle market may form alliances in order to a. take advantage of opportunities in emerging market countries. b. more quickly distribute new products. c. capture economies of scale. d. share risky R&D investments.

c. capture economies of scale.

Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance

c. compensating directors with stock options rather than with fixed remuneration

In the ____ multidivisional structure there is complete independence among the firm's divisions. a. cooperative b. matrix c. competitive d. SBU

c. competitive

In the ____ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets. a. functional b. cooperative c. competitive d. SBU

c. competitive

A firm pursuing an unrelated diversification strategy will utilize a ____ structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional

c. competitive form multidivisional

The LG Company (Chapter 11Strategic Focus) has units operating in significantly different industries and uses financial controls to manage its portfolio. LG is most likely using the ___________ structure. a. combination-matrix b. cooperative form multidivisional c. competitive form multidivisional d. strategic business unit multidivisional

c. competitive form multidivisional

Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible? a. cooperative structure; no bonus due to failure to meet divisional target. b. competitive structure; no bonus due to failure to meet divisional target. c. cooperative structure; a bonus for increasing organizational performance. d. competitive structure; a bonus for increasing organizational performance.

c. cooperative structure; a bonus for increasing organizational performance.

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(an) a. collusive tactic. b. merger. c. cross-border strategic alliance. d. international acquisition.

c. cross-border strategic alliance.

A company pursuing the differentiation or focused differentiation strategy would tend to a. build economies of scale and efficient operations. b. develop and maintain cost-effective MIS operations. c. develop flexible systems that allow rapid response to customers changing needs. d. have relationships with suppliers to maintain efficient flow of supplies for operations.

c. develop flexible systems that allow rapid response to customers changing needs.

A firm pursuing a related-constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards based on division financial performance. d. temporary teams or task forces formed around specific projects.

c. division managers' rewards based on division financial performance.

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80% of this collaboration with DoCoMo holding the remaining 20%. This collaborative arrangement is an example of a(n) a. joint venture. b. network strategy. c. equity strategic alliance. d. nonequity strategic alliance.

c. equity strategic alliance.

Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm.

c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions.

Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type lighting in non-traditional style homes. Smith has invested 40% and Revelation has invested 60% into the new operation. This is an example of a(an) a. joint venture. b. nonequity alliance. c. horizontal complementary strategic alliance. d. vertical complementary strategic alliance.

c. horizontal complementary strategic alliance.

Which of the following is NOT a risk for firms engaged in cooperative strategies? a. misrepresentation of a partner's competencies b. partner acts opportunistically c. insufficient variation in firms' core competencies d. failure of partners to make complementary resources available to the partnership

c. insufficient variation in firms' core competencies

One of the primary disadvantages of the global strategy and worldwide product divisional structure is that a. it is difficult to achieve economies of scale. b. the firm must develop centers to offer after-sales service to customers. c. it is difficult to respond effectively to local market needs and preferences. d. achieving economies of scale with this strategy/structure combination is nearly impossible.

c. it is difficult to respond effectively to local market needs and preferences.

In a(an) ____, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. a. equality-based strategic alliance b. non-equity strategic alliance c. joint venture d. equity strategic alliance

c. joint venture

Complete the following: In small firms, managers often own a ____ percentage of the firm, which means there is ____ separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large

c. large; small

Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dismissed.

c. managers' risk of job loss, loss of compensation, and/or loss of reputation.

A worldwide geographic area structure is an organizational form in which a. multiple alliances across the globe link complementary businesses. b. standardized products are offered across country markets. c. national interests dominate and management adapts to local or cultural differences. d. responsiveness to local demand is combined with economies of scale.

c. national interests dominate and management adapts to local or cultural differences.

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will a. insist on excessively close monitoring of DDD's actions. b. gain access to DDD's core competencies and use them to become a future competitor. c. not fully share its intangible resources. d. not make equivalent investments to the alliance as does DDD.

c. not fully share its intangible resources.

The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. usually on the verge of bankruptcy. b. typically under-performing their industry. c. often performing above their industry averages. d. always outperforming their industry.

c. often performing above their industry averages.

Agency costs reflect all of the following EXCEPT ____ costs. a. monitoring b. enforcement c. opportunity d. incentive

c. opportunity

If the market for corporate control were efficient as a governance device, then only ____ would be targets for takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly-performing firms d. over-valued firms

c. poorly-performing firms

German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the UK and U.S largely because a. the roles of CEO and chairperson of the board of directors are usually combined. b. large institutional investors control large blocks of stock. c. private shareholders and large institutional investors rarely have large ownership positions in firms. d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms.

c. private shareholders and large institutional investors rarely have large ownership positions in firms.

Firms seeking to differentiate particularly need support from the ____ and ____ functions. a. finance, accounting b. engineering, operations c. product R&D, marketing d. management information, finance

c. product R&D, marketing

One means that is considered to improve the effectiveness of outside directors is a. mandating that all outside directors be drawn from government or academia rather than industry. b. requiring that outside directors be former executives of the firm. c. requiring outside directors to own significant equity stakes in the firm. d. requiring that outside directors be truly objective by having no ownership interest in the firm.

c. requiring outside directors to own significant equity stakes in the firm.

In the U.S., a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.

c. shareholders.

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter markets in Europe and Asia. The steel industry is an example of a ________ market in which firms typically use alliances to gain market access. a. fast-cycle b. standard-cycle c. slow-cycle d. intermediate-cycle

c. slow-cycle

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that a. firms will have to accept greater risks. b. trust will be eroded. c. spontaneous opportunities are minimized. d. power coalitions will still develop.

c. spontaneous opportunities are minimized.

The Renault Nissan alliance (Chapter 9 Opening Case) is an example of a _______ created to gain economies of scope by sharing resources and capabilities. a. diversifying strategic alliance b. vertical complementary alliance c. synergistic strategic alliance d. nonequity-based horizontal complementary alliance

c. synergistic strategic alliance

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in a. excessive cooperation. b. joint ventures. c. tacit collusion. d. horizontal strategic alliances.

c. tacit collusion.

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to a. learn about the brand and technology from the franchisee. b. test the franchisee for potential future acquisition. c. transfer to the franchisee knowledge and skills needed to compete at the local level. d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient.

c. transfer to the franchisee knowledge and skills needed to compete at the local level.

In managing cooperative strategies, research indicates that ____ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage. a. extensive capitalization b. stability c. trustworthiness d. Internet competency

c. trustworthiness

Typically, a successful firm pursuing a differentiation strategy will a. have a very hierarchical structure. b. require a structure which is very formal. c. use cross-functional development teams. d. develop free-standing business units.

c. use cross-functional development teams.

The CEO and Chairman of the board of directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/Chair genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Establish a formal process to evaluate the board's performance. c. Electing an lead director. d. All of these choices would increase involvement.

d. All of these choices would increase involvement.

Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top managers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management.

d. Corporate governance is best achieved with a board of directors with strong ties to management.

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement? a. Meredith will own a majority equity stake in the new venture. b. JaZz will own a majority equity stake in the new venture . c. Meredith or JaZz will own an equal equity stake in the new venture. d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures? a. Firms pursuing a related-linked strategy should implement a competitive structure with a competitive culture and centralized strategic planning activities. b. Firms pursuing an unrelated diversification strategy should use an SBU structure with a small corporate staff, emphasize the R&D function, and integrate divisions to achieve synergies. c. Firms pursuing a related-linked strategy should use an SBU structure, emphasize interdependence among divisions, and manage the strategic planning function from the central office. d. Firms pursuing a related-constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.

d. Firms pursuing a related-constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.

Which of the following statements is FALSE? a. Franchising is most appropriate in fragmented industries. b. Franchising provides corporate growth with less risk than do mergers and acquisitions. c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. d. Franchising agreements require more trust between firms than do other cooperative strategies.

d. Franchising agreements require more trust between firms than do other cooperative strategies.

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breech of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here? a. Having a true perception of the partner's trustworthiness. b. Failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy. c. The partner misrepresenting competencies it can bring to the partnership. d. Opportunistic behavior.

d. Opportunistic behavior.

Agricultural Chemicals, Inc., was the target of a hostile takeover six months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE? a. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. They are more a function of general market conditions. b. The fact that a hostile takeover has occurred is proof that the firm was under-performing. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. d. The CEO and top executives should not consider their jobs secure.

d. The CEO and top executives should not consider their jobs secure.

Why are alliances in the airline industry unstable? a. Unstable industries make for unstable alliances. b. The potential for firms to take opportunistic actions is too widespread. c. The industry is declining and profits are not sufficient to divide among alliance partners. d. The alliances require cooperation among firms that must also compete with one another.

d. The alliances require cooperation among firms that must also compete with one another.

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data.

d. The compensation committee may not have comprehensive firm performance data.

Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is correct about this relationship? a. This is a joint venture because in licensing arrangements, a new company is created. b. This is an equity strategic alliance because licensing does not involve the creation of a new company, but does involve an equity commitment. c. The firms risk charges of collusion because most licensing relationships between competitors involve explicit collusion. d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.

d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.

____ are LEAST likely to involve potential or current competitors. a. Mutual forbearance strategies b. Tacit collusion strategies c. Horizontal complementary strategic alliances d. Vertical complementary strategic alliances

d. Vertical complementary strategic alliances

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT: a. Has AsiaFoods accurately represented its competencies? b. Will AsiaFoods make alliance-specific investments? c. Can Greentech expect opportunistic behavior from AsiaFoods? d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT a. making CEOs more accountable for their performance b. challenges to the decisions of boards c. focusing attention on ineffective boards of directors d. a direct effect on firm performance

d. a direct effect on firm performance

A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

d. a poison pill.

Japanese keiretsu are a. management structures related to total quality management systems. b. company unions, which are a type of governance system. c. the banks owing the largest shares of stock in the firm. d. a system of cross-shareholding among firms.

d. a system of cross-shareholding among firms.

The interests of multinational corporations' shareholders may be best served when there is a. a uniform compensation plan for all corporate executives, U.S. and foreign alike. b. executive compensation that is primarily based on long-term performance. c. elevation of foreign executive compensation to U.S. levels. d. a variety of compensation plans for executives of foreign subsidiaries.

d. a variety of compensation plans for executives of foreign subsidiaries.

The global airline industry is one in which a. national political interests prevent airlines from making international alliances. b. the fast-cycle nature of the industry mandates heavy use of alliances. c. most alliances tend to be vertical complementary. d. alliance versus alliance competition dominates firm versus firm competition.

d. alliance versus alliance competition dominates firm versus firm competition.

In Japan, the principal source of the active monitoring of large companies comes from a. boards of directors. b. stock brokerage companies. c. the government. d. banks.

d. banks.

The __________ structure is best for implementing the related constrained diversification strategy. a. functional b. competitive form of the multidivisional c. SBU form of the multidivisional d. cooperative form of the multidivisional

d. cooperative form of the multidivisional

In the Chapter 11 Strategic Focus, Cisco used the ____________ structure to implement its ___________ strategy. a. functional; cost leadership. b. SBU form of the multidivisional; related linked c. cooperative form of the multidivisional; related linked d. cooperative form of the multidivisional; related constrained

d. cooperative form of the multidivisional; related constrained

Cisco's _________ corporate-level structure was useful in implementing its ___________ business-level strategy (Chapter 11 Strategic Focus). a. SBU form; integrated cost leadership-differentiation b. competitive form; differentiation c. cooperative form; cost leadership d. cooperative form; integrated cost leadership-differentiation

d. cooperative form; integrated cost leadership-differentiation

A strategy in which firms work together to achieve a shared objective is a a. functional-level strategy. b. business-level strategy. c. corporate-level strategy. d. cooperative strategy.

d. cooperative strategy.

The most centralized and most costly form of the multidivisional structure is the a. integrated. b. competitive. c. SBU. d. cooperative.

d. cooperative.

When using cooperative strategies, a firms most frequently develop strategic alliances that a. enhance the firm's reputation in the marketplace. b. are long-lived. c. will reduce the firm's political risk. d. create a competitive advantage.

d. create a competitive advantage.

A differentiation strategy can be effective in controlling the power of substitutes in an industry because a. customers have low switching costs. b. substitute products are lower quality. c. a differentiating firm can always lower prices. d. customers develop brand loyalty.

d. customers develop brand loyalty.

In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with whom it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.

d. decreasing communications between network members to reduce communication costs.

All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. defense tactics are usually beneficial for the executives of the target firm. b. defense tactics are opposed by institutional investors. c. defense tactics vary in their effectiveness as a defense to takeovers. d. defense tactics make the costs of a takeover lower.

d. defense tactics make the costs of a takeover lower.

The BEST multidivisional structure to use a. is the competitive form. b. is the SBU form. c. is the cooperative form. d. depends on the degree of diversification.

d. depends on the degree of diversification.

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with a. low-cost labor production facilities in another country . b. similar products who could help the firm establish economies of scale. c. access to franchises in new markets . d. excess resources for investing.

d. excess resources for investing.

The alliance between Nokia and Microsoft (Chapter 9 Strategic Focus) calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a ____________ to speed up development of new products and services. a. slow-cycle market b. medium-cycle market c. standard-cycle market d. fast-cycle market

d. fast-cycle market

McDonald's, Hilton International, and Subway all heavily rely on the ____ strategy. a. transnational b. network cooperative c. cross-border alliances d. franchising cooperative

d. franchising cooperative

plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms Adams' company should a. be the strategic center firm in a network structure. b. have a specialized multidivisional structure. c. develop alliances with firms with complementary competencies. d. have a highly centralized, functional structure.

d. have a highly centralized, functional structure.

Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the ____ organizational structure. a. horizontal complementary strategic alliance b. competitive multidivisional c. strategic business unit multidivisional d. hybrid combination

d. hybrid combination

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion conscious discount shoppers illustrates the ________________strategy a. cost leadership b. differentiation c. focused differentiation d. integrated cost leadership/differentiation

d. integrated cost leadership/differentiation

Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration

d. integration

The three structural characteristics which differ between organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.

d. intermediation.

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should a. avoid future cooperative alliances because they lack the skills needed to manage them successfully. b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent opportunistic behavior by the alliance partner. c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance partner in the future. d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. is a structure organized around both functional specialization and business projects. d. is a structure requiring heavy use of horizontal integrative devices.

d. is a structure requiring heavy use of horizontal integrative devices.

The use of strategic alliances a. is unlikely to yield success if partnering firms are headquartered in the same country. b. may be too restrictive to facilitate entry into new markets. c. usually increases the investment necessary to introduce new products. d. is more frequent than other types of cooperative strategies.

d. is more frequent than other types of cooperative strategies.

The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization. a. functional b. worldwide geographic area c. network d. matrix

d. matrix

According to the Chapter 10 Opening Case, all of the following would aspects of corporate governance EXCEPT a. creating value for shareholders b. developing a succession plans for CEOs c. signaling to the global community that a nation's business infrastructure is consistent with global standards d. maximization of CEO compensation

d. maximization of CEO compensation

Alfred Chandler found that firms grow in a predictable pattern, and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory? a. functional b. simple c. vertically integrated d. multidivisional

d. multidivisional

The risks of being accused of collusion are MOST likely under what type of alliance? a. equity-based vertical complementary alliance. b. equity-based horizontal complementary alliance c. nonequity-based vertical complementary alliance. d. nonequity-based horizontal complementary alliance.

d. nonequity-based horizontal complementary alliance.

Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. b. the board includes employees as voting members. c. the board is homogenous in composition. d. outside directors own significant equity in the organization.

d. outside directors own significant equity in the organization.

Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance.

d. penalties for inadequate firm performance.

The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited a. centralization. b. coordination across divisions. c. ability to meet local market needs. d. potential for global efficiency.

d. potential for global efficiency.

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____. a. generate free cash flows, reduce the risk of total firm failure b. increase the price of the firm's stock, increase the dividends paid out from free cash flows c. reduce the risk of total firm failure, reduce their total portfolio risk d. reduce their employment risk, increase the company's value

d. reduce their employment risk, increase the company's value

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a ____ advantage. a. economic b. collusive c. alliance d. relational

d. relational

Firms participate in strategic alliances for all the following reasons EXCEPT to a. create value that they could not develop by acting independently. b. enter competitive markets more quickly. c. gain access to resources. d. retain tight control over intangible core competencies.

d. retain tight control over intangible core competencies.

All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT a. consumer protection b. CEO compensation c. regulation of derivatives d. retirement accounts

d. retirement accounts

In some countries, the only legal way for foreign firms to invest in the country is through a. acquisitions. b. mergers. c. greenfield ventures. d. strategic alliance with a local firm.

d. strategic alliance with a local firm.

Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer term contracts with suppliers, and enables engineers in the supplier company to have better communication with Toyota. This is an example of a(an): a. worldwide product divisional structure. b. functional structure. c. SBU multidivisional structure. d. strategic network.

d. strategic network.

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT a. laws. b. culture. c. trade policies. d. technology.

d. technology.

Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors.

d. the board of directors.

The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors.

d. the board of directors.

Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

d. the market for corporate control

Product diversification provides two benefits to managers that do not accrue to shareholders: ____ and ____. a. greater experience in a wider range of industries, lessening of managerial employment risk b. the manager frequently invests in the acquired firm which allows him or her extensive profits, the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered, the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth, a reduction in managerial employment risk

d. the opportunity for higher compensation through firm growth, a reduction in managerial employment risk

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy? a. the loss of unexpected opportunities b. the cost of extensive monitoring mechanisms c. the costs of writing detailed contracts d. the prevention of opportunistic behavior by the partner(s)

d. the prevention of opportunistic behavior by the partner(s)

The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE? a. Amos should consider adopting the multidivisional structure. b. Mr. Ball has insufficient power to change the structure of the organization. c. Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes. d. These businesses are too disparate to coordinate within one corporate structure.

a. Amos should consider adopting the multidivisional structure.

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets? a. Commodity goods b. Motion pictures c. Popular music d. Writing instruments

a. Commodity goods

Ever improving levels of efficiency enhance profit margins for a cost leader. This effects which of the five forces of industry structure most directly? a. Potential entrants b. Substitutes c. Buyer power d. Supplier power

a. Potential entrants

A firm successfully implementing a differentiation strategy would expect a. customers to be sensitive to price increases. b. to charge premium prices. c. customers to perceive the product as standard. d. to have high levels of power over suppliers.

b. to charge premium prices.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem? a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad. b. The decorator has no core competencies that will transfer to his new geographic market. c. The decorator should choose a strategy of cost-leadership in this environment. d. The decorator is highly affiliated with the new target market and understands how he can create value for it.

a. The decorator does not understand that customer needs are neither right nor wrong, good nor bad.

In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

a. Who: Determining the Customers to Serve

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically-raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer. b. Companies pursuing Wholesome's business strategy are especially vulnerable to this risk. c. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina. d. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

a. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.

The risks of a focus strategy include a. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment. b. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more broadly defined segment. c. decisions by industry-wide competitors to use their resources to serve a wider range of customers' needs than the focuser has been serving . d. decisions by focused competitors to use their resources to serve a wider range of customers' needs.

a. a competitor's ability to use its core competencies to outfocus the focuser by serving an even more narrowly defined segment.

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing a. a differentiation strategy. b. a cost leadership strategy. c. an integrated cost leadership/differentiation strategy. d. a single-product strategy.

a. a differentiation strategy.

A cost leadership strategy provides goods or services with features that are a. acceptable. b. unique. c. substandard. d. mediocre.

a. acceptable.

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, highly productive ground and gate crews, and so forth. a. activity map b. profit pool c. value diagram d. five forces model

a. activity map

The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits? a. aligning the corporate structure with the demands of global expansion b. more accurate monitoring of the performance of each business c. facilitation of comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance

a. aligning the corporate structure with the demands of global expansion

Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience a. coordination and control problems. b. bureaucratic inefficiencies. c. excessive competition among division managers. d. limited communication among functional specialists.

a. coordination and control problems.

Business-level strategies are concerned specifically with a. creating differences between the firm's position and its competitors. b. selecting the industries in which the firm will compete. c. how functional areas will be organized within the firm. d. how a business with multiple physical locations will operate one of those locations.

a. creating differences between the firm's position and its competitors.

The three dimensions of a firm's relationships with customers include all the following EXCEPT a. exclusiveness. b. affiliation. c. richness. d. reach.

a. exclusiveness.

Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.

a. firms must be flexible while retaining a degree of stability.

Chico's is a clothing retailer that targets middle-aged women who want stylish and appealing clothes that are suitable for the mature figure. Chico's has an extensive customer list, a frequent-buyer discount card, and frequent sales promotions to Chico's customers based on their spending levels. Chico's uses a ____ strategy. a. focused differentiation based on a buyer group b. focused differentiation based on a product line segment c. generic differentiation d. integrated cost leadership/differentiation

a. focused differentiation based on a buyer group

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use a. information networks. b. a flexible manufacturing system. c. differentiation development planning. d. Enterprise Resource Planning.

a. information networks.

The integration of a cost leadership and a differentiation strategy a. is challenging because it increases the number of value chain activities and support functions in which the firm must become competent. b. forces a firm to adapt more slowly to changes in its environment. c. allows the firm to avoid being "stuck in the middle." d. requires such a large customer base that it is most practical for firms in the global marketplace.

a. is challenging because it increases the number of value chain activities and support functions in which the firm must become competent.

A cost leadership strategy targets the industry's ____ customers. a. most typical b. poorest c. least educated d. most frugal

a. most typical

The products or services that are differentiated from others have qualities that are a. perceived by the customer to add value for which they will pay a premium. b. valued by the typical industry customer. c. perceived as standardized by the customer. d. seen as classic attributes rather than passing fads.

a. perceived by the customer to add value for which they will pay a premium

both colored precious stones and diamonds. Generations of wealthy families have patronized Andermeyer. Andermeyer has been owned and managed by the Andermeyer family since its founding, and has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the ____ structure. a. simple b. functional c. matrix d. network

a. simple

A firm's ____ specifies the work to be done and how to do it given the firm's strategy or strategies. a. structure b. controls c. culture d. strategy

a. structure

The benefit of a flexible manufacturing system is that a. the lot size needed to manufacture a firm's product efficiently is reduced. b. the necessary skill levels of workers are reduced, allowing the firm to reduce costs. c. it lends itself to empowerment of employees. d. it captures the cost savings of economies of scale.

a. the lot size needed to manufacture a firm's product efficiently is reduced

Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. But the sales of premium vodkas are thriving. This is an example of a. the perception of perceived prestige and status as a means of differentiating a product. b. the importance of high-quality raw materials when using the differentiation strategy. c. the risk of product imitation by competitors. d. the danger counterfeiting holds for firms pursuing the differentiation strategy.

a. the perception of perceived prestige and status as a means of differentiating a product.

Research suggests that having a competitive advantage in ____ creates more value in the cost leadership strategy than it does in the differentiation strategy. a. marketing and sales b. technology development c. logistics d. human resource management

c. logistics

New Balance Athletic Shoes target Baby Boomers' needs for well-fitting shoes. The company is unique in that it offers a very broad range of shoe widths. A realistic potential risk New Balance runs in this focused differentiation strategy includes the possibility that: a. Baby Boomers may find that they do not need well-fitting shoes, since they will become increasingly sedentary as they age. b. A competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit. c. Athletic shoes may go out of style. d. New Balance shoes may begin to appeal to a wider market, thus losing New Balance's focus advantage.

b. A competitor may be able to better use flexible manufacturing systems to make shoes with an individualized fit.

Which of the following is TRUE? a. As customer loyalty increases, customers are more sensitive to price increases. b. Customer loyalty has a positive relationship with firm profitability. c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success. d. Customer loyalty is of importance only to firms using the differentiation strategy.

b. Customer loyalty has a positive relationship with firm profitability.

Ikea offers young customers a selection of home furnishings featuring good design, function, and acceptable quality at low prices. Ikea is using which business level strategy? a. Cost leadership b. Focused cost leadership c. Differentiation d. Focused differentiation

b. Focused cost leadership

Suppose another firm found a way to offer IKEA's customers (young buyers interested in stylish furniture at low cost) additional sources of differentiation while charging the same price or to provide the same service with the same sources of differentiation at a lower price. What category of competitive risk to a focus strategy would this be? a. An industry-wide competitor decides that the market segment served by IKEA is worth entering. b. Focusing on a more narrowly defined segment and "outfocusing" the focuser. c. The needs of the customers in this narrow segment have become more similar to those of industry-wide competitors. d. Experience can narrow customer's perceptions of value of the firm's differentiated features.

b. Focusing on a more narrowly defined segment and "outfocusing" the focuser.

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT a. who the firm should serve. b. when the customer's needs should be satisfied. c. what needs the firm should satisfy. d. what core competencies are needed to satisfy customer needs.

b. when the customer's needs should be satisfied.

By linking companies with their suppliers, distributors, and customers, ____ provide a company with flexibility. a. Flexible manufacturing systems b. Information networks c. Total quality management systems d. Capabilities

b. Information networks

In the Chapter 4 Strategic Focus, Walmart made changes to attract upscale customers. These changes had which of the following results? a. It strengthened Walmart's position against rivals such as Dollar Stores and Amazon. b. It made Walmart vulnerable to Dollar Store and Amazon. c. It attracted significant numbers of new customers. d. Family Dollar, Dollar Tree, and Dollar General all experienced losses in sales as many of their customers went to Walmart.

b. It made Walmart vulnerable to Dollar Store and Amazon.

Hyundai allows customers to return their cars if they lose their job within 12 months of purchase. Which of the following aspects of managing customer relationships is Hyundai engaged in? a. Who: Determining the Customers to Serve b. What: Determining Which Customer Needs to Satisfy c. How: Determining Core Competencies Necessary to satisfy Customer Needs d. When: Determining When to Satisfy Customer Needs

b. What: Determining Which Customer Needs to Satisfy

A flexible manufacturing system is a. based on the use of temporary and part-time employees as well as outsourcing. b. a computer-controlled process that is used to produce a variety of products in moderate, flexible quantities with minimal human intervention. c. based on a 360-degree view of the company's relationships with customers. d. a system that identifies "the one best way" to produce each product in the company's line.

b. a computer-controlled process that is used to produce a variety of product

According to the Chapter 4 Opening Case, part of Starbuck's success in 2011 was the decision to a. cease introducing new products. b. emphasize innovation by introducing new products. c. cut back on the number of stores it operates. d. discontinue unternational expansion.

b. emphasize innovation by introducing new products.

Denver-based Kazoo Toys uses the __________ strategy to create value for parents and children interested in purchasing unique toys while simultaneously having access to unique services. a. cost leadership b. focused differentation c. integrated cost leadership differentation d. differentiation

b. focused differentation

The Monteleone Company pays large fees to a highly-recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the a. focused cost-leadership strategy. b. focused differentiation strategy. c. integrated cost leadership/differentiation strategy. d. total quality strategy.

b. focused differentiation strategy.

The new generation of lunch trucks serving high-end fare in cities such as New York, San Francisco, and Los Angeles share which of the following a business strategies? a. cost leadership. b. focused differentiation. c. integrated cost leadership/differentiation. d. differentiation.

b. focused differentiation.

Leslie is a newly-graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a ____ structure. a. simple b. functional c. multidivisional d. network

b. functional

TQM is most helpful to firms following the ____ business strategy. a. cost-leadership b. integrated cost-leadership/differentiation c. focused cost-leadership d. focused differentiation

b. integrated cost-

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks. a. broader target market b. narrower target market c. increased use of primary activities to capture value d. increased use of support activities to capture value

b. narrower target market

The typical risks of a cost leadership strategy include a. the inability to balance high differentiation and low price. b. production and distribution processes becoming obsolete. c. excessive differentiation to the point where the customer base is too small. d. loss of customer loyalty.

b. production and distribution processes becoming obsolete.

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must a. analyze the reach, richness, and affiliation the company must have with its customers. b. provide tax advice either in a different manner or provide a different kind of tax service than competitors. c. offer tax advice at a price lower than the cheapest competitor. d. offer tax advice at a higher quality than the best competitor.

b. provide tax advice either in a different manner or provide a different kind of tax service than competitors.

Typically, an organization using a simple structure would be a. large. b. small. c. of any size if the firm is privately held. d. a family-owned-and-managed firm of any size.

b. small.

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in a. the selection of industries in which the firm will compete. b. specific product markets. c. primary value chain activities. d. particular geographic locations.

b. specific product markets.

The effectiveness of any of the generic business-level strategies is contingent upon a. customer needs and competitors' strategies. b. the match between the opportunities and threats in its external market and the strengths of its internal environment. c. the trends in the general consumer base and the robustness of the global and industry economy. d. the firm's competitive scope and its competitive advantage.

b. the match between the opportunities and threats in its external market and the strengths of its internal environment.

Which of the following are central to implementing value-creating strategies and thereby satisfying customers'needs? a. Firm resources b. Capabilities c. Core competencies d. None of the these.

c. Core competencies

All of the following are ways that a good or service can be differentiated EXCEPT a. Responsive customer service b. Perceived prestige and status c. Economies of scale and efficient operations d. Engineering design and performance

c. Economies of scale and efficient operations

____ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units. a. Strategic b. Managerial c. Financial d. Environmental

c. Financial

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy, Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy? a. Cost leadership b. Differentiation c. Integrated Cost Leadership/Differentiation d. Stuck-in-the-middle

c. Integrated Cost

In order to meet and exceed customer's expectations, firms must a. constantly manipulate customers' perceptions of their needs. b. answer the questions: who, what, when, where, how, and why as they apply to customers. c. continuously improve, innovate, and upgrade their core competencies. d. successfully defend their established core competencies from imitation by competitors.

c. continuously improve, innovate, and upgrade their core competencies

The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to a. an emerging professional management philosophy. b. the increasing demand by consumers for both quality and low-price. c. coordination and control problems. d. a shift toward the global economy.

c. coordination and control problems.

According to the Chapter 4 Strategic Focus, The Li Ning Company entered the Chinese sportswear market using a __________________ strategy. As it seeks to expand into new market segments, however, its strategy has changed to ____________________. a. differentation; integrated cost leadership/differentation b. focused differentation; differentation c. cost leadership; integrated cost leadership/differentation d. focused cost leadership; cost leadership

c. cost leadership; integrated cost leadership/differentation

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because a. customers will seek out the lowest cost product. b. customers of non-differentiated products are sensitive to price increases. c. customers are loyal to brands that are differentiated in meaningful ways. d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.

c. customers are loyal to brands that are differentiated in meaningful ways.

Starbuck's (Chapter 4 Opening Case) was able to revolutionize the coffee drining experience throug its business level strategy of a. focused cost. b. cost leadership. c. differentiation. d. stuck-in-the-middle.

c. differentiation.

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that a. a competitor's products can convey a product's differentiated features to a customer at a significantly reduced price. b. a product imitation can cause customers to perceive that competitors offer essentially the same good. c. experience can narrow a customer's perceptions of the value of a product's differentiated features. d. brand loyalty insulates a company from rivalry with competitors.

c. experience can narrow a customer's perceptions of the value of a product's differentiated features.

Focus strategies are a. sheltered from the risks associated with industry-wide strategies because of their niche focus. b. able to avoid global risk by focusing on niches in national or regional markets. c. faced with additional types of risks than are industry-wide strategies. d. more subject to failure than industry-wide strategies.

c. faced with additional types of risks than are industry-wide strategies.

The focused differentiation strategy differs from the differentiation strategy in that a. the focused differentiators have a broader competitive scope. b. the value-creating activities of focused differentiators are more constrained. c. focused differentiators target a narrower customer market. d. there are fewer risks with the focused differentiation strategy.

c. focused differentiators target a narrower customer market.

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how a. the organizational culture of Southwest Airlines is the key to the success of the organization. b. understanding of the profit pool in an industry indicates to companies where above-average returns can be earned. c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity. d. the primary and support activities of a successful company capture value all along the value chain.

c. it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.

A company using a narrow target market in its business strategy is a. following a cost leadership business strategy. b. focusing on a broad array of geographic markets. c. limiting the group of customer segments served. d. decreasing the number of activities on its value chain.

c. limiting the group of customer segments served.

Firms use the integrated cost leadership/differentiation strategy because a. other firms have established unassailable market dominance with the other four strategies. b. global markets allow for much broader competitive scope. c. most consumers want to pay a low price for products with somewhat highly differentiated features. d. one strategy is not enough for most large firms.

c. most consumers want to pay a low price for products with somewhat highly differentiated features.

Some experts consider the ____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional

c. multidivisional

Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure? a. increasing diversification b. coordination and control issues c. need for knowledge-sharing among specialists d. greater amounts of data and information to process

c. need for knowledge-sharing among specialists

Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership. b. differentiation. c. related constrained diversification strategy. d. single or dominant business corporate strategy.

c. related constrained diversification strategy.

All of the following are examples of differentiated products EXCEPT a. Toyota's Lexus. b. Caterpillar's heavy duty earth moving equipment. c. store brand beef and pork. d. McKinsey & Company.

c. store brand beef and pork.

Strategic fit among many activities (in an activity map) is fundamental to a. the development of core competencies for a firm. b. the breadth of competitive scope for a firm. c. sustainability of a firm's competitive advantage. d. the integrity of the firm's value chain.

c. sustainability of a firm's competitive advantage.

Starbuck's determined that all of the following customer needs were important EXCEPT a. fast service. b. the experience associated with drinking coffee, not just the coffee. c. the actual product of service (e.g., a cup of coffee), not the experience. d. allowing customer to design their own drinks.

c. the actual product of service (e.g., a cup of coffee), not the experience.

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use a. the integrated cost leadership/differentiation strategy. b. either of the focus strategies. c. the cost-leadership strategy. d. any of the strategies except the focused differentiation strategy.

c. the cost-leadership strategy.

Financial controls are most important in the ____ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary

c. unrelated diversified

An important lesson from the Chapter 11 Opening Case about Borders is that a. Borders did a good job of implementing its strategy but its structure was wrong. b. structures rarely evolve in response to strategic change. c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy. d. Borders' decentralized structure led to poor decision making.

c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy.

Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as schools, prisons, and public administration buildings. It has always competed on a cost leadership basis. Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on these construction firms for selling its product. Durable Ceramic's next most-efficient competitor, Cost-Less Ceramics, Inc., earns average returns, while Durable earns above-average returns. The commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its prices below those of Cost-Less's prices, it is likely that a. both Durable and Cost-Less will devise additional ways to become more efficient in their production processes. b. Durable will be unable to absorb the lower cost, and will go out of business. c. both Cost-Less and Durable will go out of business, leaving the customers with fewer alternative sources of low-cost tile. d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

Three sources of flexibility in completing primary and support activities are particularly useful for firms using the integrated strategy. These are a. Flexible Manufacturing Systems, Reengineering, and Total Quality Management. b. Outsourcing, Reengineering, and Flexible Manufacturing Systems. c. Outsourcing, Total Quality Management, and Information Networks. d. Flexible Manufacturing Systems, Total Quality Management, and Information Networks.

d. Flexible Manufacturing Systems, Total Quality Management, and Information Network

If Southwest Airlines employees lost their high enthusiasm and commitment to the company, a. the airline could continue without problems because its cost-leadership strategy is dependent on its efficient internal procedures. b. replacement employees could be hired from rival airlines that are laying off employees easily merged into the Southwest culture. c. there would be no impact on Southwest's profitability because Southwest's customers value the low fares rather than being "entertained" by the employees. d. Southwest would have lost one of its competitive advantages and its performance would be threatened.

d. Southwest would have lost one of its competitive advantages and its performance would be threatened.

The typical risks of a differentiation strategy do NOT include which of the following? a. Customers may find the price differential between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features. c. Counterfeit goods are widely available and acceptable to customers. d. Suppliers of raw materials erode the firm's profit margin with price increases.

d. Suppliers of raw materials erode the firm's profit margin with price increases.

In the Chapter 4 Strategic Focus, Walmart's same store sales have been declining and those of rivals Family Dollar and Amazon have been increasing. What explains this recent change? a. Walmart was too aggressive with its low-cost position and lost customers who wanted more upscale products. b. Walmart changed its strategy to focused dirrerentation. c. Amazon and Family Dollar changed their strategies to attract more upscale customers. d. Walmart changed its strategy to attract more upscale customers.

d. Walmart changed its strategy to attract more upscale customers.

When selecting a business level strategy, the firm must determine all of the following EXCEPT a. How will the customer's needs be satisfied? b. Who is the customer? c. What are the customers' needs? d. Why should these customers' needs be satisfied?

d. Why should these customers' needs be satisfied?

Viewing the world through the customer's eyes and constantly seeking ways to create more value for the company enhances a. the reach of the company toward the customer. b. the ability to identify the customer. c. the richness of the relationship with the customer. d. affiliation with the customer.

d. affiliation with the customer.

One disadvantage of the functional structure is that a. career paths and professional development are limited. b. dual reporting relationships blur lines of authority. c. the CEO cannot coordinate and control the efforts of functional level employees. d. communication and coordination are difficult among organizational functions.

d. communication and coordination are difficult among organizational functions.

Structural stability affects the organization's ability to: a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. consistently and predictably manage its daily work routines.

d. consistently and predictably manage its daily work routines.

A manufacturer of jewelry imitates the style of a popular and expensive brand using manufactured stones rather than real gemstones and lesser grade metals rather than silver and gold. The manufacturer packages the jewelry in boxes of the same color imprinted with an almost identical logo. About 85 percent of the company's sales are through Internet sales. This example illustrates the competitive risk of ____ that threatens companies that use the differentiation strategy. a. customer sensitive to price differentials b. threat by the cost leader c. customer experience d. counterfeiting

d. counterfeiting

Strategic controls allow corporate-level managers to a. evaluate business-level performance on objective criteria. b. concentrate on day-to-day corporate operations. c. assess performance of employees and managers in each business unit. d. examine the fit between what the firm might do and what it can do.

d. examine the fit between what the firm might do and what it can do.

When the costs of supplies increase in an industry, the low-cost leader a. may continue competing with rivals on the basis of product features. b. will lose customers as a result of price increases. c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.

d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.

The term "stuck in the middle" a. means adhering to a middle of the road strategy in the face of negative outcomes. b. indicates that the customers of the firm are willing to pay only a mid-range price for the product. c. reflects the fact that the customers of the firm have only moderate expectations regarding product quality. d. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

d. means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

When implementing a focus strategy, the firm seeks to a. offer products that are both differentiated and low cost. b. move into the global market. c. target the typical customer in an industry. d. serve the specialized needs of a market segment.

d. serve the specialized needs of a market segment.

The benefits of a simple structure include all of the following EXCEPT a. ease of coordination within the organization. b. no need for sophisticated information systems. c. active involvement by the owner-manager. d. specialists can develop deep expertise.

d. specialists can develop deep expertise.

Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so a. indicates to competitors that the firm is vulnerable to a hostile takeover. b. will only lead to inefficiencies. c. requires the firm undertake multi-year restructuring period that will delay retirement. d. suggests that their previous choices were not the best ones.

d. suggests that their previous choices were not the best ones.

Which of the following is NOT a value-creating activity associated with the differentiation strategy? a. develop policies to ensure efficient hiring and retention to keep costs low and implement traing to ensure high employee efficiency. b. provide accurate and timely delivery of goods to customers. c. ensure receipt of of high quality supplies (raw materials and other goods). d. develop flexible systems that allow rapid response to to customers' changing needs.

develop policies to ensure efficient hiring and retention to keep costs low and implement traing to ensure high employee efficiency.