BUS 402 Final exam

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?

"It will be much more difficult to protect our intellectual property if we build factories overseas."

Which of the following statements is true about managing alliance-related tasks?

Alliance management capability is based on three alliance-related tasks.

_____ refers to the degree to which decision making is concentrated at the top of the organization.

Centralization

Which of the following businesses is most likely to disrupt an existing industry?

Closer Connex developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time.

Which of the following is a feature of the shakeout phase of the industry life cycle?

Competitive intensity within the industry increases.

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration.

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

Emma Burnley has a wide span of control.

Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger?

If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Which of the following most accurately describes a difference between incremental innovation and radical innovation?

Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy?

It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Why does a functional structure rely on a flat organizational structure?

It allows for efficient bottom-up and top-down communication.

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?

It enabled HP to compete head on with Cisco's videoconferencing solution.

Which of the following is a disadvantage of a horizontal integration corporate strategy?

It increases the potential for legal repercussions.

Which of the following is a drawback of vertical integration?

It increases the potential of legal repercussions.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?

It is building new core competencies to protect and extend its current market position.

Which of the following is a drawback of pursuing a transnational strategy?

It requires a global matrix structure, which is difficult to implement.

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma?

It will lower its costs through economies of scale.

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them?

Many owners, managers, and business analysts believe they are essential to survive in an industry.

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

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

What is the main reason that most mergers and acquisitions negatively effect shareholder value?

Promised synergies never take place.

Dominic is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Dominic credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Dominic do to exemplify the social entrepreneurship model?

Provide free weekly catered meals for the homeless.

Skylark Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Skylark is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Skylark pursue?

Redeploy and recombine existing core competencies to compete in markets of the future.

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

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

Which of the following is a result of horizontal integration in terms of Porter's five forces model?

There is a reduction of excess capacity in the market.

Which of the following is an advantage of equity alliances when compared to non-equity alliances?

They produce stronger ties between partners.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?

They reduce a firm's exposure to loss of reputation.

Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take?

Turn down the acquisition offer and prepare to resist a hostile takeover.

Save On Everything Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Future Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other?

Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level.

While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data?

While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants.

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

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

a decentralized structure.

Vassar Systems Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Vassar Systems?

acquisition

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

ambidextrous organization.

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?

because of the large economic distance between the United States and India

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

benefits from lower labor costs in manufacturing and services

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of

building new core competencies to create and compete in markets of the future.

Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily

building new core competencies to protect and extend current market position.

How did Canada, Mexico, and the United States reduce the administrative and political distance between them?

by establishing the North American Free Trade Agreement (NAFTA)

When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, Magnet Inc., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Magnet adopted in this scenario?

consolidation strategy

HealthTech wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, HealthTech invested $100 million in the project. This investment made by HealthTech will result in a

credible commitment.

Cheetah, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so?

dedication to a cost-leadership business strategy

A(n) _____ leverages new technologies to attack existing markets.

disruptive innovation

Sunshine Technologies introduced a tablet that could run completely on solar energy and was less expensive than competitors' tablets. On the downside, it required more frequent charging than the competition's tablets. However, the technology of the Sunshine tablet improved rapidly, thereby improving its recharge frequency. This example describes

disruptive innovation.

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should

divest the strategic business unit.

The customers entering the market in the growth stage are primarily

early adopters.

At the time when Ellen decided to purchase a tablet computer, the product had just become accessible to the mass market. She did not purchase the tablet until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Ellen best represent?

early majority

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

entrepreneur.

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to

fill gaps in its competency lineup.

Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

franchising

Which of the following types of organizations comparatively requires the lowest levels of investment and control?

franchising

To be successful and to survive the shakeout stage of the industry life cycle, a firm should

gain economies of scale.

Turquoise Games relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Turquoise should

give employees a "free day" every two weeks to pursue ideas for new educational toys.

Vermilion Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Vermilion most likely pursue?

global-standardization strategy

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

growth stage.

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?

horizontal

The four-step innovation process ends with

imitation.

Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next?

increased competition from imitators

A greater cultural distance between two trading countries

increases the liability of foreignness.

Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

incremental innovation

A factor favoring the success of disruptive innovation is that

incumbent firms are slow to change.

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

input controls.

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to

integrate different strategic positions, pursued by different strategic business units.

A. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n)

intrapreneur.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's

is mechanistic in nature.

Which of the following is a common drawback of a non-equity alliance?

lack of trust between partners

WackyPop Inc. produces an inexpensive microwave popcorn that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has WackyPop performed poorly in?

local responsiveness

Esther is the CEO of a line of accessories and cosmetics, Starring Me! Inc., which has retail stores and production units in five countries. In this scenario, Starring Me! Inc. is most likely a

multinational enterprise.

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands?

one that is in the same trading bloc as Badlands' home country

A payroll company in the nation of Antono is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion?

one that used to have a colonizer or colonized relationship with Antono

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

open innovation.

Which of the following types of organizations best helps match a differentiation strategy to a functional structure?

organic organization

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

organic.

True Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, True Tomato worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?

physical-asset specificity

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

political distance

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to

preempt its competitors from buying Waze.

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in

product-market diversification.

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a

question mark.

Incumbent firms favor incremental innovation over radical innovation because

radical innovation will disturb the existing power distribution within the firms.

Elegance Inc. is a large cosmetics company that made an initial small investment in a start-up company, Peace Planet, which was developing an organic face lotion. This gave Elegance controlling interests in the start-up company. However, Peace Planet soon began to have financial difficulties because of principal-agent problems. As a result, Elegance did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a

real-options perspective.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of

related and supporting industries/complementors.

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using

related-constrained diversification.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

related-linked diversification.

Nocturnal Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Nocturnal pursuing in this scenario?

related-linked strategy

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

resistance to change.

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in

restructuring.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?

significant differences between its U.S. personnel policies and Germany's culture

The key objective for firms during the growth phase is to

stake out a strong strategic position not easily imitated by rivals.

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under

stars

A firm's _____ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

structure

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to gain a new capability

Organizational design is

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

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

they offer the same products or services in all their stores throughout the world.

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

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

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

to make small-scale investments in ventures poised to disrupt existing market economics

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?

to take advantage of lower taxes in the southern United States

A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

unrelated diversification strategy

The most important yet least visible element of organizational culture is

values.