BUS 496* UNLV Exam 2

rely on experience effects to raise efficiency.

A manufacturing business pursuing cost leadership will likely: (a) focus on a narrow market segment. (b) rely on experience effects to raise efficiency. (c) use advertising to build brand image. (d) put heavy emphasis on product engineering

True

An alliance can be used to test whether the partners would benefit from a future merger. True or False?

(a) produces its own inputs

Backward integration occurs when a company: (a) produces its own inputs. (b) owns its own source of distribution of outputs. (c) is concentrated in a single industry. (d) is divesting unrelated businesses.

False

Backward vertical integration gives a company far more power over the supplier. This is a type of high-powered incentive. True or False?

(b) have golden parachutes

During the 1990's top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification. Now, Titanic is performing poorly and earning below average returns. Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic. Lusitania has announced that it will fire Titanic's current top executives. If the Titanic executives are not worried about their impending job loss, it is most likely that because they: (a) plan to take poison pills. (b) have golden parachutes. (c) have silver handcuffs. (d) have ironclad contracts

False

Evidence suggests that acquisitions usually lead to favorable financial outcomes, especially for the acquiring firm. True or False?

False

Low powered incentive is an example of costs of "buy" (i.e. market sourcing). True or False?

False

Non-equity alliances exist when two or more firms join together to create an independent firm. True or False?

Differentiation

Starbuck's was able to revolutionize the coffee drinking experience through its business level strategy of: (a) focused cost. (b) cost leadership. (c) differentiation. (d) stuck-in-the-middle.

True

Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage. True or False?

True

The firm using a global strategy seeks to develop economies of scale as it produces the same or virtually the same products for distribution to customers throughout the world who are assumed to have similar needs. True or False?

(c) political and economic institutions.

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT: (a) factors of production. (b) demand conditions. (c) political and economic institutions. (d) related and supporting industries.

True

The greater the unpredictability of market demand, the greater flexibility advantages of outsourcing. True or False?

False

The use of golden parachutes increases the chance that a poorly performing firm will be taken over. True or False?

True

Theory of comparative advantage explains why a country engages in export and import. True or False?

A long-term agreement with competitors to fix the market price for a commodity product

Which of these choices is NOT an example of a vertical relationship? a. A franchise agreement b. An exclusive single-supplier agreement c. A long-term agreement with competitors to fix the market price for a commodity product d. A joint development group between a supplier and a customer

True

"Brand extension" is also a way to achieve an " economy of scope", by using a good reputation built around one product to help sell a different product or service. True or False?

(d) Spin-offs

( ) occur when a single firm creates at least two firms in a nontaxable break-off creating at least one new equity share offering. (a) Leveraged buyouts (b) Hostile takeovers (c) Shakeouts (d) Spin-offs

transaction cost economics

( ) provides theoretical background regarding why firms do outsourcing (buy) or in-house production (make). Write the name of theory.

Greenmail

( ) refers to the repurchase of the target firm's shares that were obtained by the acquirer at a premium in exchange for an agreement that the acquirer will not longer target the company for takeover. (a) golden parachutes (b) greenmail (c) poison pill (d) dual-class stocks

True

A business -level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage i n specific product markets. True or False?

True

A firm can pre-empt imitation by introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents. True or False?

economies of scale

A global corporate -level strategy emphasizes (a) differentiated products. (b) economies of scale. (c) sensitivity to local product preferences. (d) decentralizin g control and limited monitoring.

(a) competitive strategy is dictated by the home office.

A global corporate-level strategy differs from a multi-domestic corporate-level strategy in that in a global strategy: (a) competitive strategy is dictated by the home office. (b) competitive strategy is decentralized and controlled by individual strategic business units. (c) products are customized to meet the individual needs of each country. (d) the firm sells in multiple countries

True

A key question of business -level strategy is how to create differences between the firm's position and its rivals; either to perform activities differently or to perform different activities. True or False?

False

A multi-domestic strategy assumes that consumer needs, industry conditions, and social norms are homogeneous in every country. True or False?

False

A multi-domestic strategy is an international strategy in which a firm's home office determines the strategies that foreign affiliates use in each region. True or False?

(c) the firm customizes the product for each country in which it competes.

A multidomestic corporate -level strategy is one in which: (a) a corporation chooses not to compete internationally but where there are a number of international competitors in the firm's local marketplace. (b) the firm produces a standardized product, but markets it differently in each country in which it competes. (c) the firm customizes the product for each country in which it competes. (d) the firm competes in a number of countries, but it is centrally coordinated by the home office.

economies of scale

A reduction in costs per unit due to increases in efficiency of production as the number of goods being produced increases best defines the term _____. (a) economies of scope (b) economies of finance (c) economies of scale (d) economies of wealth

True

A risk of a focus strategy is that the needs of the customer within a narrow competitive segment may become more similar to those needs of customers in the whole market. True or False?

True

A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value for which customers are willing to pay. True or False?

True

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions. True or False?

trading industries

Aerospace, military hardware, and diamond mining are example of ( ), where internationalization occurs primarily through imports and exports. (a) sheltered industries (b) trading industries (c) multi-domestic industries (d) global industries

(b) universal

All of the following are international corporate-level strategies EXCEPT the ____ strategy. (a) multi- domestic (b) universal (c) global (d) transnational

universal

All of the following are international corporate-level strategies EXCEPT the ____strategy. (a) multidomestic (b) universal (c) global (d) transnational

True

An "economy of scope" is where a firm can spread the fixed cost of a common resource or a shared service across multiple products or activities. True or False?

forward integration

An independent group of suppliers, such as farmers, gather to form a cooperative to sell their products to buyers directly, replacing their former distributor. This is an example of: (a) threat of entry. (b) backward integration. (c) forward integration. (d) threat of substitute products.

Vertical Acquisition

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(an) (a) merger. (b) unrelated acquisition. (c) horizontal acquisition. (d) vertical acquisition.

all of the above

Being 'stuck in the middle' gives low profits because: a) the firm loses those customers who want the lowest prices (b) the firm loses those customers who want the best product on the market (c) employees become confused about what the firm's goals and strategy really are (d) all of above

all of the above

Being 'stuck in the middle' gives low profits because: (a) The firm loses those customers who want the lowest prices (b) The firm loses those customers who want the best product on the market (c) Employees become confused about what the firm's goals and strategy really are (d) All of the above

False

Companies without the core competencies in their value chain activities and support functions are still able to implement successfully a either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy. True or False?

(b) A country's relative efficiency in producing goods or services

Comparative advantage refers to: (a) A country's absolute efficiency in producing goods or services (b) A country's relative efficiency in producing goods or services (c) A country's total effi ciency in producing goods or services (d) A country's inefficiency in producing goods or services

True

Corporate strategy is concerned with 'where' a firm competes (in which industries it competes), while business strategy is concerned with 'how' a firm competes in a specific industry. True or False?

Exploit all sources of cost advantage in providing customers with a standardized product

Cost leadership means a firm must: (a) Exploit all sources of cost advantage before tailoring the product to each customer (b) Exploit all sources of cost advantage in providing customers with a standardized product (c) Exploit all sources of cost advantage in providing each customer with unique products (d) Exploit all sources of cost advantage while providing every customer an individual service

False

Costs of "Make" include searching, negotiation, contracting, monitoring and enforcing (of contract). True or False?

Offers customers something valuable and unique other than a low price

Differentiation is when a firm: (a) Offers customers a standardized product or service (b) Offers customers something valuable and unique other than a low price (c) Offers customers a uniquely low price (d) Offers customers products with many additional feature

True

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, human resources, and management. True or False?

True

Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets. True or False?

True

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry. True or False?

False

Firms can increase their speed to market for new products by pursuing an internal product development strategy rather than an acquisition strategy. True or False?

True

Firms implementing cost leadership strategies often sell no -frills s tandardized goods or services (but with competitive levels of differentiation) to the industry's most typical customers. True or False?

De-integration

Firms seek to create value from economies of scope through all of the following EXCEPT: a. activity sharing. b. skill transfers. c. transfers of corporate core competencies. d. de-integration.

b) economies of scope

Firms that have selected a related diversification corporate -level strategy are likely to seek to exploit (a) control shared among business-unit managers. (b) economies of scope between business units. (c) the favorable demand of buyers. (d) market power.

True

For a firm to imitate the strategy of another firm, it must do four things: identify the target firm, incentivize the rival, diagnose the sources of competitive advantage, and acquire the resources needed.

True

Franchising is an alternative to pursuing growth through mergers and acquisitions for franchiser. True or False?

(d) (a) competitive advantage,(b) industry attractiveness

GE/McKinsey matrix , useful framework to analyze firm's diversified portfolio, has two dimensions of (a) and (b). What are (a) and (b)? (a) (a) relative market share, (b) industry growth rate (b) (a) relative market share, (b) industry attractiveness (c) (a) competitive advantage,(b) industry growth rate (d) (a) competitive advantage,(b) industry attractiveness

(a) Externally and internally sourced inputs

High powered-incentives and low-powered incentives respectively generally apply to (respectively): (a) Externally and internally sourced inputs (b) Internally and externally sourced inputs (c) Market and alliance sourced inputs (d) Joint venture and alliance sourced inputs

True

High transaction-specific investment between two industrial process stages is more likely to lead to vertical integration of these processes. True or False?

False

If the transaction costs associated with buying in a product or service from the market costs more than the firm providing this internally, then the firm will outsource. True or False?

joint venture

In a(an) ( ), the firms involved own equal shares of a newly -created venture. (a) equality-based strategic alliance (b) non-equity strategic alliance (c) joint venture (d) equity strategic alliance

True

In diversification decision, the better-off-test means "either the new unit must gain competitive advantage from its link with the corporation, or vice versa". True or False?

(a) Trade and direct investment are both important

In global industries: (a) Trade and direct investment are both important (b) Firms trade commodities globally (c) Capital is traded globally (d) Employees move globally

False

In the BCG matrix, "Cash Cow" is characterized by high market share and high industry growth. True or False?

carrying a high risk of failure.

Internal product development is often viewed as: (a) carrying a high risk of failure. (b) the only reliable method of generating new products for the firm. (c) a quicker method of product launch than acquisition of another firm. (d) critical to the success of biotech and pharmaceutical firms.

False

International strategic alliances are less risky than domestic strategic alliances because of diversification across countries. True or False?

Barriers that slow or stop the equalization of profits between firms, such as barriers to imitation

Isolating mechanisms are: (a) Barriers that slow or stop the equalization of profits between firms, such as barriers to imitation (b) Mechanisms that speed up the equalization of profits between firms (c) Barriers that prevent potential entrants from grabbing a significant market share in the industry (d) Mechanisms that limit or enhance the ex post equilibration of rents among individual firms, depending on their relative bargaining powers

True

Italy has become the leader in the shoe industry because of related and supporting industries such as a well-established leather-processing industry which provides the leather needed to construct shoes and related products. True or False?

(a) Tends to be particularly unsuccessful.

Mergers and acquisitions are frequent. Diversifying into another industry this way: (a) Tends to be particularly unsuccessful. (b) Tends to be better than strategic alliance. (c) Is advisable, because it's a relatively low-cost entry method. (d) Is preferred by shareholders, hence the frequency of this method

True

Michael Porter's determinants of national advantage model (i.e., national diamond model) describe factors associated with the firm's domestic environment that contribute to its dominance in a particular global industry. True or False?

Subject to erosion by competitors or entrants

Once established, competitive advantage is: (a) Relatively stable over time (b) Subject to erosion by competitors or entrants (c) A firm's reward for leading the industry (d) Easily maintained unless entry barriers are high

True

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value. True or False?

True

One reason why firms pursue international opportunities is to extend the product's life cycle. True or False?

True

Outsourcing is a form of de -integration or disaggregation. True or False?

True

Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities. True or False?

Sheltered Industries

Railroads, hairdressing, milk, dry cleaning are example of ( ), (a) sheltered industries (b) trading industries (c) multidomestic industries (d) global industries

(d) One partner makes general investments to the alliance while the other partner may not.

Risks of strategic alliance include EXCEPT: (a) Partners misrepresent the value or competencies of their inputs. (b) Partner may fail to make available the complementary resources and capabilities that were committed. (c) Partners may choose to act opportunistically. (d) One partner makes general investments to the alliance while the other partner may not.

(d) Inward direct investment and imports

Sheltered industries are protected from: (a) Imports (b) Imports and Exports (c) Direct and Indirect inward investment (d) Inward direct investment and imports

True

Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership. True or False?

False

Successful product diversification is expected to increase the variability in the firm's profitability since the earnings are generated from several different business units. True or False?

(c) leasing.

The choices that a firm has for entering the international market include all of the following EXCEPT: (a) exporting. (b) licensing. (c) leasing. (d) acquisition

False

The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effe ctive for common, inexpensive products such as doughnuts. True or False?

True

The fewer number of supplier firms, the grater are the market transaction costs. Thus, vertical integration is preferred over outsourcing. True or False?

True

The greater the information asymmetries between focal firm and supplier(s), the more likely is opportunistic behavior and the greater the advantages of vertical integration. True or False?

high transportation costs

The problems associated with exporting include (a) merging corporate cultures. (b) a partner's incompatibility. (c) difficulty in negotiating relationships. (d) high transportation costs.

Horizontal Acquisition

The purchasing of firms in the same industry is called: a. unrelated diversification. b. vertical integration. c. networking the organization. d. horizontal acquisition.

True

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence. True or False?

True

The usual justification for a diversification strategy is a combination of growth, spreading risk and creating extra value. True or False?

(c) the better-off test

There are three tests for deciding whether diversification will create shareholder value. ( ) test means "either the new unit must gain competitive advantage from its link with the corporation". (a) the attractiveness test (b) the cost-of-entry test (c) the better-off test (d) the synergy test

True

To position itself differently from competitors, a firm must decide to either perform activities differently or to perform different activities. True or False?

where & how to compete

Two basic questions concern corporate and business strategy: (a) Where and how to compete? (b) How and when to compete? (c) What are the best arenas and structures to compete? (d) When and where to compete?

Transaction specific investment

Vertical integration is more likely when there is: (a) Availability of large number of supplier/buyer firms (b) Transaction-specific investment (c) Low likelihood of potential hold-up problem from supplier(s) (d) High level of uncertainty in market demand

False

Vertical integration is preferable in a technology-intensive industry whereas market sourcing is preferable when the industry is very fragmented. True or False?

True

Vertical integration of the supplier firm is more likely when there is a high level of transaction specific investment. True or False?

(a) the industries chosen for diversification must be structurally attractive or capable of being made attractive.

When managers decide whether diversification will create shareholder value, the attractiveness test refers to: (a) the industries chosen for diversification must be structurally attractive or capable of being made attractive. (b) the cost of entry must not capitalize all the future profits. (c) the new unit must gain competitive advantage from its link with the corporation (d) there should be a balanced portfolio of cash-generating vs. cash-using business

True

When selecting a business level strategy, the firm determines who will be served, what customer needs will be satisfied, and how those needs will be satisfied. True or False?

False

Where there is volatile, uncertain demand for a resource, it is more likely that this resource will be internally produced (make-decision). True or False?

(a) potential loss of proprietary technologies

Which of the following is NOT a disadvantage associated with exporting? (a) potential loss of proprietary technologies (b) high transportation costs (c) loss of control over distribution activities (d) tariffs imposed by local governments

(d) It is the slowest way to enter a new market

Which of the following is NOT a disadvantage of international acquisitions? (a) They are very expensive and often require debt financing. (b) The acquiring firm has to deal with the regulatory requirements of a host country. (c) Merging the acquired and acquiring firm is difficult. (d) It is the slowest way to enter a new market

Cost cutting may lead to the loss of desirable features.

Which of the following is a risk (or potential pitfall) of cost leadership? (a) Cost cutting may lead to the loss of desirable features. (b) Attempts to stay ahead of the competition may lead to gold plating. (c) Cost differences increase as the market matures. (d) Producers are more able to withstand increases in suppliers' cost

False

solating mechanisms are forces tending to equalize profit rates among firms, i.e. phenomena that erode a firm's competitive advantages. True or False?