BUSMHR 4490 Final Practice Questions

Long-term contracts include which forms?

- franchising - licensing

What are the risks of vertical integration?

- reduced flexibility - increased costs - reduced quality

When an established firm makes an equity investment in an entrepreneurial venture it is known as ___ investment

a corporate venture capital

When firms from wealthy countries trade with firms from poor countries, they benefit from economic ___

arbitrage

___ are unique assets with high opportunity cost

specialized assets

___ costs refer to the costs that arise from managing the linked businesses in a related-constrained or related-linked diversification scenario

coordination

___ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes

diversification

What is true of an M-form?

each division operates independently

The primary way cultural change is enacted in a company is through ___

new leadership

___ refers to the act of outsourcing some of the firm's activities outside of the home country to another nation

offshoring

The first stage of the industry value chain is typically what?

raw materials

What are the managerial advantages of building a firm into a large organization?

- greater prestige - increased power - more job security

When supporting a related-diversification strategy with the M-form organizational structure, managers typically ___

concentrate decision making at the top of the organization

What are the types of general diversification strategies?

- product - geographic - product-market

What are examples of input controls?

- standard operating procedures - budgets

What are the three choices in the build-borrow-or-buy framework?

- acquisition of new resources - strategic alliances - internal development

What are the three options used by executives to drive firm growth?

- acquisitions - alliances - organic growth

What are advantages of joint ventures?

- commitment - trust - strong ties

What do managers use the key levers of structure, culture, and control for?

- coordinate work - motivate employees

Because executives make decisions about structure and strategy, ___

a change in leadership often results in a change in culture

The BCG growth-share matrix requires managers to view their SBUs in terms of relative market ___ and speed of market ___

share; growth

What are the most important determinants of economic distance?

- per capita income - wealth

Corporate strategies associated with competitive M-form structure?

- related diversification - unrelated diversification

Which of the following occurs when a targeted firm is unwillingly acquired?

a hostile takeover

According to the BCG matrix, cash cows are SBUs that do what?

compete in a low-growth market but have high market share

___ are partnerships in which at least one partner takes partial ownership in the other partner

equity alliances

The ___ depicts the transformation of raw materials into finished goods and services along distinct vertical stages, each of which represents a distinct industry in which a number of different firms are competing

industry value chain

What is the main reason why boards fire CEOs?

ineffective strategy implementation

___ is an example of an alternative arrangement located on the continuum between "buying" and "making"

short-term contracting

Why did Coca-Cola enter into a strategic alliance with Monster?

so that it could gain private information to determine whether an acquisition might be beneficial

Causal ambiguity and ___ make it difficult to imitate the cultures of successful firms

social complexity

The element of organizational structure that separates the tasks of one job from the tasks of another is known as ___

specialization

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ___

winner's curse

What are the three main reasons firms make acquisitions?

- gain access to new distribution channels and markets - preempt rivals - gain access to a new capability or competency

What are extremely important aspects of alliance success?

- partner compatibility - inter-organizational trust

A firm with alliance management capability is able to effectively manage what tasks?

- partner selection and alliance formation - alliance design and governance - post-formation alliance management

The forms of specialized assets include what?

- physical asset specificity - human asset specificity - site specificity

What are downsides of equity alliances?

- the amount of investment involved can be great - assembling the partnership may be slow and inflexible

What are the dimensions along which corporate strategy is assessed?

- the stages of the industry value chain in which the business participates - the range of products and services the business offers - where (geographically) to compete

What are the primary reasons for pursuing a merger?

- to overcome competitive disadvantage - to gain superior acquisition and integration capability - to address principal-agent problems

Firms can achieve increased competitive advantage as a result of ___, which are firms that produce a good or service that increases the perceived value of a focal firm's offering when the two are combined

complementors

A(n) ___ is a voluntary arrangement between firms that involves sharing of resources and capabilities with the intent of developing processes, products, or services

strategic alliance

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of what?

strategic alliances

What dimensions are considered in the CAGE distance framework?

- cultural - economic - geographic

Corporate strategy needs to be dynamic over time in order to ___

- diversify to capture growth opportunities - keep and maintain a competitive advantage - respond to the ever-changing external environment

What are examples of artifacts?

- dress code - private offices - formal vocabulary

What are the three mechanisms that alliances can be governed by?

- equity alliance - joint venture - non-equity alliance

The four quadrants of the core competence-market matrix are?

- existing competencies with existing markets - existing competencies with new markets - new competencies with existing markets - new competences with new markets

Advantages of vertical integration include?

- facilitating scheduling - bettering quality - reducing costs

Characteristics of simple organizational structures:

- flat hierarchy - decentralized - low formalization

What two things accurately describe organic organizations?

- flat organizational structure - low degree of specialization

What conditions suggest a multidomestic strategy might be the appropriate strategy for MNEs?

- high demand for local responsiveness - little need for cost reductions - host countries with idiosyncratic domestic markets

Disadvantages of organizing economic activity in the open market include?

- high search costs - incomplete contracting - opportunism by others

Which of the following are alternatives on the make-or-buy continuum?

- joint ventures - equity alliances

Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. This is an example of what?

a fully vertically integrated company

Which type of structure uses domain expertise to separate employees into specific areas based on their purpose, such as sales and HR?

a functional structure

What approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?

a real-options perspective

What is a major problem for between 30-70% of all strategic alliances?

at least one partner in the alliance considers the venture to be a failure

In general, if a resource is highly tradable, then it should be ___ using a license or contractual agreement

borrowed

A real option gives a firm the right to continue making investments ___

but does not obligate the firm to do so

Strategic positions ___

can fluctuate

Transaction cost economies helps managers do what?

choose which activities to carry out within the firm

How willing the firms in an alliance are to share necessary resources and make sacrifices in the name of long-term rewards is referred to as partner ___

commitment

___ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously

corporate

A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of ___

critical complementary assets

A(n) ___ is a situation in which the stock price of a highly diversified firm is valued as less than the sum of their individual business units

diversification discount

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience what?

diversification discount

How does an organization's culture influence employee behavior?

employees are motivated by positive culture because it appeals to their higher ideals

In order to implement a transnational strategy, MNEs typically adopt a global ___ structure

matrix

What level of diversification leads to the highest levels of performance?

moderate

___ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution

taper integration

What is a national competitive advantage?

the extent to which a country can compete in international markets

Transaction costs include ___ costs associated with an economic exchange

the internal and external

The degree of vertical integration corresponds to ___

the number of industry value chain stages in which a firm directly participates

What is a major disadvantage of organizing economic activity within firms?

the principal-agent problem

What states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries?

the relational view of competitive advantage

What are economies of scope?

the savings that come from producing two or more outputs at less cost than producing each output individually

How can firms build alliance management capability?

through repeated experiences over time

What is the goal of a differentiation strategy?

to control costs while offering products or services at a higher perceived value, thereby creating a competitive advantage

What is the main goal of corporate venture capital investments?

to create real options in terms of gaining access to new technologies

What is NOT a reason to pursue horizontal integration?

to reduce flexibility

Unlike short-term contracts, long-term contracts encourage firms to make ___ investments

transaction-specific

What factors help define administrative and political distance?

- shared monetary associations - the strength of financial institutions - political hostilities

Which types of diversification tend to have the lowest performances?

- single - unrelated

Corporate strategies associated with functional structure?

- single business - dominant business

What are the main types of corporate diversification?

- single business - dominant business - related diversification - unrelated diversification

What are two internal governance mechanisms put in place to align principal and agent incentives?

- strategic control - reward systems

Two alternatives to vertical integration are?

- strategic outsourcing - taper integration

How does horizontal integration affect Porter's Five Forces?

- strengthens bargaining power vis-a-vis suppliers - reduces the threat of entry - reduces rivalry among existing firms

What characteristics help make an MNE's international strategy successful?

- strong reputation - large domestic markets - prominent brand names

What three key levers can managers use when shaping their organization into a firm with the highest level of competitive advantage?

- structure - control - culture

What describes searching for new knowledge that may enhance a firm's future performance?

exploration

When looking at the modes of foreign-market entry, one could conclude that ___

exporting might be the earliest stage of commitment because it allows the firm to test whether a foreign market is ready for its products

An advantage of using a non-equity alliance to govern a strategic alliance is its ___

flexibility and ease of initiation

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which strategy?

focused differentiation

The organizational structure element that deals with the degree to which employees are guided by specific, codified rules and processes is known as ___

formalization

What structure is best for international strategy?

functional

What structure is best for transnational strategy?

global matrix; balance of centralized and decentralized decision making, two layers of hierarchy (geographic and product)

How do foreign governments typically influence a firm's use of strategic alliances to enter new markets?

governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders

Specialized assets have what?

high opportunity cost

A firm's unwillingness to alter how things are currently done is known as ___

inertia

What uses codified policies and procedures to define and direct employee behavior?

input controls

What is true of tacit knowledge?

it can only be acquired through actively participating in the process

A standalone organization that two or more companies create and own together is a ___

joint venture

Kava Botanicals, a boutique that sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which type of strategic alliance?

joint venture

What is a disadvantage of a joint venture?

knowledge shared with the new partner could be misappropriated by opportunistic behavior

When two firms that have formed a strategic alliance to learn vary in the rate at which they learn, a(n) ___ may result

learning race

One notable advantage of a multidomestic strategy is ___

lower exchange-rate exposure

TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the ___. When they announced the spin-off, the stock price of TWN went up by 5%

diversification discount

___ is an advantage of a firm in organizing economic activity

transaction-specific investments

What must a firm do to effectively implement a cost-leadership strategy?

use a functional structure that has mechanistic organizational elements

What is important is defined by ___; which attitudes and behavior are deemed appropriate are defined by ___

values; norms

When a firm is more efficient in organizing economic activity than markets are, the firm should ___

vertically integrate

What statement is true of the network organizational structure?

- it enables firms to access communities of practice - it should be supported by uniform, company-wide policies and procedures

Strategy scholars believe that firms should create a dedicated alliance function with which features?

- it should be led by a vice president or director - it should have its own resources and support staff

Groups that are highly cohesive and lack diversity are at risk of falling victim to ___

groupthink

When two competitors merge, leading to industry consolidation, they are engaging in ___

horizontal integration

In order for a company to be considered a MNE, it must operate ___

in more than one country

Companies seek to access international markets as a means of ___

increasing their economic value creation

In order to build alliance management capabilities in small companies, it is recommended that firms take the ___ approach

learning-by-doing

What is an option for formulating strategy via core competencies?

leverage existing core competencies to improve current market position

What is a related-linked diversification strategy?

one in which executives pursue various business opportunities that share only a limited number of linkages

A ___ diversification strategy refers to a firm that pursues both product and geographic diversification

product-market

One disadvantage of a matrix structure is that ___

reporting structures are often unclear

When a firm's employees have internalized norms and share the firm's core values, the firm is said to have a(n) ___ culture

strong

In order for firms to achieve superior performance, ___

structure must follow strategy

The lemons problem suggests that information asymmetries can cause ___

superior goods to be replaced by inferior ones

In many fast-moving markets, strategic alliances allow firms to ___ to hedge against uncertainty

take a wait-and-see approach

What are sources of value creation in a horizontal integration strategy?

- lower costs - reduction in competitive intensity

What should partners do in order to make a strategic alliance work?

- make relation-specific investments - establish knowledge-sharing routines - build inter-firm trust

Stages four and five of the industry value chain involve?

- marketing - sales - after-sales service and support

What is true of cross-functional teams?

- meant to facilitate collaboration between departments - work on specific products/projects

Characteristics of organic organizations:

- low formalization - low specialization - differentiation strategy - decentralized - flat structure

What are the types of vertical integration along the industry value chain?

- forward - backward

Because organizational culture encompasses interactions among employees in all levels of the firm as well as the firm's relationships with its customers and suppliers, it is said to be ___

socially complex

Taper integration allows firms to do what?

- gain knowledge from external sources - be more flexible when responding to market changes such as fluctuations in demand

What are the four essential aspects of an organizational structure?

- hierarchy - formalization - specialization - centralization

Why do firms enter into strategic alliances?

- learn new capabilities - enter new markets - strengthen competitive position

What forms of agreement do non-equity alliances typically take?

- licensing - supply - distribution

What are advantages of strategic alliances?

- might give companies a competitive advantage - help firms achieve goals faster than they would alone

Characteristics of mechanistic organizations:

- tall structure - cost-leadership strategy - high formalization - high specialization - centralized

Knowledge that can be codified is also called ___ knowledge

explicit

A top-down strategic plan generally takes place in what type of organization?

highly centralized

What structure is a combination of the multidivisional structure and the functional structure?

matrix structure

What structure is divided into several distinct business units, each with its own profit-and-loss center?

multidivisional

What structure is best for multidomestic strategy?

multidivisional with divisions according to geographic ares; decentralized decision making

What structure is best for global standardization strategy?

multidivisional with divisions according to products; centralized decision making

Wheels on the Go! is a company that manufactures tires for semis. The company is entirely owned by North American Haulers, a large company in the semi industry. The two companies have formed a(n) ___.

parent-subsidiary relationship

The ___ dimension of national culture focuses on how a society deals with inequality among people

power-distance

A firm follows a(n) ___ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity

related

When pursuing an international strategy, a company ___

sells the same product in both domestic and foreign markets