BUSN 450: Final (CH 1-12)

Which of the following is an advantage of the balanced-scorecard?

It allows managers to translate a firm's vision into measureable operational goals.

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?

It allows the conglomerate to overcome institutional weaknesses in emerging economies.

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful.

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

What most likely happens when a firm optimizes its organizational structure to its current situation?

It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take?

Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Which of the following statements accurately describes a firm's resource stock?

Resource stocks are a firm's current level of intangible resources.

________ precisely indicates how much of a firm's sales is converted into profits.

Return on revenue

Which of the following is an advantage of a triple-bottom-line approach?

The approach takes an integrative and holistic view in assessing a company's performance.

A bank, CQC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?

The bank knows that the customer will be unable to pay the loan if the interest rate rises.

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

The first mover will be able to reduce costs through economies of scale.

Which of the following is true of acquisitions?

They can be friendly or hostile.

Managers use the AFI strategy framework to

explain and predict differences in firm performance

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?

exporting

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

exporting goods.

In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources.

factor

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

gain economies of scale.

The process of closer integration and exchange between different countries and peoples worldwide is

globalization

A functional structure is recommended when a firm

has a low level of diversification.

According to the perspective of shareholder capitalism, shareholders in public stock companies

have the most legitimate claim on profits.

Adverse selection in a public stock company occurs when

information asymmetry increases the likelihood of selecting inferior alternatives.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its

internal strengths change with its external environment in a dynamic fashion.

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by

introducing results-only-work-environments to tap intrinsic motivations.

A firm is said to be pursuing a polycentric innovation strategy when

it draws from multiple, equally important research facilities located throughout the world.

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

Michael Porter's diamond framework explains

national competitive advantage.

In a radical innovation, a firm targets

new markets by using new technologies.

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that

some of the firm's proprietary know-how may be appropriated by the foreign partner.

The key objective for firms during the growth phase is to

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

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally

stake out a unique position within the industry

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic trade-offs.

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?

strategy analysis

Successful ________ requires managers to design and shape structure, culture, and control mechanisms.

strategy implementation

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

structure

In a large company, who is most responsible for devising the corporate strategy?

the CEO of the company

The MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after

the Hippocratic oath in medicine.

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

the absence of a trading bloc.

The downside of equity alliances is

the amount of investment that can be involved.

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

the chief executive officer

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

the expectation that the agent will act in the principal's best interest

Which of the following best describes a strategic trade-off?

the tension between value creation and the pressure to keep costs in check

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

It reduces the trust of shareholders in the organization as a vehicle for value creation.

One way to foster ethical behavior in employees is to

create a control system that encourages desired values.

According to Michael Porter, which of the following is a problem with many publicly traded companies?

They have defined value creation too narrowly in terms of financial performance.

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

competitive advantage

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

informational advantage of the lower-level employees.

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and

obeys the VRIO principles.

Shareholders of public companies need to appoint a board of directors to represent their interests because

of the separation of ownership and control.

A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.

strategic initiative

In a non-equity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

The most important yet least visible element of organizational culture is

values.

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration.

In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application.

20 years

Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.

Which of the following describes a firm in the Globalization 1.0 stage?

Asha Inc. had a base office in New York and distributed some of its products overseas.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

How does availability of complements act as a value driver?

Complements add value to a product when they are consumed in tandem with it.

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

Coordination costs

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

Each stage of the industry life cycle is dominated by a different customer group.

________ is best described as decreases in cost per unit as output increases.

Economies of scale

What does it mean for a firm to have an 80 percent learning curve?

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

Which of the following examples describes the task of an alliance manager?

Hussein trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

Which of the following scenarios exemplifies a sustainable strategy under the triple bottom line approach?

Impervious Plastics reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

Which of the following is a drawback of vertical integration?

It increases the potential of legal repercussions.

Which of the following expressions accurately describes market cap?

It is the product of the number of outstanding shares and the share price.

Which of the following is an accurate statement about learning effects?

Learning effects occur over time as output accumulates.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.

The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

PESTEL framework

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

Promised synergies never take place.

Which of the following scenarios would be characteristic of an entrepreneur?

Rachel implemented a new and more efficient way to produce pottery.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases.

Which of the conditions prevail when an industry is at the end of its life cycle?

The level of process innovation reaches its maximum as firms attempt to lower cost.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix?

The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

How will an increase in coordinated economic and political integration between countries affect the world economy?

There will be gains in social welfare and living standards across the globe.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

building downstream complementary assets can be expensive and time-consuming.

The tenet behind the triple-bottom-line is that

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

Which of the following accurately describes an organic organization?

a flexible organization that fosters fast decision making and high employee motivation

A primary advantage of organizing economic activity within firms is the

ability to coordinate highly complex tasks to allow for specialized division of labor.

according to ___, conflicts that arise in corporations should be addressed in the legal realm.

agency theory

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in

architectural innovations.

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

availability of complements.

Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies.

backward vertical integration

A firm always has a competitive disadvantage when its return on invested capital is

below the industry average

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

A firm pursuing a transnational strategy would believe that

best practices, ideas, and innovations should be diffused throughout the world.

The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs.

blue ocean

Which quadrant in the core competence-market matrix is the hardest to pursue?

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

The name for an agreed-upon code of conduct in business, based on societal norms, is

business ethics.

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

capabilities.

In an industry, the threat of entry is high when

capital requirements are low

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

causal ambiguity.

Economic value creation is best expressed as

consumer surplus plus firm profit.

A resource-based view of a firm provides a model that systematically aids in identifying

core competencies.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

customer experience

The first step to gain and sustain a competitive advantage is to

define a firm's vision, mission, and values

In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market.

Organizational core values are the ________ that govern the behavior of individuals within a firm or organization.

ethical standards and norms

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the

differentiator is able to create a significant difference between perceived value and current market prices.

Companies in the same strategic group are ________ to each other.

direct competitors

The customers entering the market in the growth stage are primarily

early adopters.

___ is not synonymous with law

ethics

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they

enter into the market in large numbers, creating a herding effect.

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate.

How do low interest rates affect a business?

firms can easily borrow money to finance future growth

A strategic group will typically include

firms within the same industry.

A firm will fail to create a sustained competitive advantage when the

fit between its internal strengths and the external environment is static.

Which of the following is an ineffective practice in alliance management?

focusing on developing an alliance-management capability in isolation

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies.

functional

To implement specific business strategies, general managers of strategic business units rely on

functional managers

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a ________ structure.

global matrix

The four-step innovation process ends with

imitation.

A greater cultural distance between two trading countries

increases the liability of foreignness.

The board of directors of a public stock company consists of

individuals who formally represent the firm's shareholders and oversee the work of executives.

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing.

industry

The informational advantage that agents possess over principals is often based on the fact that

insiders are the first to learn about important developments before the information is released to the public.

Which of the following lists the stages of the industry life cycle in the correct order?

introduction, growth, shakeout, maturity, and decline

A trend observed during the Globalization 3.0 stage involves

multinational companies organizing as global-collaboration networks.

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

The ratio of SG&A/Revenue is an indicator of a firm's focus on

marketing and sales to promote its products and services.

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.

matrix

Which of the following motivations for business growth involves principal-agent problems?

motivating managers

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

organic

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

organizational design

The competitive advantage that one firm has will be short-lived in an industry in which

perfect competition exists.

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

price-cutting

The ratio Cost of goods sold/Revenue indicates how efficiently a company can

produce a good.

The difference between the price charged for a product and the cost to manufacture it is referred to as the

producer surplus.

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale.

The strategic objective of a first mover during the introduction stage of the industry life cycle is to

pursue a harvest strategy.

The process of alliance management begins with

selecting the best possible partner.

As the legal owners, ________ have the most legitimate claim on a company's profits.

shareholders

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are

similar to those that need to be developed and superior to those of competitors in the targeted area.

A high degree of formalization in an organization is most likely to

slow down decision making.

Employees learn about an organization's culture through the process of

socialization.

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position

Strategic thinking is different from strategic planning in that

strategic thinking includes all types of information sources while strategic planning does not.

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

A drawback of short-term contracting as an alternative to making a component in-house is that

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

Which of the following factors is the most important determinant of economic distance?

the wealth and per capita income of consumers

The administrative and political distance between two trading countries decreases when

there is a well-functioning capital market in the host country.

In a public stock company, senior executives, such as the CEO, face agency problems when

they delegate authority of strategic business units to general managers.

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.

Which of the following is an external performance metric?

total return to shareholders

During the process of formulating an effective business model, a firm's managers should first

transform their strategy of how to compete into a blueprint of actions and initiatives.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

trying to be everything to everybody by combining different competitive strategies

The primary objective of Porter's five forces model is to

understand the profit potential of industries

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

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity