ch quizzes and pratice exam for final
Siobhan, the chief financial officer at an office furniture 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? A) "As the rest of the world globalizes, we will lead the way in strengthening our home nation." B) "Keeping our factories in Canada means facing up to the liability of foreignness." C) "Canada's wages and benefits are so low compared with the rest of the world that it makes the most sense to build factories here." D) "It will be much more difficult to protect our intellectual property if we build factories overseas."
"It will be much more difficult to protect our intellectual property if we build factories overseas."
Which of the following best illustrates forward vertical integration? A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. A chain of ice cream parlors launches a brand of toys and accessories for children. A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.
A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
Iselectrics, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Iselectrics's European sales? A) Alert the European Union that conditions in the European medical technology market are approaching oligopoly. B) Initiate a hostile takeover of a European rival. C) Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels. D) Contact its congressional representative to request higher tariffs on European technology products.
Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels.
Which of the following statements is true about managing alliance-related tasks? A) Forming an alliance with another firm prohibits that firm from forming other alliances. B) Alliance-management capability is based on three alliance-related tasks. C) A merger is one of the three options for alliance design and governance. D) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.
Alliance-management capability is based on three alliance-related tasks.
American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern? A) Require business units at American Snacks and Très Bien to sign loyalty pledges. B) Encourage business units at American Snacks to act independently. C) Arrange for the alliance to be managed at the corporate level. D) Sever the relationship with Très Bien and find a more trusting corporate partner.
Arrange for the alliance to be managed at the corporate level.
American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern? Require business units at American Snacks and Très Bien to sign loyalty pledges. Encourage business units at American Snacks to act independently. Arrange for the alliance to be managed at the corporate level. Sever the relationship with Très Bien and find a more trusting corporate partner.
Arrange for the alliance to be managed at the corporate level.
Which of the following countries has a high geographic distance but a low cultural distance from the United States? Canada Mexico Australia France
Australia
Which of the following provides an example of a common drawback of a functional strategy? Bert had a difficult time communicating efficiently with the manager of another department. Marietta was surprised about the inflexibility of her firm when it rejected her marketing plan. Juan's manager dismissed his idea because it was too innovative. Mary did not accept the position with the firm because it has an ineffective cost-leadership strategy.
Bert had a difficult time communicating efficiently with the manager of another department.
Globex Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Omni Consumer Products, a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A) While Omni Consumer Products' competitive advantage will lie in its high local responsiveness, Globex Inc. will lack such competencies. B) Omni Consumer Products will face greater pressure for cost-reductions than Globex Inc. due to strategy choice. C) Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries. D) While Globex Inc. will require a global matrix structure, Omni Consumer Products Inc. will require a traditional headquarters model.
Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries.
How does horizontal integration within an industry affect the surviving firms? By increasing the threat the surviving firms will face from new entrants By strengthening the rivalry among existing firms By requiring the surviving firms to shift their focus from non-price to price competition By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
Bayside Inc., a reputed brand for fine art supplies, is implementing an international strategy. Cyberdyne Corp., a maker of mini-computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario? A) While Bayside Inc.'s competitive advantage lies in its high local responsiveness, Slalom Corp. will lack such capabilities. B) Cyberdyne Corp. focuses more on cost-reductions when compared to Bayside Inc. C) Cyberdyne's business functions are highly centralized, whereas Bayside organizes its activities worldwide. D) Cyberdyne is exposed to greater risks of exchange rate fluctuations.
Cyberdyne Corp. focuses more on cost-reductions when compared to Bayside Inc.
Which of the following perspectives best supports the shared value creation framework? A) Markets are more often than not defined by societal needs rather than economic needs. B) Failing to create value for society almost always reflects on the bottom line. C) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.
Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.
Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test? A) Firms can apply the VRIO framework for the second test. B) Firms can implement various financial metrics like NPV and IRR. C) Firms can employ external analysis tool like PESTEL and Porters Five Forces. D) Firms can use an international framework to determine global relevancy.
Firms can apply the VRIO framework for the second test.
DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently. A) Compete based on price in order to drive out remaining competitors and create a monopoly. B) Focus on research and development as a form of nonprice competition. C) Encourage new competitors to enter the market to improve competition. D) Prepare to resist a hostile takeover by buying back as much stock as possible.
Focus on research and development as a form of nonprice competition.
Greg is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders? A) Greg needs to focus on the company's earnings because that is what shareholders care about. B) He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price. C) He should discourage pension funds from investing because they are interested in safety at the expense of growth. D) He should make the company stock available only to hedge funds so he will have the freedom to take risks as the firm expands.
He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price.
________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model. A) Vertical integration; horizontal integration B) Horizontal integration; vertical integration C) Vertical integration; Porter's Five Forces D) Horizontal integration; structure-conduct-performance
Horizontal integration; structure-conduct-performance
Why does a functional structure rely on a flat organizational structure? A) The work in the organization is centrally coordinated by the CEO. B) It allows for a higher degree of specialization and domain expertise. C) It allows for efficient bottom-up and top-down communication. D) It allows for the implementation of a differentiation strategy.
It allows for efficient bottom-up and top-down communication.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? It allows the firm to create incentives to foster process innovation in order to drive down cost. It allows the firm to reduce its cost below that of competitors while offering acceptable value. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.
It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Ganjaflex's stock price? A) It is valued at less than the sum of its individual business units. B) It is valued at greater than the sum of individual business units. C) It is valued at the exact sum of individual business units. D) It is consistently lower than the industry average.
It is valued at less than the sum of its individual business units.
Stratton Oakmont Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in Old Hebrides, considered one of the less-developed nations in the world. How will this strategic move most likely affect Stratton Oakmont Inc.? A) It will benefit from economic arbitrage. B) Stratton Oakmont will use its competitive advantage from economies of standardization. C) Stratton Oakmont will replicate its existing business model easily. D) It will be able to easily sell products for which demand varies by income.
It will benefit from economic arbitrage.
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. It will diminish its economic value creation. Elemental Pharma will increase its cost of distribution. Elemental Pharma will reduce the size of its product line.
It will lower its costs through economies of scale.
Why is the optimal organizational structure a multidivisional structure? Its focus is on driving down costs. Its focus is on producing differentiated products. Its focus is on retaining activities within a single geographic area. Its focus is on establishing a flat hierarchy operated in a decentralized fashion.
Its focus is on driving down costs.
Paper Street Soap Company, a cosmetics 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 Jennifer Watson, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Jennifer Watson 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? A) Jennifer Watson has a wide span of control. B) Paper Street Soap Company has a tall hierarchical structure. C) Jennifer Watson is underworked. D) Paper Street Soap Company is a mechanistic organization.
Jennifer Watson has a wide span of control.
Jim is the CEO of a financial services firm. What action should Jim take to be sure the firm avoids moral hazards? A) He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. B) Jim must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." C) He must create a plan in which government agencies, or a consortium of other financial services firms will assume any future debts of the company. D) Jim should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Jim should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Los Pollos Hermanos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. The firm's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's? A) Los Pollos Hermanos has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy. B) Los Pollos Hermanos has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy. C) Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy. D) Los Pollos Hermanos has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy.
Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.
Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy? A) M-Form with centralized decision-making power (cooperative multidivisional) B) M-Form with decentralized decision-making power (competitive multidivisional) C) functional with centralized decision-making power D) functional with decentralized decision-making power
M-Form with centralized decision-making power (cooperative multidivisional)
Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A) Recent advances in management science have greatly improved the success rate of strategic alliances. B) Many owners, managers, and business analysts believe they are essential to survive in an industry. C) Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D) These alliances have an excellent record of success if managers have enough confidence in the outcome.
Many owners, managers, and business analysts believe they are essential to survive in an industry.
Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? Recent advances in management science have greatly improved the success rate of strategic alliances. Many owners, managers, and business analysts believe they are essential to survive in an industry. Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. These alliances have an excellent record of success if managers have enough confidence in the outcome.
Many owners, managers, and business analysts believe they are essential to survive in an industry.
Sean was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically? A) Observe executives at the company, and see whether they model ethical behavior and demand it of others. B) Research the results of the ethics violations. If the perpetrators were fired or jailed, then the rest of the company is sound. C) Check the company's mission statement to make sure that it guarantees respect and integrity. D) Ignore the alleged ethics violations because there is no one standard of ethical behavior.
Observe executives at the company, and see whether they model ethical behavior and demand it of others.
Sarah, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Sarah? A) Once the firm starts growing and attracting more customers she is likely to feel overloaded. B) Hiring more employees will result in loss of intellectual property. C) People are highly unlikely to buy clothes from a store run by a fashion design student. D) The online admiration of her designs will not translate into sales.
Once the firm starts growing and attracting more customers she is likely to feel overloaded.
Two leading home appliance companies, Globex Inc. and Pug Tech, are in competition for market share. In their quest for exciting new products, Globex employs an open innovation model, while Pug Tech pursues a closed innovation model. Which of the following statements is most likely true? A) Globex has a greater chance of capturing market share. B) Pug Tech has a superior absorptive capacity. C) Pug Tech will protect its intellectual property with patents and trade secrets. D) Globex is most concerned with securing first-mover advantages.
Pug Tech will protect its intellectual property with patents and trade secrets.
Fang and Bone Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fang and Bone snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fang and Bone take? A) Achieve economies of scale by using the global-standardization approach. B) Pursue a multidomestic strategy that includes new "local" brands. C) Keep costs low with undifferentiated product in the international strategy. D) Appease pressures for cost-reductions by following the transnational approach.
Pursue a multidomestic strategy that includes new "local" brands.
Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results? A) Invest in vertical integration despite the cost of producing pickups. B) Abandon the idea of vertical integration entirely. C) Pursue taper integration. D) Introduce a budget line of guitars to diversify the firm's offerings.
Pursue taper integration.
Rantouch is one of the largest tax-preparation firms in the United States. It wants to acquire Doncon , a smaller rival. After the merger, Rantouch will be one of the two largest income-tax preparers in the U.S. market. What should Rantouch include in its acquisition plans? A) It should refocus its attention from the national to the international market. B) In addition to acquiring Doncon, it should also determine the best way to drive independent "mom and pop" tax preparers out of business. C) Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers. D) Rantouch should enter a price-based competition with its other major competitor to force it out of business and become a monopoly.
Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.
Raul is the Chief Operating Officer (COO) of Black Mesa Inc., a firm that produces handcrafted kitchen tables for both the residential and commercial markets. Jose believes that his domestic market is saturated and now wishes to go global. Which of the following below would serve as an advantage for Raul if he chose to pursue international markets? A) Raul could gain access to cheaper raw materials in a foreign country, thus lowering the cost of his input factors. B) Raul could share his intellectual properties with another firm that operates in a foreign country in hopes of achieving collaboration. C) Raul's brand might suffer a loss in reputation if he goes global but could increase his market share. D) Raul may benefit from learning about Hofstede's cultural dimensions that could be leveraged on his current employees in his domestic market.
Raul could gain access to cheaper raw materials in a foreign country, thus lowering the cost of his input factors.
Carla recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Carla to undertake to help safeguard the company's financial health? A) Request and review a copy of the firm's risk assessment plan, if such a plan exists. B) Take part in the annual reviews of employees in the financial department. C) Draft and circulate a statement that the firm's board members serve at the pleasure of the CEO. D) Determine how to postpone or evade the firm's compliance with local, regional, and national regulations.
Request and review a copy of the firm's risk assessment plan, if such a plan exists.
Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take? A) Quickly build downstream complementary assets. B) Enter multiple learning races within strategic alliances. C) Seek an alliance with a company or companies that will complete the value chain. D) Pursue managerial hubris at all levels of development.
Seek an alliance with a company or companies that will complete the value chain.
Laura owns and runs Cyberdyne Systems Corp., a private start-up company with a current value of $1.3 billion. Cyberdyne Systems Corp.is interested in going public to fund future growth. Which action should Laura take before Cyberdyne Systems Corp.'s initial public offering? A) Laura should come up with a business plan for what Cyberdyne Systems Corp. will do once it is no longer publicly traded. B) She and senior managers should write down their code of ethics. C) Laura should not embark on an IPO until Cyberdyne Systems Corp.'s value is higher. D) She should investigate Cyberdyne Systems Corp.'s existing or potential problems with ethics or the law, if such problems exist.
She should investigate Cyberdyne Systems Corp.'s existing or potential problems with ethics or the law, if such problems exist.
General Electric's board has only one inside director, John Flannery, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A CEO is likely to be more responsible because he or she is setting his or her own performance targets. The CEO might be able to influence the board through setting the meeting agendas. The CEO possesses invaluable inside information that can help him or her chair the board effectively. Any CEO will suggest board appointees who are friendly toward him or her.
The CEO possesses invaluable inside information that can help him or her chair the board effectively.
A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? A) Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals. B) Whichever company is larger should acquire the smaller one and impose its management system on the acquired company. C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power. D) For data security reasons, both companies should remain separate and refrain from sharing information.
The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
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. They produce products that cannot be copied easily because of their complex designs. The employees in the organization themselves are unaware of the factors contributing to their organizational culture. It is not commercially viable for other companies to implement the same culture.
Their culture reflects complex relationships with their employees, customers, and suppliers.
What are poison pills? Shareholders use them to prevent the founder of a company from taking the company private through a leveraged buyout. They are unspecified conditions in the contract between stakeholders in an organization. Companies use them in a bid to perform a hostile takeover of competing firms. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.
They are defensive provisions that kick in should a buyer reach a certain level of share ownership.
Three months ago, Darren became a board member at Runswell, a publicly traded company. Two weeks ago, the board members discovered that Runswell's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Darren and the other board members hold the CEO? They should hold her to the same ethical standards that they would expect of any Runswell employee—no more, no less. They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny. If the board members are able to determine that the CEO is not a "bad apple," then they should give her their full support. The board members must wait until the lawsuit results in a settlement or a guilty verdict.
They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny.
Todd is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, he knows that trade and investment barriers are falling among wealthy nations. He also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Todd and his company take? A) Todd and her employer should wait out this period of uncertainty and take action when market forces are more stable. B) They should anticipate market corrections because investment barriers and the price of oil inevitably rise. C) Todd and his employer need to prepare for the cost of doing business to increase. D) They should seriously consider globalization because of the falling trade and investment barriers.
They should seriously consider globalization because of the falling trade and investment barriers.
________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. Venture capitalism Bootlegging Vertical integration Crowdsourcing
Vertical integration
Paul is a manager at Macmillan Toys Inc. and is friends with the company's CEO. This privilege gives Paul the information that Macmillan Toys is in the midst of talks to take over a leading rival. Paul buys stocks of Macmillan Toys with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of Macmillan Toys depreciate in the following months. Are Paul's actions unethical? Why or why not? A) Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome. B) Yes. It is illegal and unethical for Paul to possess any kind of insider information. C) No. Paul did not ask the CEO to disclose such information to him. D) No. Paul did not make any profits from trading stocks using this information.
Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome.
Yubaba Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. Axe Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A) Yubaba Inc. will sell the same products in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements. B) Yubaba Inc. will pursue a differentiation strategy at the business level, whereas Axe Inc. will pursue a cost-leadership strategy at the business level. C) Yubaba Inc. will be better protected from exchange rate fluctuations when compared to Axe Inc. D) Yubaba Inc. will not be able to use its home-based core competencies in foreign markets as much as Axe Inc. will.
Yubaba Inc. will sell the same products in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements.
For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country? a firm that manufactures cell phone batteries a firm that extracts and exports iron ore a firm that produces movies a firm that sells wristwatches
a firm that extracts and exports iron ore
Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate? a joint venture a franchisee a licensing contract a corporate acquisition
a joint venture
Which of the following best illustrates physical-asset specificity? a unique training program developed in an organization a ship container designed to carry more than the average load of iron ore a generic machine that can be used to churn different mixtures a machine solely designed to give a candy its trademarked shape
a machine solely designed to give a candy its trademarked shape
Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as a break-even analysis. a real-options perspective. credible commitment. transaction cost economics.
a real-options perspective.
A primary advantage of organizing economic activity within firms is the ability to coordinate highly complex tasks to allow for specialized division of labor. low administrative costs because of reduced bureaucracy. eradication of the principal-agent problem. high-powered incentive to work as salaried employees for an existing firm.
ability to coordinate highly complex tasks to allow for specialized division of labor.
When Turbo Autos Inc. wanted to sell its cars in the country of Sylvanistan, it lacked access to distribution channels and marketing expertise in the country. Thus, Turbo Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? increasing competitive intensity accessing critical complementary assets procuring additional capital investments reducing differentiation of product and service offerings
accessing critical complementary assets
Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers? licensing some of its newest designs to overseas competitors acquiring an airplane-parts manufacturer in another country beginning a brownfield project in its home country exporting airplane parts to many other countries
acquiring an airplane-parts manufacturer in another country
Managers at Umbrella Corporation, a firm in East Asia, want to make their company a global leader in business process outsourcing (BPO). What should the Umbrella managers look for as they decide where to locate their BPO facilities? A) large, undeveloped plots of land for greenfield projects B) plentiful natural resources C) many uneducated workers who are highly trainable D) an abundance of well-educated English speakers
an abundance of well-educated English speakers
Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Golddex should pursue A) backward integration. B) forward integration. C) product diversification. D) geographic diversification.
backward integration.
Fang and Bone Corp. is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, Fang and Bone Corp. should A) be prepared to restructure as the landscape changes. B) stick with the structure that brought it success no matter what happens. C) attempt to implement an unstructured organization. D) switch to whichever structure is most common in the industry.
be prepared to restructure as the landscape changes.
The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? by having higher performance in another sector by sharing their market power by increasing the firm's risk in another sector by motivating managers
by having higher performance in another sector
ABX Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as competition. co-opetition. exploitation. exploration.
co-opetition.
John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his A) corporate level strategy. B) business level strategy. C) functional level strategy. D) geographic scope.
corporate level strategy.
Jordan is president of a medium-sized bank. What can he do to lessen the chance of employees or board members taking part in insider trading? A) forbid managers and executives from having access to private information B) forbid board members from having access to private information C) work with analysts and customer-facing employees to root out information asymmetry D) create a strict code of ethics and explain that inside traders will be fired
create a strict code of ethics and explain that inside traders will be fired
Hooli, 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? A) decision-making power distributed throughout the organization B) a wide span of control for managers C) dedication to a cost-leadership business strategy D) flexible job descriptions for employees
dedication to a cost-leadership business strategy
A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n) non-equity alliance. equity alliance. joint venture. capital venture.
equity alliance.
om is the inventor of a personal fitness tracking device, and he is in the process of hiring employees after receiving investment funding. When considering how to structure his company, he should A) emulate the structure of the leading firm in the industry. B) first establish a strategy and let that be him guide. C) choose the structure that will give him the most control. D) ask employees what structure they are most comfortable with.
first establish a strategy and let that be him guide.
Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate? A) crowdsourcing B) new product development C) forward vertical integration D) conglomerate diversification
forward vertical integration
Aperture Science relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Aperture Science should A) offer bonuses to employees whose ideas go into production. B) threaten to fire employees who do not come up with at least one new idea per week. C) give employees a "free day" every two weeks to pursue ideas for new educational toys. D) distribute a list of standard operating procedures for employees to follow.
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? international strategy multidomestic strategy global-standardization strategy transnational strategy
global-standardization strategy
A functional structure is recommended when a firm has a broad focus in terms of its product/service offerings. has a low level of diversification. has a low degree of specialization. diversifies into different product lines and geographies.
has a low level of diversification.
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? A) supply-chain B) technological C) horizontal D) perfect
horizontal
Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate? information asymmetry principal-agent problem experience-curve effect learning-curve effect
information asymmetry
Adverse selection in a public stock company occurs when information asymmetry increases the likelihood of selecting inferior alternatives. a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. a principal is not aware of the context from which information from an agent is derived. an agent manipulates information to benefit stockholders.
information asymmetry increases the likelihood of selecting inferior alternatives.
Martha received a tip from a close friend who is an executive manager of a publicly traded company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of A) information asymmetry. B) adverse selection. C) stakeholder strategy. D) shared value creation.
information asymmetry.
Delos Inc. is an apparel manufacturer. The management at Delos Inc. 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 A) output controls. B) input controls. C) multidivisional strategy. D) centralization.
input controls.
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 organic in nature. is mechanistic in nature. has an informal structure. has a decentralized structure.
is mechanistic in nature.
Sterling Cooper Footware and NERV Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Sterling Cooper Footware entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footware. However, Sterling Cooper Footware was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) network effects B) economies of scope C) learning races D) time compression diseconomies
learning races
A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? legal but not ethical ethical but not legal legal and ethical neither legal nor ethical
legal but not ethical
Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? licensing franchising crowdsourcing bootlegging
licensing
Aldorria and Estoccia are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A) food processed in Estoccia. B) movies and TV shows produced in Aldorria. C) iron ore extracted in Estoccia. D) luxury items manufactured in Aldorria.
luxury items manufactured in Aldorria.
Warephase Airway's decision to acquire Konex Fuels Inc. proved to be ill-fated because the Warephase managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate? A) knowledge race B) competitive feasibility C) managerial hubris D) unfettered free market
managerial hubris
When a firm diversifies into different product lines and geographies, a ________ structure is preferred. simple functional multidivisional network
multidivisional
Many financial service firms, IT firms, and health care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm. A) strategic outsourcing B) procurement C) offshore outsourcing D) diversification
offshore outsourcing
A payroll company in the nation of Osterlich 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? A) one that considers payroll companies essential to national security B) one that is outside of any trading blocs that Osterlich participates in C) one that used to have a colonizer or colonized relationship with Osterlich D) in a country that has extensive tariffs and trade quotas to protect businesses
one that used to have a colonizer or colonized relationship with Osterlich
E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp 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, E Corp Inc. is most likely an organization that is A) formalized. B) mechanistic. C) centralized. D) organic.
organic
Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) adopting a narrow shareholder perspective B) separating economic interests and social needs C) practicing effective corporate governance D) adopting the principles of shareholder capitalism
practicing effective corporate governance
Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A) employing celebrity spokespeople B) implementing automated soy-making machinery C) purchasing competitors D) increasing executive salaries
purchasing competitors
The core competency of Newex Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B) redeploying and recombining existing core competencies to compete in future markets. C) building new core competencies to create and compete in future markets. D) building new core competencies to protect and extend current market position.
redeploying and recombining existing core competencies to compete in future markets.
Plexzap 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 Plexzap pursuing in this scenario? A) taper integration strategy B) niche marketing strategy C) related-constrained strategy D) related-linked strategy
related-linked strategy
Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors for roughly $3 billion. This strategic move allowed InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of A) restructuring. B) corporate diversification. C) a business level strategy. D) the Core Competence-Market Matrix.
restructuring
Shelia is a graduate student pursuing a course in business. Presented with the case of a company's unethical behavior, Shelia wonders if the company's board of directors should ask the CEO to step down. Having a strong belief in Michael Porter's idea of value creation, Shelia is most likely to conclude that company's board of directors A) should not ask the CEO to step down because doing so would cause a profit dip that would affect its shareholders. B) should ask the CEO to step down because it has a greater obligation toward society. C) should not ask the CEO to step down because he was responsible for an almost 90 percent appreciation of the company's stock. D) should ask the CEO to step down because agents, unlike principals, are disposable.
should ask the CEO to step down because it has a greater obligation toward society.
Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? inability to implement its trademark focused-differentiation strategy in the German market significant differences between its U.S. personnel policies and Germany's culture Germany's unfamiliarity with retail discount powerhouses Metro's hostile takeover of Walmart in Germany
significant differences between its U.S. personnel policies and Germany's culture
Because Facebook receives almost all of its revenues from online advertising, we would conclude that Facebook would be characterized as a(n) ________ firm, which has the lowest levels of corporate diversification. A) single business B) dominate business C) related diversification D) unrelated diversification
single business
A high degree of formalization in an organization is most likely to improve customer service. slow down decision making. produce inconsistent results. increase creativity and innovation.
slow down decision making.
Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying? concentric integration taper integration horizontal integration conglomerate integration
taper integration
Which of the following is an example of an external transaction cost? the cost of setting up a production unit the cost of searching for a contract manufacturer the cost of recruiting and retaining employees the cost of maintaining plant and machinery
the cost of searching for a contract manufacturer
In a non-equity alliance, which of the following types of information would firms most likely share? a manager's knowledge related to solving non-routine problems a top-level manager's experience related to making strategic decisions the documented information about the material composition of a product the employees' entrepreneurial skills
the documented information about the material composition of a product
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 changes the industry structure from oligopolistic to monopolistically competitive. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. the horizontal integration activity has the potential to reduce competitive intensity in an industry. the surviving firms will need protection against the relaxed entry barriers.
the horizontal integration activity has the potential to reduce competitive intensity in an industry.
A company that is using extrinsic motivation as an output control mechanism will most likely organize training sessions for employees. cut budgets during recessions. implement a peer review system. threaten to lay off employees if they do not achieve targets.
threaten to lay off employees if they do not achieve targets.
Johnathan owns shares in a company called Delos Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Johnathan wants to proactively cut his losses and therefore sells his shares. Mary, a trading enthusiast, buys shares in Delos Inc. Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A) separation of legal ownership and management control B) legal personality C) limited liability for investors D) transferability of investor ownership
transferability of investor ownership
The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n) multidomestic strategy. international strategy. global-standardization strategy. transnational strategy.
transnational strategy.
Mary has been named CEO of an office furniture manufacturing company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Mary most likely to make? A) whether to pursue a differentiation or cost-leadership strategy B) which customer segments to target C) how to achieve the highest levels of customer satisfaction D) what range of products the firm should offer
what range of products the firm should offer