Chapter 10 - 12

An entrepreneur just started a business and decides that she needs a team to help this new business grow. Which group of individuals, with their specific backgrounds, would give the entrepreneur a heterogeneous top management team?

1 finance, 1 marketing, 1 technology

What is the definition of a functional structure?

A chief executive officer and a limited corporate staff, with functional line managers in dominant organizational areas

What is believed to be a likely consequence if shareholders, lawmakers, and regulators are not critical and attentive to the actions of a company's top managers?

A financial crisis due to manager ineffectiveness and lack of focus on all stakeholders, causing the company to fail, resulting in a rise in unemployment

What's an organizational structure?

A firm's formal reporting relationships, including procedures, controls, authority and decision-making processes

Activists are very unhappy with the Board of Directors' recent pattern of decisions. They believe that they need to be given more decision-making capabilities, have their voices heard, and nominate another Board member. What should the activists propose?

A proxy vote

What is a simple structure?

A structure in which the owner-manager makes all major decisions and monitors all activities while the staff serves as an extension of the manager's supervisory authority.

A firm is struggling with the behavior of its employees. There have been reports of ethically questionable behavior. When asking some employees about their motives for these actions, a common theme was uncovered. They were cutting corners to hit their performance numbers. The firm now wants to focus on ethical behavior and shift organizational culture. The company distributes emails from HR about appropriate behavior and ethics and hosts a series of office workshops on ethics. What is this firm attempting to become?

A values based culture

Support from which of the following sources is crucial to successfully implementing a new organizational culture?

All of these (CEO, top management, mid level managers)

What is the market for corporate controls?

An external governance mechanism that is active when a firm's internal governance mechanisms fail

What are distributed strategic networks?

An organizational structure used to manage international cooperative strategies

A technology company is looking for a new CEO because it is in need of a new strategy to remain competitive. The firm needs someone who will be able to analyze the market and industry to develop many options on how to turn the company around. Which of the following candidates hold the best chance to help this company achieve their goals?

An outside industry C- level candidate with short tenure

A company has a dashboard to monitor its progress. This dashboard analyzes the company's finances and its strategy. The C-level executives use this to inform decisions and determine next appropriate steps. What is this a description of?

Balanced scorecard

Elected individuals whose primary responsibility is to act in the owners' best interest by formally monitoring and controlling the firm's top level managers is the definition for _______.

Board of Directors

How does the market for corporate control help stakeholders?

By taking undervalued companies and helping them grow and become more profitable, thus benefitting all stakeholders

Clark has a business and is in need of a functional structure. His strategy is to sell as much as possible and spend the least amount of capital as possible. He wants his employees to be compensated when they can find cost-cutting tactics. What type of functional structure would you recommend Clark implement?

Cost leadership

What should the CEO of a company suggest to another CEO if their companies have a very similar product, but do not share the same market?

Create a horizontal alliance so that each firm can compete better in their respective markets

A technology firm has had some issues in their decision making. The company is the leader in innovation and is always ahead of the curve on technological advances. But, the business struggles with operations and marketing decisions. The leadership team is the same group of five people that started in a garage after meeting in a computer science class. What would you suggest to this company?

Create a more heterogenous top management team

Gina is a transformative leader. She wants as much input from others as possible and has developed a top leadership team. The team is composed of the brightest minds with the best backgrounds, ensuring that the decisions made will be the best and most thought out. However, the Board has concluded that the decision making is too slow and that the company is losing its competitive advantages as a result. What does Gina need to change?

Cut the number on her leadership team

What is involved in identifying the vision and the strategy or strategies to achieve a goal over time?

Determining strategic direction

Apple, a leader in mobile devices, can link its success to which functional strategy?

Differentiation

After a recent round of share releases, many individuals bought up shares and reduced the number of large-block shareholders. The company's managers recently had the luxury of performing without much interference or monitoring by their shareholders. The managers are now engaging in risky strategic tactics that may not be in the best interest of shareholders. What type of ownership does this company have?

Diffuse Ownership

James is a consultant who helps guide businesses in their growth. His current client has previously streamlined its supply chain by acquiring a few of its suppliers. This is an attempt to increase cost efficient

Diversification through products or business

A top priority of General Motors' CEO Mary Barra is to change the organizational culture. The motivation behind this was the discovery of ignition problems. The company was aware of them but chose not to address them for many years. How may a change in culture prevent similar events in the future?

Employees with more of a customer focus will want to keep their buyers safe.

What is the term for a company's options outside the firm for managerial positions?

External managerial labor market

How is McDonald's thinking strategically about cutting costs by $300 million by 2017?

Franchising 90% of the restaurants

Christopher is the CEO of a company that another company is trying to acquire. The success of Christopher's company has declined dramatically over recent years. Chris knows that the acquisition could help save the shareholders and other stakeholders from the turmoil that would ensue if the company went bankrupt. However, this is Christopher's only line of income for his family. He decides to defend his company from being taken over to help secure his position. Which defense strategy would you recommend be implemented that would benefit all stakeholders?

Golden Parachute

What is one risk companies could be vulnerable to if participating in a horizontal alliance?

Government action due to collision

Which of these is not an example of a strategic leader?

High performing sales associate

Not all CEO changes are successful. Which one of the following scenarios has the greatest chance of failure?

Hiring an international external CEO

Lisa is the CEO of her company and is on the Board of Directors as an insider director. She has recently become suspicious of certain events and discussions. The discussions have been about replacing management. These discussions have been sparked by letters from shareholders, which have become more frequent. What may Lisa be suspicious of?

Hostile Takeover

What is referred to as the knowledge and skills of a firm's entire workforce?

Human capital

Which of these is a potential benefit of establishing CEO duality?

Increased crisis management

Acer, the electronics company, is always behind the technological curve. When products are ready to hit the market, the trend has already passed and it continues to lose market share. What change to its organizational structure might you recommend to counteract this trend?

Increasing structural flexibility

irms may hire a CEO from the external managerial labor market for which of the following reasons?

Innovation of the company

Target is a company that focuses on reasonable prices for goods that are of high quality, unlike its competitors. Wal-Mart has a focus on cutting costs to save as much money as possible for its customers and has historically not focused on quality. Target has grown due to which strategy?

Integrated cost leadership/ differentiation strategy

CEO has just resigned and quickly vacated his role for a more lucrative opportunity. The company, with the rapid change, is in limbo and is in need of leadership. What is the Board of Directors next logical action?

Internal interm CEO

An appliance company is looking for a new CEO. They are looking to continue - and rejuvenate - the vision that already exists. They want someone who will be well versed in the appliance industry to more easily see the firm's potential for growth. What option should the Board focus on?

Internal managerial labor market

What are some of the largest factors for a firm when it demands continuous product innovation?

Interpreting and taking action on often ambiguous information

What would happen if a company decided to compete on an international level without a distributed strategic network?

It would likely fail due to an unsuccessful strategy.

The Board of Directors is deciding who the new CEO should be for a company. They have narrowed their candidates down to two highly-credentialed individuals. Steve is known to be harsh but fair. He is a proven CEO and has driven companies to success quickly. Kim is the other candidate and is known to be a "people person" with a high emotional intelligence. In the past she has demonstrated success building company culture to achieve great results. Knowing this, which candidate should the company choose if it is seeking to motivate its employees?

Kim because she is a transformational leader

Why could many large block owners be beneficial to the company?

Large-block owners will be able to easily collaborate on current issues and drive change in an organization, more so than many small share owners.

A company is thinking about changing its organizational structure to gain a competitive edge on a consumer trend. This new consumer behavior is very profitable, and the company sees the revenue that can stem from it. However, there is research stating that the trend may not last forever and could be a "fad." Changing the structure to accommodate this new behavior may have which of the following consequences?

Limiting future strategies

What is most likely to happen to a firm that has a Board of Directors that is automatically approving the decisions made by the CEO and the management team?

Lower performance

What is a cooperative form?

M-form structure in which horizontal integration is used to bring about interdivisional cooperation

Susan is worried about her performance as CEO. She thinks that she may lose her position, receive a cut to her salary, or be seen by her peers as incompetent and ineffective. What is another term for what Susan is worried about?

Managerial employment Risk

A company is part of a keiretsu in Japan. Its leaders are worried about the company's financial viability and ask for help from other members of the keiretsu. Why would other participants of the keiretsu feel the need to aid the failing company?

Members of the keiretsu are seen as family, which commands the attention and allegiance.

A company consists of a corporate office and operating divisions. Each operating division represents a separate business or profit center in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers. What type of structure does this company have?

Multidivisional structure

Do German firms have the presence of agency problems as much as U.S. firms?

No, German firms are managed and owned by the same individual

Would a company want media tension during a discussion of a possibly organizational structure change?

No. The media can give the company too much attention and hinder the change or give competitors a clue to what the company's new strategy is.

Which organizational structure has been deemed "the best"?

None

What are the concepts that affect attitudes toward corporate governance in Japan?

Obligation, family, consensus

A company has a misguided use of its strategy. This is due to poor reporting on how to enhance performance and maintain a competitive edge. Which aspect of structure is this company missing?

Organizational controls

Ross is the newly appointed CEO of an automobile manufacturer. While analyzing the business, he recognized a competitive advantage his company could achieve if the organizational structure could change very quickly. What is a challenge the new CEO will have to overcome for this change to happen?

Organizational inertia

A CEO recently led her company through a period of significant growth and profitability. Her structure change, new strategy and other decisions have caused the company to grow beyond expectations. But, recently her decisions have been poor, which may have to do with lack of analysis and attention to the details of projects put before her. When her team suggests alternatives, she pushes back. What most likely happened to the CEO?

Overconfidence

A company is being accused of polluting the environment through its manufacturing process. The company agrees that this is a problem but does not have the expertise or capital to investigate and produce a solution. What would you recommend for this company?

Partner horizontally with environmentally conscious organizations

What would happen, in theory, if a company is able to align its strategy and structure?

Performance will improve

A fashion apparel company has seen much success over the years. For almost a decade, it seems to have perfected the formula for success. The tenured CEO of 12 years has developed this strategy, and this success has become her career "legacy." Recently, the company has seen its growth slow. The year-to-year profit growth is also leveling out. The current CEO has stated that it is a bump in the road, and that changing strategy would be rash. What is the diagnosis of this CEO's mindset?

Risk adverse

Who are seen as the most significant stakeholders in the United States?

Shareholders

What is the proper order of changing corporate strategy and corporate structure?

Simultaneously changing structure and strategy

A firm is attempting to break into an international market. It easily established alliances in that foreign market and was able to successfully expand. What concepts helped the firm with its transition?

Social capital

Based on the reading, the changes McDonald's is making are due to a shift in strategic focus. Which of these is the primary rationale for the change?

Speed and flexibility

If a company were to only have insider directors and related outsider directors, which would leave out the independence of outsider directors, what could the consequences be?

Stockholders' interests could be ignored due to executives desire for personal financial gain without regard for all shareholders

The CEO wants to implement a new strategy for the firm. Previously, the company's strategy was differentiation and focused on having the highest quality product. Now, instead of increasing the quality of the product, he wants to maintain quality but drive down cost per unit. What term defines this scenario?

Strategic change

Which of these terms describes largely subjective criteria intended to verify that a firm is using appropriate strategies for the conditions in the external environment and that the company will maintain a competitive advantage?

Strategic controls

What term encompasses the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary?

Strategic leadership

The Carter family has been the successful owner of a manufacturing company for over 50 years. The company has always performed better than expected and was projected to grow for years to come. To help with this growth, the Carters decided to hire a CEO who is not from the family, the first time in its history. After the hire, the performance of the company shifts for the worse, and there is a separation of ownership and managerial control. What factors should the Carter family change?

The Carters should appoint a family member as CEO, as research shows that family-owned firms perform better when a member of the family is the CEO.

What is another instance where decision-making bodies are separated like the Board structure in German firms?

The United State's three branches of government

What are the benefits of having a strong corporate governance?

The ability to be strategically competitive and perform without risk of being ethically or legally exposed

Without strong corporate governance, what is likely to become of a company?

The company will fail because of legal issues, lack of strategic focus and risky behavior.

If a company's structure is not aligned with the competitive environment or fluid enough to deal with environmental changes, what is a likely outcome for that company?

The company will likely not be successful and succumb to competitors

Calming Industries, a hospitality company, has experienced growth. The leadership attributes its early success to its structure and strategy being aligned. Recently, it seems that the previous structure isn't working as efficiently as it once did. What could be a cause for this performance trend?

The growth in sales has caused issues that the previous structure can no longer handle

What is the definition of ownership concentration?

The number of large-block shareholders and the total percentage of the firm's shares they own

Why is bribery a major issue confronted by multinational companies operating in international markets?

The prevalence of bribery in foreign markets leaves industries at a competitive disadvantage.

What is the agency relationship in the text most concerned with?

The relationship between management and the individuals who have a stake in the company

Why would a company want to have a heterogeneous top management team?

Thoughts coming from different expertise and backgrounds will provide a better decision

Laws and regulations require independent outsider directors to lead important committees, such as audit and compensation. Why are these rules in place?

To avoid the influence of insider directors who may sway the Board in their self-interests

What is the reasoning behind P&G's commitment to giving employees of all levels meaningful and significant roles?

To develop talent that will be able to move up in the organization and be effective in the future

Melissa is the CEO of her company and has to make a business decision. She is faced with a scenario where she can please one group of stakeholders, or all of them minimally. What is Melissa's most likely action?

To please as many stakeholders as possible, because if stakeholders are not minimally satisfied, they will give support to another company

Why are corporate governance mechanisms important to foreign investors?

To protect their investments; governance mechanisms are designed to protect shareholders

Many companies encourage employees to take on entrepreneurial pursuits. While this could cause companies to lose top talent, why may companies want to foster this behavior?

To spark innovation that the company may be able to use

What is the name for a group of individuals who are responsible for making certain a company uses the strategic management process, especially for the purpose of selecting and implementing strategies?

Top management team

Lisa is the CEO of her company and has a distinct leadership style. She doesn't want her employees to be afraid to take an action they know is right. She wants her subordinates to be able to take matters into their own hands, so she delegates many things to empower them. She has built a team culture where the team and the company are more important than personal interests. What type of manager is Lisa?

Transformational leader

A company that has alliances with its suppliers and aids them in becoming modern and sustainable is an example of:

Vertical alliance

What is an alternate definition for "poison pill?

When a company decides to increase the number of overall shares, which will both dilute the hostile company's shares and also increase the cost of the company overall, making the company less appealing to take over

What is an agency relationship?

When one party delegates decision-making responsibility to a second party for compensation

Kevin is on the Board of Directors of a local company and has become concerned with a situation that came to his attention. The Board is in talks to elect the current CEO as Chairman of the Board. Does Kevin have a reason for concern?

Yes, as the CEO will not be able to be forced out if his or her performance becomes unacceptable.

A firm that measures its success by performance standards that are previously established is one that has high:

financial controls

An institution that holds 15 percent of shares in a company in order to be a powerful governance mechanism is an example of a(n):

institutional owner

Greg is the CEO of a leading company in the consumer packaged goods industry. He is trying to grow his company for personal gain and wealth. However, Greg sees that his company has an opportunity to break into the chemical industry. He has decided to invest free cash flow into acquiring small chemical companies that have the potential of growth, if funded properly. Shareholders are not happy. Their case for wanting to cease these actions is that Greg is practicing ______.

overdiversification

What is the Board of Directors' most important responsibility?

selection of CEO