mgmt 478 exam 2 practice exam

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 captures the cultural fit between different firms, is one key element needed when selecting an alliance partner.

Partner compatibility

General Electric's board has only one inside director, John Flannery, GE's CEO, who also acts as chairperson of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE?

The CEO possesses invaluable inside information that can help them lead the board effectively.

Joaquin owns shares in a company called Maxapro Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Joaquin wants to proactively cut his losses and therefore sells his shares. Miriam, a trading enthusiast, buys shares in Maxapro Inc. 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?

transferability of investor ownership

A defining characteristic of the pay-as-you-go business model is that the

users pay for only the services they consume.

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy.

Which of the following is true of acquisitions?

They can be friendly or hostile.

Dontechi is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate?

freemium

The professional social media website LinkedIn allows its users to create their profiles for free, but it charges a premium price for additional services. This is an example of a________ business model

freemium

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

strategic tradeoffs

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zig zags.

A wearable technology company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling at any price less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch?

$170

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.

Ari is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Ari most likely to agree?

Businesses can use their resources to create profit as long as they do so within the rules of the game.

________ is best described as a situation in which one party possesses private information and is therefore better informed than another party.

Information asymmetry

___ are the board members who are part of the company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Inside directors

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

It allows managers to translate a firm's vision into measurable 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.

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.

Which of the following statements is true of shareholders in a public stock company?

They are granted a charter of incorporation by the state and legally own company stock.

Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, 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 Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate?

a joint venture

Siobhan's firm focuses only on design, marketing, and retailing, and it outsources all its other value chain activities. This firm has

a low degree of vertical integration

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complement to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of strategic alliance such as

a non-equity alliance

Which of the following best describes a strategic alliance?

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

Gregarious Simulation Systems Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, although that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign-entry modes would best suit Gregarious Simulation Systems?

acquisition

Janelle hires Vanessa to perform a critical task in her organization. However, Vanessa has misrepresented her knowledge, skills, and abilities, and Janelle has no way of knowing whether Vanessa can indeed perform well. This is an example of

adverse selection

Under the________ framework, the question "How do we create value?" is relevant when trying to improve innovation and organizational learning.

balanced scorecard

Khalil is interested in building the centerpiece of his firm's corporate governance, and so hires a________ that is made up of individuals from both inside and outside the firm.

board of directors

Several notable firms, including Eli Lilly, HP, Procter & Gamble, and IBM, each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that________ is a necessary and critical element for an alliance to be a success.

building interorganizational trust

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

business ethics.

The translation of strategy into action primarily takes place in a firm's

business model.

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm's slogan, We Guarantee Success! However, Tom's constituents presented him with data on their latest project that suggests they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can't lose. This is a classic example of

cost benefit analysis

University Home Goods is a home furnishings company that caters to college students and other highly price-conscious customers. Through its simple designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is University Home Goods applying?

cost-leadership

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

Skin Science Inc. produces a line of skincare products that it sells at higher prices than its competitors. The company has a large and loyal customer base due to its unique formulations, high-quality ingredients, and superior customer service. Which of the following generic business strategies has Skin Science adopted in this scenario?

differentiation

Projecta is a publicly traded company and a highly diversified firm. But Projecta's most recent stock price is valued less than the sum of all its individual business units. Projecta is most likely experiencing a

diversification discount.

Jermaine's Choppers sells Chandler Dogies, a special type of motorcycle. The business generates roughly 80 percent of its revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Jermaine's Choppers would be classified as a________ firm.

dominant business

Under the________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service.

economic value creation

Open Window, a brand well known for producing vinyl and aluminum window blinds, introduced a new range of faux-wood shutters and vertical blinds a few years ago. Because most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is Open Window applying?

economies of scope

The concept of a(n)________ attempts to capture both learning effects and process improvements at firms.

experience curve

Maria wants to pursue an international strategy but is concerned that foreign markets aren't ready for her products and services. You recommend that she engage in________, which would be contract based and would limit risk and exposure of her investments.

exporting

Industry analysts, auditors, and government regulators are examples of

external governance mechanisms.

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

factor

In the CSV framework, value creation is

focused on both economic benefits and societal benefits.

Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to

gain a market share and make up the loss in margin through increased sales.

Vinny, the CEO of Rainholm Industries, is looking to employ a________ strategy, which would take advantage of economies of scale and location economies. He wishes to pursue and establish a global division of labor based on wherever best-of-class capabilities reside at the lowest possible cost for Rainholm Industries.

global-standardization

Hector, owner of Hector's Trucking, wants to figure out if his business should diversify its range of services to gain an advantage over competitors. Business consultants have advised Hector to focus on the key question of where to compete. He would therefore be considering which of the following?

his corporate strategy

Which term describes the process of merging with a competitor at the same stage of industry value chain?

horizontal integration

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a

hostile takeover.

1) The broad question that business-level strategy answers is________ the firm will compete.

how

Teresa wants to take her firm internationally but is concerned with the________, which refers to the possibility of higher costs of doing business in an unfamiliar cultural and economic environment

liability of foreignness

Josie wants to invest in the stock market but is afraid of losing more money than what she invests. Josie need not worry because of

limited liability for investors.

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of

location economies.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

lowering costs

When a firm is facing high pressure for local responsiveness and low pressure for cost reductions, the firm is likely to adopt a(n)________ strategy, according to the cost-responsiveness framework.

multidomestic

Michael Porter developed the diamond framework to explain why some nations outperform others in specific industries. This is referred to as

national competitive advantage

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.

offshore outsourcing

What is the name of the situation that can arise when strategic leaders pursue their own interests in conflict with the firm's goals?

principal-agent problem

Exporting is best described as

producing goods in one country to sell in another.

Customer service and________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position.

product uniqueness

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—which in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of

related and supporting industries/complementors.

One of the risks of pursuing a blue ocean strategy is that a firm can find itself

stuck in the middle without a clear strategic position.

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?

subscription-based

Sanjay, owner of WashTubs, a washing machine company, is looking for an alternative to vertical integration. He decides to manufacture some of his own machine parts while keeping a few key suppliers in his industry value chain. This is known as

taper integration.

Lupita is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The board of directors for JustFixIt Inc. suggested that the firm enter a contractual agreement with a partner. This scenario best illustrates the concept of

the Build-Borrow-Buy framework.

Firms that consider international expansion will often examine absolute metrics on which countries to pursue investments in but also consider relative distance. To help firms decide where to compete,________ was developed to help firms make this decision.

the CAGE distance framework

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

Which of the following is the source of the principal-agent problem in publicly traded companies?

the separation of ownership and control

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 are the most important determinants of economic distance?

the wealth and per capita income of consumers

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

they maximize their scale efficiencies by stocking more inventory and handling it more efficiently.

Multinational enterprises (MNEs) such as Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

they offer the same products or services in all their stores throughout the world.

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?

to take advantage of lower taxes in the southern United States

The goal of a strategic position is to create the largest gap possible between the________ that a firm creates through its offerings and the________ required to create these offerings

value; cost

Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should

vertically integrate.

When does a merger between companies typically occur?

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