mgmt exam 3
Which of the following is not a type of corporate strategy? A. Collusion B. Mergers & acquisitions C. Strategic alliances D. Diversification E. Vertical integration
A. Collusion
What is a common way of thinking about strategy across different businesses called? A. Dominant logic B. Related-link diversification C. Core competencies D. Related-constrained diversification E. Link relationships
A. Dominant logic
Which of the following is BEST described as the difference between the value of the target as a standalone entity and its value in combination with a bidding firm? A. Economic profit B. Economic value C. Economic potential D. Strategically related profit E. Economies of scope
A. Economic profit
_____________ represents the value of a target firm when combined with the value of competitors. A. Economies of scope B. Return on investment C. Economies of scale D. Cumulative abnormal returns E. Capital asset pricing model
A. Economies of scope
Which of the following is the MOST popular way to evaluate the performance effect of an acquisition for a bidding firm? A. Event study analysis B. Retained earnings C. The Federal Trade Commission Analysis Report D. The Economic Justification Board E. Vertical integration
A. Event study analysis
Which of the following is LEAST likely to be a potential area of problems when implementing merger or acquisition strategies? A. Financial B. Operational C. Cultural D. Functional E. Strategic
A. Financial
Which of the following represents a compensation agreement between a firm and its senior management team in the event the firm is acquired and they lose their jobs? A. Golden parachutes B. Supermajority voting rules C. Crown jewels D. Shark repellents E. White knights
A. Golden parachutes
In the automotive industry, General Motors and Toyota formed an alliance allowing General Motors an advantage in which area? A. Manufacturing high-quality small cars profitable B. To act as a supplier in the Japanese car market C. New car design D. To allow for joint manufacturing of products E. Ability to buy Toyota
A. Manufacturing high-quality small cars profitable
Which of the following is a common clause for establishment issues in contracts to govern strategic alliances? A. Place of incorporation B. When an initial public offering (IPO) will be pursued C. Performance expectations D. Non-compete agreements E. Confidentiality clauses
A. Place of incorporation
When a firm sets prices so that they are less than the business's cost, what type of cross subsidization is taking place? A. Predatory pricing B. Multipoint competition C. Tacit collusion D. Mutual forbearance E. Deep-pocket modeling
A. Predatory pricing
Which of the following BEST describes when a firm acquires a complementary product line? A. Product extension merger B. Vertical merger C. Acquisition premium D. Tender offer E. Market extension merger
A. Product extension merger
If a firm has valuable, rare, or costly-to-imitate resources, vertical integration of these activities will do which of the following for the firm? A. Put it at a competitive disadvantage B. Increase its competitive advantage C. Increase the value chain D. Alter the corporate strategy E. Increase the cost of transaction-specific investments
A. Put it at a competitive disadvantage
Which of the following reasons for diversification does not directly benefit a firm's outside equity holders? A. Reduced riskiness of cash flow B. Shared managerial competencies C. Reduces total costs of products D. Shared business level competencies E. Shared corporate competencies
A. Reduced riskiness of cash flow
When less than 70 percent of a firm's revenue comes from a single product market and these multiple lines of business share important economies of scope, what type of strategy is the firm using? A. Related corporate diversification B. Related constrained strategy C. Unrelated corporate diversification D. Related linked E. Dominant business strategy
A. Related corporate diversification
_____________ includes all groups who have an interest in how a firm performs. A. Stakeholders B. Customers C. Equity investors D. Employees E. Suppliers
A. Stakeholders
Which of the following exists when firms coordinate production and pricing decisions by exchanging signals with others' firms about their intent to cooperate? A. Tacit collusion B. Uncertainty C. Explicit collusion D. Absorptive capacity E. Network industries
A. Tacit collusion
Who is the governing body that evaluates the competitive implications of proposed mergers? A. The Federal Trade Commission B. The New York Stock Exchange (NYSE) C. The U.S. Securities and Exchange Commission D. The board of directors E. The Economic Justification Board
A. The Federal Trade Commission
Which of the following is the primary objective of the executive committee of a firm? A. Track short-term performance B. Implement quality improvement programs C. Monitor long-term strategic investments D. Oversee the introduction of new products E. Monitor plant expansions
A. Track short-term performance
Which of the following is a set of activities that must be accomplished to bring a product or service from raw material to the final customer? A. Value chain B. Vertical integration C. Business strategy D. Value added as a percentage of sales E. Corporate strategy
A. Value chain
To be economically valuable, links between bidding and target firms must meet the same criteria as diversification strategies, called _______________. A. economies of scope B. pecuniary economies C. underutilized tax shields D. economies of scale E. vertical integration
A. economies of scope
A _________ merger takes place when a firm acquires a former competitor. A. horizontal B. conglomerate C. product extension D. market extension E. vertical
A. horizontal
Using a forward vertical integration strategy brings a firm closest to ________. A. its final customers B. suppliers in the industry C. other competitors in the industry D. the raw materials needed by the company E. wholesalers in the industry
A. its final customers
Based on tangible assets of the firm, _____________ are usually relatively easy to duplicate. A. research and development B. core competencies C. significant market power in one line of business D. coordination between different business segments E. information-processing capabilities
A. research and development
Which of the following are substitutions for strategic alliances? A. "Going it alone" and acquisitions B. Joint ventures and acquisitions C. Nonequity alliance and joint ventures D. Collusion and acquisitions E. Licensing agreement and nonequity alliance
A. "Going it alone" and acquisitions
When the value of the investments stakeholders make in a particular firm are greater than the value of those same investments would be in other firms, what type of investment has been made? A. Firm-specific investments B. Customer-specific investments C. Supplier-specific investments D. Human capital investment E. Rare resource investments
A. Firm-specific investments
_____________ can limit the development of an alliance over time. A. Need to learn B. A priori C. Flexibility D. Trust E. Allowing the alliance to develop over time on its own
B. A priori
__________ is the result of an alliance partner that promises a certain resource that it either does not control or cannot acquire. A. Alliance rarity B. Adverse selection C. Holdup D. Transaction specificity E. Moral hazard
B. Adverse selection
_____________ identify a complex set of resources and capabilities that link different businesses in a diversified firm through managerial and technical expertise. A. Free cash flow B. Core competencies C. Related constrained diversification D. Diversification E. Rare and valuable resources
B. Core competencies
How are the resources and capabilities that enable firms to implement strategies imitated? A. Direct duplication and licensing agreement B. Direct duplication and substitution C. Substitution and acquisition D. Joint ventures and government intervention E. Going it alone and acquisitions
B. Direct duplication and substitution
Which of the following helps reduce production or distribution costs? A. Increasing market power in product markets B. Economies of scale C. Eliminating inefficient target management D. Tax shields E. Avoiding bankruptcy
B. Economies of scale
________ is when firms coordinate production and pricing by directly communicating with each other. A. Absorptive capacity B. Explicit collusion C. Tacit collusion D. A learning race E. Facilitating entry and exit opportunities
B. Explicit collusion
Which of the following is not one of the ways in which firms improve the performance of their current operations? A. Learning from competitors B. Exploiting economies of scope C. Exploiting economies of scale D. Managing risk E. Sharing costs
B. Exploiting economies of scope
______________ differences is not one of the post-merger integration problems due to the differences between the acquiring and target firms? A. Strategic B. Financial C. Operational D. Cultural E. Functional
B. Financial
Why are mergers and acquisition strategies important? A. To limit control of the FTC B. For diversification and vertical integration C. To prevent hostile takeovers D. To satisfy demands of the FTC E. To generate additional value for a firm
B. For diversification and vertical integration
Which of the following allows a target firm's management to purchase stock for a price greater than the current market value? A. A trade offers B. Greenmail C. Pac Man defense D. A poison pills E. A standstill agreement
B. Greenmail
The extent to which rare vertical integration decisions can be sources of sustained competitive advantage depends on which one of the following? A. Threat of opportunism B. Imitability C. Vertical dis-integration D. U-form management structures E. Outsourcing
B. Imitability
____________ reduces cheating by linking the ability of partners to earn returns on their investments to the economic success of the alliance. A. Distribution agreements B. Joint ventures C. Licensing agreements D. Supply agreements E. Equity investments
B. Joint ventures
Which diversification strategy is related to the extent to which a firm is diversified? A. Geographic B. Limited corporate C. Single-business corporate D. Vertical E. Capabilities
B. Limited corporate
Which of the following is a less costly-to-duplicate economies of scope? A. Multipoint competition B. Risk reduction C. Internal capital allocation D. Exploiting market power E. Core competencies
B. Risk reduction
_____________ allow employees to purchase stock at predetermined prices. A. Performance-based bonuses B. Stock options C. Profit sharing D. Stock grants E. Cash bonuses
B. Stock options
Which of the following is a substitute for exploiting economies of scope in diversification? A. Deep-pocket model of diversification B. Strategic alliance C. External capital markets D. Related-linked strategies E. Human capital investments
B. Strategic alliance
Which of the following is an advantage of internal capital allocation for a diversified firm? A. There are fewer inflated estimates of performance. B. There is an efficiency advantage. C. There is a higher quality exchange of information between firms. D. Poor performers require less incentive. E. Unrelated diversity is easier to manage.
B. There is an efficiency advantage.
When does an imperfectly competitive market of control exist? A. When all bidders are aware of additional value to competitors B. When the target is worth more to one bidder than others C. When the target is worth less than what is being bid D. When performance can be measured in the global market E. When the target is worth more than what is being bid
B. When the target is worth more to one bidder than others
One limitation of core competencies based on economies of scope includes ___________. A. invented competencies B. intangible nature of economies of scope C. dominant logic D. exploitation of core competencies E. prevention of exploitation of core competencies
B. intangible nature of economies of scope
When a firm allows others to use its brand name to sell products, a(n) _________ has been established. A. equity alliance B. licensing agreements C. distribution agreement D. nonequity alliance E. joint venture
B. licensing agreements
Vertical integration reduces the threat of _________. A. a transaction specific investment B. opportunism C. uncertainty D. limited flexibility E. backward vertical integration
B. opportunism
To have a sustained competitive advantage, a strategic alliance must be ________. A. equally beneficial to all members B. rare and costly to imitate C. common among competitors in the industry D. easily duplicated among alliance partners E. interchangeable with low-cost substitutions
B. rare and costly to imitate
High levels of transaction-specific investment lead to higher levels of _____________. A. flexibility B. vertical integration C. strategic alliances D. competitive advantage E. opportunism
B. vertical integration
Which of the following will negate competitive advantage even when objectives of a strategic alliance are rare and costly to imitate? A. Licensing agreements B. Low-cost substitutions C. Foreign market penetration D. An alliance is too socially complex E. "Going it alone"
B. Low-cost substitutions
When a firm's businesses share few economies of scope, which type of strategy is the firm pursuing? A. Limited-corporate diversification B. Unrelated-corporate diversification C. Related-constrained strategy D. Related-corporate diversification E. Related-link strategy
B. Unrelated-corporate diversification
Investments that have more value in a particular firm are examples of ________ investments. A. transaction-specific B. firm-specific C. short-term D. operational committee E. long-term
B. firm-specific
A strategy that allows firms to implement more than one diversification strategy is said to be implementing a ______ strategy. A. corporate diversification B. product-market diversification C. geographic-market diversification D. dominant business E. product diversification
B. product-market diversification
Which of the following indicates a firm's ability to learn? A. A learning race B. Strategic alliance C. Absorptive capacity D. Explicit collusion E. Increasing returns to scale
C. Absorptive capacity
Which of the following is a necessary but not sufficient condition for a firm to gain a competitive advantage from acquiring a target to pursue scope economies? A. Target firm must have valuable and rare resources and capabilities B. Both target and acquiring firms must have valuable and rare resources and capabilities C. Acquiring firm must have valuable and rare resources and capabilities D. Both target and acquiring firms must have valuable resources and capabilities E. Target firm must have valuable resources and capabilities
C. Acquiring firm must have valuable and rare resources and capabilities
When bidding on a firm with rare and valuable economies of scope, which of the following would have the LEAST likelihood of generating profits for equity holders? A. Search for firms that have valuable and rare commodities. B. Operate in a "thinly traded" acquisition market. C. Announce the potential bid publicly to influence bidding firm stock prices. D. Keep information away from other bidders. E. Avoid bidding wars.
C. Announce the potential bid publicly to influence bidding firm stock prices.
Which of the possible sources of economies of scope is achieved by improving a firm's performance relative to risk? A. Manufacturing economies B. Technical economies C. Diversification economies D. Pecuniary economies E. Vertical mergers
C. Diversification economies
Which of the following clauses that might be found in an alliance contract addresses how profits will be divided? A. Equity investment B. Initial Public Offerings C. Establishment issues D. Licensing intellectual property rights issues E. Termination issues
C. Establishment issues
Which of the following evaluates the performance effects of an acquisition for a bidding firm? A. Cumulative abnormal returns B. Asset pricing model C. Event study analysis D. Management hubris E. Economic profit potential
C. Event study analysis
Which of the following is not a requirement for a learning race to evolve between firms? A. Firms must have a strategic alliance B. Firms may vary in the rate they learn from each other C. Firms must seek to learn the same thing D. Firms may differ in terms of their ability to learn E. Firms may seek to learn from each other
C. Firms must seek to learn the same thing
Which of the following is NOT true about vertical integration? A. Vertical integration is simply the number of steps in this value chain that a firm accomplishes within its boundaries B. Backward vertical integration is when a firm incorporates more stages of the value chain within its boundaries. C. Firms that are more vertically integrated accomplish fewer stages of the value chain within their boundaries than firms that are less vertically integrated. D. Forward vertical integration brings firms closer to interacting directly with final customers. E. A firm's level of vertical integration is a potential source of competitive advantage.
C. Firms that are more vertically integrated accomplish fewer stages of the value chain within their boundaries than firms that are less vertically integrated.`
Which of the following occurs when a firm that has not made transaction-specific investments demands returns from the alliance that are higher than initially agreed to? A. Alliance rarity B. Transaction specifity C. Holdup D. Adverse selection E. Moral hazard
C. Holdup
Which of the following is a costly-to-duplicate economy of scope? A. Tax advantages B. Employee compensation C. Internal capital allocation D. Shared activities E. Risk reduction
C. Internal capital allocation
Which of the following is NOT a form of obtaining a controlling share of assets of another firm? A. Using cash from ongoing businesses to purchase a target firm B. Using a combination of assets to purchase a target firm C. Issuing an IPO to purchase a target firm D. Using internal equity to purchase a target firm E. Going into debt to purchase a target firm
C. Issuing an IPO to purchase a target firm
Which of the following is true about business strategy? A. It is a theory of how to gain competitive advantage in multiple businesses simultaneously. B. It is a theory of how to gain competitive advantage in a single industry simultaneously. C. It is a theory of how to gain competitive advantage in a single business or industry. D. It equates to the value chain of a company. E. It is similar to a company's mission.
C. It is a theory of how to gain competitive advantage in a single business or industry.
Which of the following is an example of a firm allowing others to use its brand name to sell products? A. Joint venture B. Equity alliance C. Licensing agreement D. Strategic alliance E. Nonequity alliance
C. Licensing agreement
Which one of the following is a difference between acquisitions and mergers? A. Mergers use cash while acquisitions use stock to purchase B. Acquisitions rather than mergers tend to be friendly C. Mergers rather than acquisitions typically involve firms of equal size and profitability D. Mergers and acquisitions involve one buyer and one target E. Mergers are public while acquisitions are private
C. Mergers rather than acquisitions typically involve firms of equal size and profitability
When firms work together but do not have equity positions in each other's organization, what type of alliance is formed? A. Joint venture B. Strategic alliance C. Nonequity alliance D. Licensing agreement E. Equity alliance
C. Nonequity alliance
When entering a new market, especially a new foreign market, which of the following is a reason that the benefits of an alliance may be few? A. Government may act to encourage the number of local firms in a market B. When the market is saturated C. Relatively few firms may have complementary resources needed in the alliance D. Increased trust of partners E. Encouraged duplication of product sources
C. Relatively few firms may have complementary resources needed in the alliance
Which of the following increases revenue by exploiting the reputation of some of a firm's business in other segments of its business? A. Product bundles B. Related constraints C. Shared activity D. Purchasing E. Inputs
C. Shared activity
Which of the following provides a firm with flexibility but still gives the firm enough information about an exchange to estimate its value over time? A. Value added as a percentage of sales measurements B. Vertical integration C. Strategic alliance D. Opportunism E. Transaction-specific investments
C. Strategic alliance
_____________ is an aspect of imitability of diversification. A. Shared activity B. Multipoint competition C. Substitution D. Predatory pricing E. Firm-specific investment
C. Substitution
Which of the following is a financial motivation to mergers and acquisitions? A. Economies of scale B. Increased utilization of the bidder's management team C. Tax shields D. Adoption of more efficient production technology E. Vertical integration
C. Tax shields
Which of the following indicates only a small number of firms know about opportunities in a market? A. Asset pricing model B. Return on investment C. Thinly traded market D. Economies of scope E. Management hubris
C. Thinly traded market
Among the following, when is adverse selection in an alliance MOST likely to be made? A. When a partner sends less qualified or poorly trained employees to support the partnership B. When there is limited value in economic exchanges C. When it is difficult to observe the resources that a partner brings to an alliance D. When a partner makes investments that have value only in context of that alliance and no other economic exchanges E. When the potential partner produces the highest bid on the partnership
C. When it is difficult to observe the resources that a partner brings to an alliance
When is the cost of flexibility high? A. When the cost of changing strategic choices is high B. When resources are rare or costly to imitate C. When the cost of changing strategic choices in low D. When an investment is transaction specific E. When there is uncertainty
C. When the cost of changing strategic choices in low
From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy almost always involves ______________. A. external labor markets B. firm specific investments C. conflict resolution D. maximizing managerial accountability E. external capital markets
C. conflict resolution
The theory of how to gain competitive advantage by operating in several businesses simultaneously is called ________. A. business strategy B. forward vertical integration C. corporate strategy D. value chain E. vertical integration
C. corporate strategy
In addition to exploiting economies of scope in diversification by strategic alliances, firms can substitute for diversification by _________________. A. linking businesses thru common sales forces. B. using intangible core competencies. C. growing each business separately. D. exploiting economies of scope across businesses. E. using shared risk and tax advantages.
C. growing each business separately.
A _________ merger is when a firm acquires a former competitor. A. conglomerate B. market extension C. horizontal D. product extension E. vertical
C. horizontal
When competing firms cannot vertically integrate the same way as another firm, the firm's vertical integration strategy is considered to be _________. A. transaction specific B. alliance based C. rare D. opportunistic E. inflexible
C. rare
The two types of firms included in limited corporate diversification strategies are dominant-business firms and which of the following? A. Related-constrained strategies B. Unrelated-corporate diversification C. Single-business firms D. Related-corporate diversification strategies E. Related-linked strategies
C. Single-business firms
Which of the following is an advantage to an acquisition instead of a firm "going it alone"? A. The independence of the firm's resources is valuable. B. Acquisitions allow firms to retain flexibility to enter or not enter a new business. C. Acquisitions limit organizational baggage. D. A firm can exploit opportunities provided by the acquired firm. E. The acquisition will result in a monopoly.
D. A firm can exploit opportunities provided by the acquired firm.
Which of the following indicates a firm purchasing a second firm? A. Controlling shares B. Merger C. Hostile takeover D. Acquisition E. Tender offer
D. Acquisition
A firm that has not sold many shares of stock on the public market is BEST described as which of the following? A. Tender offer B. Controlling shares C. Premium D. Closely held E. Privately held
D. Closely held
_________ strategy is defined as a firm's theory of how to gain competitive advantage by operating in several businesses simultaneously. A. Real options B. Business C. Differentiation D. Corporate E. International
D. Corporate
When a firm generates between 70 and 95 percent of its total sales in a single product market, what type of corporate diversification category does the firm fall into? A. Limited corporate diversification B. Related constrained firm C. Related corporate diversification D. Dominant business firms E. Single business firms
D. Dominant business firms
_____________ refers to how costly it is for a firm to alter strategic and organizational decisions. A. Vertical integration B. Value added as a percentage of sales C. Value chain D. Flexibility E. Opportunism
D. Flexibility
When a firm operates in several geographic areas at the same time, which type of strategy is being implemented? A. Product diversification strategy B. Limited corporate diversification C. Corporate diversification strategy D. Geographic market diversification strategy E. Product-market diversification strategy
D. Geographic market diversification strategy
If a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, how should that firm use vertical integration? A. It should not use any type of integration in that activity. B. It should use forward integration into that activity. C. It should pursue backward integration in that activity. D. It should pursue vertical integration into that activity. E. It should pursue transaction-specific investments for that activity.
D. It should pursue vertical integration into that activity.
Which of the following suggests economic value of bidding firms will fall once a merger or acquisition is announced? A. Event study analysis B. Asset pricing model C. Economic profit potential D. Managerial hubris E. Cumulative abnormal returns
D. Managerial hubris
Which of the following represents the market created when multiple firms seek to acquire other firms? A. Strategic relatedness B. Securities and exchange C. Potential for economic profits D. Market for corporate control E. Cumulative abnormal return
D. Market for corporate control
Which of the following is characterized by increasing returns to scale? A. Absorptive capacity B. The learning race C. Explicit collusion D. Network industries E. Economies of scale
D. Network industries
If the cost of vertical integration is greater than the cost of opportunism, what should the firm do? A. Vertically integrate into the exchange B. Not participate in the exchange C. Use forward integration in the exchange D. Not integrate into the exchange E. Use backward integration in the exchange
D. Not integrate into the exchange
If a firm does not possess resources necessary to gain competitive advantage, what should the firm avoid doing? A. Changing their business strategy B. Providing value chain C. Using vertical integration D. Pursuing opportunism E. Implementing corporate strategy
D. Pursuing opportunism
When a business exploits different types of economies of scope, what type of strategy is the firm implementing? A. Core competencies B. Risk reduction C. Diversified portfolio D. Related link diversification E. Related constrained diversification
D. Related link diversification
Which of the following has associated costs that are known and fixed? A. Opportunism B. Corporate strategy C. Flexibility-based approach D. Strategic alliances E. Vertical integration
D. Strategic alliances
Which of the following is true of a transaction-specific investment? A. The alternate exchange has greater value. B. The current exchange has less value than an alternate exchange. C. The current exchange and the alternate exchange has equal value. D. The current exchange has more value than an alternate exchange. E. The value of the exchanges cannot be compared.
D. The current exchange has more value than an alternate exchange.
Which one of the following is a reason to prefer alliances over "going it alone"? A. The level of transaction-specific investment required to complete an exchange is low. B. The level of transaction-specific investment required to complete an exchange is high. C. There is great certainty about the future value of an exchange. D. There is great uncertainty about the future value of an exchange. E. An exchange partner possesses valuable resources and capabilities
D. There is great uncertainty about the future value of an exchange.
Which of the following represents a decision-making setting where the future value of an exchange cannot be known when the investment is being made? A. Valued added as a percentage of sales measures B. Transaction-specific investments C. Flexibility D. Uncertainty E. Opportunism
D. Uncertainty
Which of the following is NOT one of the four business strategies? A. Flexibility B. Cost leadership C. Collusion D. Vertical integration E. Product differentiation
D. Vertical integration
Which of the following strategies implemented by mergers and acquisitions would benefit by using the U-form structure? A. Horizontal integration strategies B. Diversification strategies C. Outsourcing strategies D. Vertical integration strategies E. Asset pricing model strategies
D. Vertical integration strategies
Which of the following BEST defines opportunism? A. The amount of sales within the boundaries of the firm B. Investing in an exchange that has more value than a current exchange C. Marketing to a specific population, such as children D. When a firm is unfairly exploited in an exchange E. Reaching the largest number of customers possible
D. When a firm is unfairly exploited in an exchange
Core competencies more difficult to directly duplicate because they ___________. A. are socially complex. B. are dependent on capital allocation. C. are part of a strategic alliance. D. are more intangible. E. must be used in shared activities.
D. are more intangible.
The failures typically associated with the worst acquisitions can primarily be attributed to ________. A. financial struggles B. strategic differences C. operational challenges D. cultural clashes E. functional and organizational differences
D. cultural clashes
Firms must be ________ to exploit economies of scope? A. linked B. single C. public D. diversified E. private
D. diversified
"Going it alone" preferred over a strategic alliance when the level of the specific investment is ______. A. low B. evenly shared C. moderate D. high E. undetermined
D. high
When a business in a diversified firm competes for corporate capital, a(n) _______ market is created A. dominant logic B. cost of capital advantage C. external capital D. internal capital E. internal competencies
D. internal capital
When firms create a legally independent firm in which they invest and share profits, a(n) __________ has been established. A. equity alliance B. strategic alliance C. nonequity alliance D. joint venture E. distribution agreement
D. joint venture
When two or more diversified firms simultaneously compete in multiple markets, the result is _________. A. mutual forbearance B. risk of cash flow C. tacit collusion D. multipoint competition E. escalation of commitment
D. multipoint competition
Transaction-specific investments make parties to an exchange vulnerable to _________. A. value chain B. limited flexibility C. uncertainty D. opportunism E. forward vertical integration
D. opportunism
When attempting to exploit opportunities created by valuable, rare, and costly-to-imitate resources and capabilities, firms should engage in ___________. A. business strategy B. value chain C. opportunism D. vertical integration E. corporate strategy
D. vertical integration
If a firm operates in business with the same economies of scope and generates less than 70% of its revenues in one business, which type of diversified firm is this? A. Unrelated diversification B. Related-link C. Dominant business D. Related-constrained E. Single business
D. Related-constrained
When a firm uses monopoly power in several different businesses, they are engaging in _________. A. multipoint competition B. tacit collusion C. mutual forbearance D. deep-pocket model E. predatory pricing
D. deep-pocket model
Which of the following will limit the value of a firm's resources that are dependent on its independence? A. Joint venture B. "Going it alone" C. Nonequity agreement D. Alliances E. Acquisition
E. Acquisition
Which of the following describes a company's strategy of incorporating various stages of the value chain with those stages bringing it closer to gaining access to raw materials? A. Transaction-specific investments B. Opportunism C. Forward vertical integration D. Business strategy E. Backward vertical integration
E. Backward vertical integration
Which of the following is one of the MOST important control mechanisms for CEOs in U-form organizations? A. Operations committees B. Firm-specific investments C. Compensation D. Executive committees E. Budgeting
E. Budgeting
Which of the following is MOST likely to create a moral hazard? A. Misrepresented resources B. Government intervention C. An unethical CEO D. Lack of skills and abilities E. Changes in market conditions
E. Changes in market conditions
Which diversification strategy will a firm implement when it operates in multiple industries or markets simultaneously? A. Geographic market B. Product-market C. Product D. Related-corporate E. Corporate
E. Corporate
Which of the following reasons is not consistent with a valuable vertical integration strategy? A. Enables a firm to exploit its own or other firms' valuable, rare, and costly-to-imitate resources B. Responds to threats of opportunism; C. Gives a firm flexibility D. A firm is organized to implement it correctly E. Creates more uncertainty
E. Creates more uncertainty
Which of the following occurs when competitors develop or obtain the resources and capabilities that enable another firm to implement a valuable and rare vertical integration strategy? A. Casual ambiguity B. Sustained competitive advantage C. Path dependency D. Social complexity E. Direct duplication
E. Direct duplication
_________________ exists when the value of the product increases as a function of the number of businesses the firm operates. A. Unrelated corporate diversification B. Limited corporate diversification C. Product diversification strategy D. Link relationships E. Economies of scope
E. Economies of scope
______________ reduces the likelihood of cheating by strategic alliance partners. A. Strategic alliance B. Licensing agreements C. Intellectual property rights ownership D. IPOs E. Equity alliances
E. Equity alliances
When a firm incorporates more stages of the value chain and those stages bring the firm closer to the final customer, what is it engaging in? A. Corporate strategy B. Backward vertical integration C. Value chain D. Vertical integration E. Forward vertical integration
E. Forward vertical integration
Which of the following is NOT a tool used to help realize the value of alliances and minimize the threat of cheating? A. Contracts B. Joint ventures C. Trust D. Equity investments E. Licensing
E. Licensing
Which of the following is an unrealistic belief that managers in a bidding firm can manage assets of a target more efficiently? A. Asset pricing model B. Cumulative abnormal return C. Economic profit potential D. Event study analysis E. Management hubris
E. Management hubris
When firms purchase services from outside suppliers that it used to obtain internally, what is the firm performing? A. Rare vertical integration B. Offshoring C. Direct duplication D. Forward vertical integration E. Outsourcing
E. Outsourcing
Which of the following allows a firm to reduce costs and focus efforts on business functions that are central to competitive advantage? A. Backward vertical integration B. U-form management structures C. Imitability D. Opportunism E. Outsourcing
E. Outsourcing
When a firm operates in multiple industries simultaneously, what type of strategy is being used? A. Corporate diversification strategy B. Geographic market diversification strategy C. Product-market diversification strategy D. Limited corporate diversification E. Product diversification strategy
E. Product diversification strategy
Which of the following economies of scope is NOT likely to be subject to high-cost imitation? A. Exploiting market power B. Multipoint competition C. Internal capital allocation D. Exploiting corporate capabilities E. Shared activities
E. Shared activities
Which of the following is not one of the ways to cheat in strategic alliances? A. Partners exploit transaction specific investments made by others in the alliance B. Holdup C. Adverse selection D. Moral hazard E. Tacit collusion
E. Tacit collusion
Which of the following is NOT a reason to merge with another company? A. For the potential for above normal profits B. To ensure survival C. To increase cash flow D. Management hubris E. To pay increased dividends to shareholders
E. To pay increased dividends to shareholders
Which of the following can describe business activities that are shared across different businesses within a diversified firm? A. Exploiting market power B. Risk reduction C. Operational economies of scope D. Multipoint competition E. Value chain
E. Value chain
When a firm incorporates more stages at the beginning of the supply chain, the firm engaging in __________. A. mergers and acquisitions B. vertical integration C. forward vertical integration D. value chain E. backward vertical integration
E. backward vertical integration
The theory of how to gain competitive advantage in a single business or industry is called a ______. A. corporate Strategy B. backward vertical integration C. value chain D. forward vertical integration E. business strategy
E. business strategy
A(n) ________ is when a firm purchases a majority of a second firm's outstanding stock shares. A. friendly acquisition B. hostile takeover C. acquisition premium D. unfriendly acquisition E. controlling share
E. controlling share
When one firm agrees to distribute products of others, a(n) _____________ is formed. A. strategic alliance B. joint venture C. nonequity alliance D. equity alliance E. distribution agreement
E. distribution agreement
A(n) __________ indicates an acquisition that the target firm did not want. A. merger B. acquisition premium C. friendly acquisition D. strategic options for diversification E. hostile takeover
E. hostile takeover
When one firm agrees to supply another firm with a product or service, a __________ is formed. A. distribution agreement B. nonequity alliance C. joint venture D. licensing agreement E. supply agreement
E. supply agreement
In what percentage of alliances do one or more partners feel the alliance did not meet their expectations? A. 50% B. 75% C. 40% D. 25% E. 30%
E. 30%
_________________ do not commonly experience conflict due to vertical integration? A. Finance and Human Resources B. Manufacturing and Sales C. R&D and Finance D. Accounting and R&D E. R&D and Human Resources
E. R&D and Human Resources