MGT final exam

ambidexterity

A firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation with exploration.

alliance management capability

A firm's ability to effectively manage three alliance-related tasks concurrently: (1) partner selection and alliance formation, (2) alliance design and governance, and (3) post-formation alliance management.

Inertia

A firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure

Open innovation

A framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones. The sharing goes both ways: some external ideas and inventions are insourced while others are spun out.

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity 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 alliance, like

A non equity alliance

Founder imprinting

A process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure.

Leveraged Buyout (LBO)

A single group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company in order to take it private

Moral hazard

A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party.

stock options

An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?

Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.

Inside directors

Board members who are generally 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.

Jonathan 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

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

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

Organic organization

Characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.

A firm that uses a functional structure will typically have efficient top-down and bottom-up communications, but

Communication may be hampered among the horizontal, distinct organizational functions

Build-borrow-or-buy framework

Conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy).

Artifacts

Elements that allow corporate culture to be expressed, such as via the design and layout of physical space, symbols, vocabulary etc

A candy company called blackzim inc forms an agreement with another candy company called streethex inc. through this agreement, blackzim owns 30% of streethex. However, streethex does not own any part of blackzim. This type of agreement is called an

Equity alliance

Frank is a newly elected board member of XYZ inc, a publicly traded stock. As a newly elected board member, Frank has a ________ which is a legal duty to act solely in another party's interests.

Fiduciary responsibility

Bill Lewis is the CEO of Nordic Technologies Inc., a firm that offers a limited line of standard products that competes in a similar manner with a narrow, local market focus and whose competitive advantage is a focus on low cost derived from gaining economies of scale. Bill should use a

Functional structure

Elvira is the CEO of all things inc which employs a matrix structure which is the combination of the ________ and _______ structures

Functional; M-form

PolyCon Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs cause the maintenance budget to be trimmed. It's pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that public companies

Have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events

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

The following are responsibilities of the board of directors, except:

Implement strategies to achieve competitive advantage

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

_________ 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

Li runs a firm that has diversified into different product lines and geographies. She should probably use an________ organizational structure

M-form

Output controls

Mechanisms in a strategic control-and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

multidivisional structure (M-form)

Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility.

Jack is a board member of firm A but is not an employee of firm A; Jack is a senior executive from firm B. Jack can best be described as a(n)

Outside director

Stratton Oakmont Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Terry. The stockholders expect Terry to make decisions that will benefit the company. However, Terry begins to find ways to maximize his total compensation, which hinders Stratton Oakmont's performance. This scenario reflects

Principal-agent problems

Unicorns

Private start-up companies valued at a billion dollars or more

Which of the following best illustrates a merger between the two companies Scotfind Inc and Inity Inc?

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Micaela is the ethics officer at Oceanic Airlines, a publicly traded company. She wants to make sure that on-the-job consumption at Oceanic Airlines stays within legal and ethical bounds. Which action should she and the Oceanic Airlines board of directors take?

Set strict limits on what executives can spend on office redecoration or work-related celebrations

Shareholder capitalism

Shareholders—the providers of the necessary risk capital and the legal owners of public companies—have the most legitimate claim on profits.

Vanessa just graduated from law school and wants to open her own law firm. Vanessa should probably adopt a(n) ______ structure for the firm.

Simple

Which of the following is true of acquisitions?

They can be friendly or hostile.

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

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

Which of the following is an advantage of equity alliances when compared to non equity alliances?

They produce stronger ties between partners.

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

To make small-scale investments in ventures poised to disrupt existing market economies

Absorptive capacity

a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones

Managerial hubris

a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary

shared value creation framework

a model proposing that managers have a dual focus on shareholder value creation and value creation for society

Adverse selection

a situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives

Susan works for a firm that has high degrees of formalization in their organizational structure. She understands that one of the main drawbacks of working in a firm with such high levels of formalization can often result in which of the following?

a slower decision-making process

Objectives and Key Results (OKRs)

a strategic reward and control system that helps a team and its individual members monitor objectives and outcomes, as well as set ambitious stretch goals

Corporate governance

a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally

Agency theory

a theory that views the firm as a nexus of legal contracts

Hostile takeover

acquisition in which the target company does not wish to be acquired

Ambidextrous organization

an organization able to balance and harness different activities in trade-off situations

Formalization

an organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures

Centralization

an organizational element that refers to the degree to which decision making is concentrated at the top of the organization

Holacracy

an organizational structure in which decision-making authority is distributed through loose collections or circles of self-organizing teams

Exploitation

applying current knowledge to enhance firm performance in the short term

Real-options perspective

approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time

Outside directors

board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals

Mechanistic organization

characterized by a high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making

Co-opetition

cooperation by competitors to achieve a strategic objective

Some argue that the global financial crisis of 2008 was worsened because large Fortune 500 companies did not practice effective

corporate governance

Poison pill

defensive provisions to deter hostile takeovers by making the target firm less attractive

Simple organizational structures often exhibit low levels of formalization and specialization. Which of the following is not a benefit of employing a simple organizational structure?

employing specialists that can develop deep knowledge/expertise in their field

Corporate venture capital

equity investments by established firms in entrepreneurial ventures; CVC falls under the broader rubric of equity alliances

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

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

Tacit knowledge

knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task

Input controls

mechanisms in a strategic control-and-reward system that seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures that are considered prior to the value-creating activities

Jerry is one of the SBU managers for a firm that has been in business for over 50 years. The external environment in which they have operated has changed significantly in the past decade, but this firm is still operating under a "business as usual" mantra. Jerry can't seem to convince the upper level executives to reorganize the firm's structure and formal reporting relationships. This firm is probably experiencing

organizational inertia

Simple structure

organizational structure in which the founders tend to make all the important strategic decisions as well as run the day-to-day operations

Matrix structure

organizational structure that combines the functional structure with the M-form

functional structure

organizational structure that groups employees into distinct functional areas based on domain expertise

Non-equity alliance

partnership based on contracts between firms

Equity alliance

partnership in which at least one partner takes partial ownership in the other

Which of the following characteristics of a public stock company deals with principals and agents?

separation of legal ownership and management control

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

separation of ownership and control

CEO/chairperson duality

situation where the CEO of a publicly traded company is also the chairperson of the board of directors

Learning races

situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary

Relational view of competitive advantage

strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries

The downside of equity alliances is

the amount of investment that can be involved.

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

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

Merger

the joining of two independent companies to form a combined entity

Horizontal Integration

the process of merging with competitors, leading to industry consolidation

Acquisition

the purchase or takeover of one company by another; can be friendly or unfriendly

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

they delegate authority of strategic business units to general managers.

Strategic alliances

voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services