Policy & Strategy Exam 3

American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern?

Arrange for the alliance to be managed at the corporate level.

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

Australia

Which of the following provides an example of a common drawback of a functional strategy?

Bert had a difficult time communicating efficiently with the manager of another department.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma?

It will lower its costs through economies of scale.

Why is the optimal organizational structure a multidivisional structure?

Its focus is on driving down costs.

Makes Scents Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. PriceSmasher Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

Makes Scents Inc. will sell the same products in both domestic and foreign markets, whereas PriceSmasher Inc. will customize its product

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

Their culture reflects complex relationships with their employees, customers, and suppliers.

What are poison pills?

They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

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.

Vermilion Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Vermilion most likely pursue?

global-standardization strategy

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?

horizontal

Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate?

information asymmetry

Adverse selection in a public stock company occurs when

information asymmetry increases the likelihood of selecting inferior alternatives.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

informational advantage of the lower-level employees.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's

is mechanistic in nature.

A high degree of formalization in an organization is most likely to

slow down decision making.

Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying?

taper integration

In a non-equity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

Mediflow, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Mediflow's European sales?

Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can gain access to new distribution channels.

How does horizontal integration within an industry affect the surviving firms?

By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

ABX Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as

Co-opetition.

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest?

Coolco, because firms that face stiff competition at home tend to do better abroad

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them?

Many owners, managers, and business analysts believe they are essential to survive in an industry.

Fun Foods Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fun Foods snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fun Foods take?

Pursue a multidomestic strategy that includes new "local" brands.

Janessa Inc., a reputed brand for fine art supplies, is implementing an international strategy. Slalom Corp., a maker of mini computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario?

Slalom Corp. focuses more on cost-reductions when compared to Janessa Inc.

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

The CEO possesses invaluable inside information that can help him or her chair the board effectively.

Three months ago, Darren became a board member at Runswell, a publicly traded company. Two weeks ago, the board members discovered that Runswell's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Darren and the other board members hold the CEO?

They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny.

________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Vertical integration

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country?

a firm that extracts and exports iron ore

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate?

a joint venture

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers?

acquiring an airplane-parts manufacturer in another country

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

a real-options perspective.

A primary advantage of organizing economic activity within firms is the

ability to coordinate highly complex tasks to allow for specialized division of labor.

When Turbo Autos Inc. wanted to sell its cars in the country of Sylvanistan, it lacked access to distribution channels and marketing expertise in the country. Thus, Turbo Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

accessing critical complementary assets

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?

by having higher performance in another sector

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

by having higher performance in another sector

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should

be prepared to restructure as the landscape changes.

A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n)

equity alliance.

A functional structure is recommended when a firm

has a low level of diversification.

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario?

legal but not ethical

Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

licensing

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, BioCure Inc. is most likely an organization that is

organic.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?

significant differences between its U.S. personnel policies and Germany's culture

A company that is using extrinsic motivation as an output control mechanism will most likely

threaten to lay off employees if they do not achieve targets.

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n)

transnational strategy.