Policy Chapter 8
40) Which of the following is an example of an external transaction cost? A) the cost of setting up a production unit B) the cost of searching for a contract manufacturer C) the cost of recruiting and retaining employees D) the cost of maintaining plant and machinery
B) the cost of searching for a contract manufacturer
74) Sonron Auto Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Auto Corporation? A) a conglomerate B) a subsidiary C) a dominant-business firm D) a single-business firm
C) a dominant-business firm
14) Susan owns a firm that is considered fully integrated. Which of the following statements below would best describe a firm that is fully integrated? A) Susan's firm is a single-business organization. B) Susan's firm is more than likely a conglomerate. C) Susan's firm is still reliant on certain key suppliers in the industry value chain. D) All of Susan's business activities are conducted within the boundaries of the firm.
D) All of Susan's business activities are conducted within the boundaries of the firm.
104) About 20 years ago, Xx-zobam, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario? A) Xx-zobam was a star that developed into a cash cow. B) Xx-zobam was a question mark that developed into a star. C) Xx-zobam was a dog that developed into a question mark. D) Xx-zobam was a cash cow that developed into a star.
A) Xx-zobam was a star that developed into a cash cow.
25) XYZ Inc. is a publicly traded company and a highly diversified firm. However, XYZ's most recent stock price is valued less than the sum of all its individual business units. We would conclude that XYZ is currently experiencing a A) diversification discount. B) diversification premium. C) two for one split. D) shareholder rights plan.
A) diversification discount.
63) Which of the following best illustrates site specificity? A) equipment necessary for mining bauxite and aluminum smelting B) bottling machinery to manufacture bottles with trademarked shapes C) investment made in human capital to master procedures of a specific organization D) investment made to train employees to operate computers
A) equipment necessary for mining bauxite and aluminum smelting
16) Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation
A) forward vertical integration
58) Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing. A) industry B) functional department C) economy D) customer segment
A) industry
20) Since Coca-Cola focuses on selling only soft drinks, a low degree of product diversification, we would conclude that they compete in a(n) ________ market versus their main competitor PepsiCo, that sells a wide variety of products. A) single product B) multiple product C) related diversification D) unrelated diversification
A) single product
17) Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as A) taper integration. B) strategic off shoring. C) forward vertical integration. D) a balanced score card.
A) taper integration.
79) A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses. A) related-constrained strategy B) unrelated diversification strategy C) differentiation strategy D) dominant-business strategy
B) unrelated diversification strategy
64) Which of the following is a drawback of vertical integration? A) It increases the difficulty of securing critical supplies. B) It impedes scheduling and planning. C) It increases the potential of legal repercussions. D) It impedes investments in special assets.
C) It increases the potential of legal repercussions.
50) ________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. A) Embargos B) Cartel agreements C) Strategic alliances D) Corporate acquisitions
C) Strategic alliances
80) Funholding Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? A) a flagship brand B) a single-business firm C) a dominant-business firm D) a conglomerate
D) a conglomerate
60) Which of the following best illustrates forward vertical integration? A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B) A chain of ice cream parlors launches a brand of toys and accessories for children. C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.
A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
100) Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results? A) Increase investment in the personal health monitoring unit to encourage future growth. B) Seek to lower costs in the personal health monitoring unit to increase market share. C) Harvest as much cash flow as possible before shutting the business down. D) Immediately divest from the personal health monitoring industry.
A) Increase investment in the personal health monitoring unit to encourage future growth.
83) Why is following an unrelated diversification strategy especially advantageous in an emerging economy? A) It allows the conglomerate to overcome institutional weaknesses in emerging economies. B) It allows the conglomerate to form a monopoly in emerging economies. C) It allows the conglomerate to use well-defined legal systems in emerging economies. D) It allows the conglomerate to take advantage of strong capital markets in emerging economies.
A) It allows the conglomerate to overcome institutional weaknesses in emerging economies.
91) Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Ganjaflex's stock price? A) It is valued at less than the sum of its individual business units. B) It is valued at greater than the sum of individual business units. C) It is valued at the exact sum of individual business units. D) It is consistently lower than the industry average.
A) It is valued at less than the sum of its individual business units.
66) Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies. A) backward vertical integration B) forward vertical integration C) backward horizontal integration D) forward horizontal integration
A) backward vertical integration
36) The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector? A) by having higher performance in another sector B) by sharing their market power C) by increasing the firm's risk in another sector D) by motivating managers
A) by having higher performance in another sector
29) Bob is the strategic business unit (SBU) CEO in charge of manufacturing cufflinks for men's clothing. While the market he competes in is low growth, Bob's SBU's earnings and cash flow are both ranked at high and stable. When examining Bob's SBU through the Boston Consulting Group (BCG) matrix lens, we can conclude that his SBU would be classified as a A) cash cow. B) dog. C) star. D) question mark.
A) cash cow.
John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his A) corporate level strategy. B) business level strategy. C) functional level strategy. D) geographic scope.
A) corporate level strategy.
90) Ontomedia Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Ontomedia experiencing in this scenario? A) diversification discount B) learning-curve effects C) experience-curve effects D) economies of scale
A) diversification discount
23) When examining the core competence-market matrix, the most challenging diversification strategy occurs when firms attempt to combine ________ with ________. If done successfully, the firm could have the potential for "mega-opportunities" that may lead to competitive advantage. A) new core competencies, new markets B) new core competencies, existing markets C) existing core competencies, existing markets D) existing core competencies, new markets
A) new core competencies, new markets
75) When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using A) related-constrained diversification. B) related-linked diversification. C) strategic outsourcing. D) offshore outsourcing.
A) related-constrained diversification.
27) Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors for roughly $3 billion. This strategic move allowed InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of A) restructuring. B) corporate diversification. C) a business level strategy. D) the Core Competence-Market Matrix.
A) restructuring.
46) ________ is best described as a situation in which one party is more informed than another, because of the possession of private information. A) Information governance B) Information asymmetry C) Information deregulation D) Information piracy
B) Information asymmetry
82) The Tata Group, Warren Buffet's Berkshire Hathaway and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as A) differentiators. B) conglomerates. C) internal competitors. D) vertically integrated.
B) conglomerates.
57) ________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. A) Venture capitalism B) Bootlegging C) Vertical integration D) Crowdsourcing
C) Vertical integration
52) Hot Potatoes, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Hot Potatoes stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate? A) crowdsourcing B) credit rationing C) franchising D) bootstrapping
C) franchising
72) Rangreen Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing? A) product diversification strategy B) process diversification strategy C) geographic diversification strategy D) product-market diversification strategy
C) geographic diversification strategy
30) Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens? A) hold B) invest for growth C) harvest and/or divest D) allocate more resources for manufacturing
C) harvest and/or divest
41) Which of the following is an example of an internal transaction cost? A) the cost of searching for a contract manufacturer B) the cost of signing a contract with a supplier C) the cost of buying raw materials D) the cost of maintaining a production unit
D) the cost of maintaining a production unit
70) While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company. B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.
A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.
99) Hatfan Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario? A) The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. B) The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. C) The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. D) The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.
A) The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.
54) 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) a joint venture B) a franchisee C) a licensing contract D) a corporate acquisition
A) a joint venture
43) A primary advantage of organizing economic activity within firms is the A) ability to coordinate highly complex tasks to allow for specialized division of labor. B) low administrative costs because of reduced bureaucracy. C) eradication of the principal-agent problem. D) high-powered incentive to work as salaried employees for an existing firm.
A) ability to coordinate highly complex tasks to allow for specialized division of labor.
61) Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Golddex should pursue A) backward integration. B) forward integration. C) product diversification. D) geographic diversification.
A) backward integration.
55) How is an equity alliance different from a joint venture? A) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm. C) An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. D) An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.
B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.
102) ________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. A) Fixed costs B) Influence costs C) Coordination costs D) Opportunity costs
B) Influence costs
87) Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A) It is leveraging existing core competencies to improve current market position. B) It is building new core competencies to protect and extend its current market position. C) It is redeploying and recombining existing core competencies to compete in markets of the future. D) It is targeting the chasm between the early adopter and early majority market segment.
B) It is building new core competencies to protect and extend its current market position.
15) Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation
B) backward vertical integration
89) Which quadrant in the core competence-market matrix is the hardest to pursue? A) building new core competencies to protect and extend current market position B) building new core competencies to create and compete in markets of the future C) leveraging core competencies to improve current market position D) redeploying and recombining core competencies to compete in markets of the future
B) building new core competencies to create and compete in markets of the future
53) Vehement Capital Partners wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, Vehement Capital Partners invested $100 million in the project. This investment made by Vehement Capital Partners will result in a A) cartel. B) credible commitment. C) corrective action. D) parent-subsidiary relationship.
B) credible commitment.
92) Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created? A) capital liquidity B) diversification premium C) diversification discount D) demand-pull inflation
B) diversification premium
21) Because Facebook receives almost all of its revenues from online advertising, we would conclude that Facebook would be characterized as a(n) ________ firm, which has the lowest levels of corporate diversification. A) single business B) dominate business C) related diversification D) unrelated diversification
B) dominate business
22) Pete E' Gee sell's Big Dog Choppers, a special type of motorcycle. His business generates roughly 80 percent of his revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Pete E' Gee would be classified as a ________ firm. A) single business B) dominate business C) related diversification D) unrelated diversification
B) dominate business
42) The Umbrella Corporation (UC) recently acquired a smaller competitor, Packer and Associates, which specializes in issues not previously covered by UC, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will A) decrease. B) increase. C) become external transaction costs. D) be eliminated.
B) increase.
37) There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A) increasing profits B) lowering costs C) reducing risk D) motivating managers
B) lowering costs
45) Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A) diseconomies of scale B) principal-agent problem C) experience-curve effects D) information asymmetries
B) principal-agent problem
31) Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of A) geographic diversification. B) product diversification. C) vertical integration. D) horizontal integration.
B) product diversification.
85) The core competency of Newex Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B) redeploying and recombining existing core competencies to compete in future markets. C) building new core competencies to create and compete in future markets. D) building new core competencies to protect and extend current market position.
B) redeploying and recombining existing core competencies to compete in future markets.
76) Silis Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Silis' executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue? A) dominant business B) related-constrained C) related-linked D) unrelated
B) related-constrained
94) The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? A) start-up capital required and stage of industry life cycle B) relative market share and speed of market growth C) economic value created and costs incurred D) amount of debt financing and equity financing
B) relative market share and speed of market growth
98) The smartphone division of the large consumer electronics company, Streethex Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under A) question marks. B) stars. C) cash cows. D) dogs.
B) stars.
18) Todd Wilkinson, the founder of 123.com, looked outside his firm for the right talent in order to develop his firm's website. The search led him and his team to a different country where they were able to procure the right talent to get the job done. This example best illustrates the concept of A) insourcing. B) strategic outsourcing. C) investments in human capital. D) value chain analysis.
B) strategic outsourcing.
68) Rundofase 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 Rundofase International applying? A) concentric integration B) taper integration C) horizontal integration D) conglomerate integration
B) taper integration
49) A drawback of short-term contracting as an alternative to making a component in-house is that A) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C) it fails to allow a long planning period that individual market transactions provide. D) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.
B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
48) 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 inhouse manufacturing facility. In this scenario, Massive Dynamic should A) continue to outsource production. B) vertically integrate. C) exit the laptop industry. D) diversify its activities.
B) vertically integrate.
78) Finjob Inc. is following a related-linked diversification strategy, and Rangreen Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A) Rangreen Inc. generates 70 percent of its revenues from its primary business, while Finjob Inc. generates only 10 percent of its revenues from its primary business. B) Rangreen Inc. pursues a backward diversification strategy, while Finjob Inc. pursues a forward diversification strategy. C) Finjob Inc. will share fewer common competencies and resources between its various businesses when compared to Rangreen Inc. D) Finjob Inc. pursues a differentiation strategy, and Rangreen Inc. pursues a costleadership strategy, to gain a competitive advantage.
C) Finjob Inc. will share fewer common competencies and resources between its various businesses when compared to Rangreen Inc.
67) Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results? A) Invest in vertical integration despite the cost of producing pickups. B) Abandon the idea of vertical integration entirely. C) Pursue taper integration. D) Introduce a budget line of guitars to diversify the firm's offerings.
C) Pursue taper integration.
84) Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Plexzap pursue? A) Leverage existing core competencies to improve current market position. B) Build new core competencies to protect and extend current market position. C) Redeploy and recombine existing core competencies to compete in markets of the future. D) Build new core competencies to create and compete in markets of the future.
C) Redeploy and recombine existing core competencies to compete in markets of the future
81) How does a conglomerate benefit from following an unrelated diversification strategy? A) The conglomerate can solely depend on its primary business activity for a major portion of its revenues. B) The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. C) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. D) The conglomerate can limit the learning- and experience-curve effects it faces.
C) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
44) Hooli Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? A) The firm will be protected against the principal-agent problem. B) The firm's administrative costs will be low because of necessary bureaucracy. C) The firm will have more flexibility in purchasing and comparing prices of goods and services. D) The firm will have high-powered incentives, such as hourly wages and salaries.
C) The firm will have more flexibility in purchasing and comparing prices of goods and services.
97) Inity Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario? A) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.
C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.
96) Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under A) stars. B) question marks. C) dogs. D) cash cows.
C) dogs.
59) Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate? A) crowdsourcing B) new product development C) forward vertical integration D) conglomerate diversification
C) forward vertical integration
26) Danke Inc. is a diversified firm that creates more value than the cost that it incurs. As a result, they are experiencing a diversification premium in their stock price. Danke Inc. is able to accomplish all of the following except A) provide economies of scale, which reduces Danke's costs. B) exploit economies of scope, which increases Danke's value. C) increase their costs but maintain their current stock price. D) reduce Danke's costs and increase value.
C) increase their costs but maintain their current stock price.
65) VineRipe Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, VineRipe worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A) site specificity B) research specificity C) physical-asset specificity D) human-asset specificity
C) physical-asset specificity
73) Singletechno Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Groundswell Industries pursuing? A) zone pricing B) niche marketing C) product-market diversification strategy D) process diversification strategy
C) product-market diversification strategy
69) PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in A) strategic outsourcing. B) lean manufacturing. C) product-market diversification. D) process diversification.
C) product-market diversification.
39) Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A) employing celebrity spokespeople B) implementing automated soy-making machinery C) purchasing competitors D) increasing executive salaries
C) purchasing competitors
93) Hottechi Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, Hottechi is involved in A) reverse engineering. B) benchmarking. C) restructuring. D) crowdsourcing.
C) restructuring.
34) Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy? A) the first-line employees B) the creditors C) the chief executive officer D) the middle manager
C) the chief executive officer
32) Decisions relating to "what stages of the industry value chain to participate in" determine a firm's A) level of diversification. B) geographic scope. C) vertical integration. D) competitive strategy.
C) vertical integration.
28) Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ________ tool. A) value chain analysis B) VRIO C) diversification premium D) Boston Consulting Group (BCG) matrix
D) Boston Consulting Group (BCG) matrix
24) Salesforce is one of the leading providers of platform as a service (PaaS) tools and services. They developed a new competency in delivering software development that allows its customers to better customize their future needs. Viewing this through the lens of the Core Competence-Market Matrix, which of the following four options below does Sales force best exemplify? A) Salesforce leveraged existing core competencies to improve their current market position. B) Salesforce built new core competencies to protect and extend their current market position. C) Salesforce redeployed and recombined existing core competencies to compete in markets of the future. D) Salesforce built new core competencies to create and compete in markets of the future.
D) Salesforce built new core competencies to create and compete in markets of the future.
62) Which of the following best illustrates physical-asset specificity? A) a unique training program developed in an organization B) a ship container designed to carry more than the average load of iron ore C) a generic machine that can be used to churn different mixtures D) a machine solely designed to give a candy its trademarked shape
D) a machine solely designed to give a candy its trademarked shape
88) In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A) leveraging existing core competencies to improve current market position. B) building new core competencies to achieve vertical integration. C) redeploying and recombining existing core competencies to compete in markets of the future. D) building new core competencies to create and compete in markets of the future.
D) building new core competencies to create and compete in markets of the future.
38) Which of the following motivations for business growth involves principal-agent problems? A) increasing profits B) increasing market power C) reducing risk D) motivating managers
D) motivating managers
56) Goodsilron is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A) venture capitalism B) franchising C) joint venture D) parent-subsidiary relationship
D) parent-subsidiary relationship
105) Blackzim Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady but might be growing. According to the BCG growth matrix, Blackzim is a A) cash cow. B) star. C) dog. D) question mark.
D) question mark.
101) A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance. A) unrelated level of diversification B) single-business level of diversification C) dominant-business level of diversification D) related-linked diversification
D) related-linked diversification
77) Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario? A) taper integration strategy B) niche marketing strategy C) related-constrained strategy D) related-linked strategy
D) related-linked strategy
35) Mary has been named CEO of an office furniture manufacturing company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Mary most likely to make? A) whether to pursue a differentiation or cost-leadership strategy B) which customer segments to target C) how to achieve the highest levels of customer satisfaction D) what range of products the firm should offer
D) what range of products the firm should offer
103) ________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another. A) Coordination costs B) Fixed costs C) Agency costs D) Network costs
A) Coordination costs
47) Rebecca 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 Rebecca should be hired as a salesperson in the company. However, in her resume, Rebecca 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? A) information asymmetry B) principal-agent problem C) experience-curve effect D) learning-curve effect
A) information asymmetry
33) Decisions relating to the range of products and services a firm will offer determine the firm's A) level of diversification. B) geographic scope. C) vertical integration. D) absorptive capacity.
A) level of diversification.
51) Initech 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 Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A) licensing B) franchising C) crowdsourcing D) bootlegging
A) licensing
71) J-Texon Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? A) process diversification B) product diversification C) geographic diversification D) market diversification
B) product diversification
19) 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. A) strategic outsourcing B) procurement C) offshore outsourcing D) diversification
C) offshore outsourcing
86) Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily A) leveraging new core competencies to improve current market position. B) redeploying existing core competencies to compete in future markets. C) unlearning existing core competencies to create and compete in markets of the future. D) building new core competencies to protect and extend current market position.
D) building new core competencies to protect and extend current market position.
95) In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should A) infuse more capital into the strategic business unit. B) provide more human resources to the business. C) hold the business till it turns into a star. D) divest the strategic business unit.
D) divest the strategic business unit.
