Practice Test

Consider the two statements below and then choose the correct alternative. Statement I: The situation where the CEO is also chairperson of the board of directors refers to CEO duality. Statement II: Cohesive groups are least susceptible to groupthink. a. Only Statement 1 is true b. Only statement 2 is true c. Both Statement 1 and 2 are true d. Neither statement 1 or 2 are true

a

If two similar size firms agree to integrate on a relatively equal basis, this is called a(n) _________, while if a larger firm purchases a smaller firm, this is usually referred to as a(n) __________. Finally, a(n) _________ is often used to refer to an unfriendly acquisition where one of the firms involved does not want to be acquired. a. Merger, acquisition, hostile takeover b. Acquisition, merger, hostile takeover c. Merger, hostile takeover, acquisition d. None of the above options are correct

a

Unilever operates throughout the world, and is organized into seven regional business units: North America, Europe, North Asia, Southeast Asia, South Asia, NAMET (North Africa, Middle East, Turkey, and Russia) and Africa. Within each geographic business unit, there are divisions organized by key product categories: Food & Beverage, Detergents, Frozen Products, Personal Products, and Agribusiness. Managers in the product divisions have a dual reporting relationship: they are accountable to their regional business unit general manager, as well as to the CEO of their product category. This is an example of: a. A matrix structure b. A holacracy c. A functional structure d. A simple structure e. A hybrid structure

a

Wal-Mart Stores Inc. said it plans to open what would be one of the country's biggest dairy plants in Indiana by next year. Wal-Mart's new dairy plant will supply milk to more than 600 stores that are now supplied by Dean Foods Co. Dean will still continue to supply Wal-Mart stores, but the new Wal-Mart plant will cost Dean roughly 100 million gallons of annual milk sales. The decision of Wal-Mart Stores Inc. could be best described as _________________. a. taper integration b. forward integration c. horizontal integration d. product diversification e. value chain integration

a

Which of the following best describes the key components of organizational design? a. Structure, culture, and control b. Structure, inertia, and control c. Inertia, culture, and control d. Specialization, formalization, and differentiation e. Specialization, formalization, and inertia

a

"Because of Nestlé's inherent confidence in its own processes and data, it couldn't imagine that it might have a problem on its hand. That attitude of detached if polite superiority would irritate (government) officials and exacerbate Nestlé's problems..." The above passage would characterize Nestlé's: a. Corporate indifference b. Hubris c. Long-term strategic initiative d. Business strategy e. Core values

b

All of the following are reasons a firm might enter into a strategic alliance except: a. To hedge against uncertainty b. To preempt rivals c. To enter new markets d. To learn new capabilities e. To access critical complementary assets

b

At General Mills, the entry level marketing position is Assistant Brand Manager (ABM). The ABM reports to the Brand Manager, who reports to the category manager, who reports to the marketing manager. The marketing manager reports to the Division General Manager, who in turn, reports to the Group Vice President. The Group Vice-President reports to the CEO/North America, who reports to the CEO and Chairman. This is an example of: a. A flat structure b. A tall structure c. A matrix structure d. A holocracy e. An axiomatic structure

b

Mike and Adam are about to start a firm. Mike argues that due to the advent of globalization, the location of their potential firm is irrelevant for competitive advantage because firms are now able to source their inputs globally, whereas Adam argues otherwise. Adam specifically suggests despite advances in globalization, location matters for competitive advantage. Mike suggestion about the irrelevance of location, closely resembles which of the below concepts: a. National competitive disadvantage b. Death-of-distance hypothesis c. Porter's Diamond framework d. Location responsiveness e. Economic distance irrelevance

b

On the day, GE announced spin-off of GE Capital from General Electric, GE's stock price jumped by 11 percent, adding some $28 billion to GE's market capitalization. Through this restructuring of the corporate portfolio, GE is now better positioned to focus more fully on its core competencies in industrial engineering and management processes. This has shown that Jeffrey Immelt was right when he said the presence of ____________________ depressed GE's stock price and by selling off GE Capital he was able to elevate the stock price. a. Diversification premium b. Diversification discount c. Diversification scale d. Diversification failure e. Diversification risks

b

Recently, Roman bought stocks for a publicly traded company called Copnay Telecom Inc. A few months later, Roman noticed that the company's financial performance has been declining, and the value of its stock has been decreasing. Roman proactively cut his losses and sells his shares. On the other hand, Jeremy, a trading enthusiast, buys shares in Copnay Telecom because he believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? a. separation of legal ownership and management control b. transferability of investor ownership c. legal personality d. limited liability for investors e. Separation of strategy formulation and implementation

b

The reasons that make it appropriate to go for an acquisition include all of the following except: a. Increased market power b. Large or extraordinary debt c. Overcoming barriers to entry d. Cost of new product development and increased speed to market e. Learning and developing new capabilities

b

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by a. agent's hubris b. information asymmetry c. corporate governance d. groupthink e. principal bounded rationality

b

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has a. Dynamic design b. Decentralized structure c. Organizational inertia d. Top-down management style e. Post holacracy management

b

Which of the following statements is true of strategy in an organization? a. Strategy implementation is considered unsuccessful if it requires changes within an organization. b. Organizational structure must follow and align with its strategy in order for the firm to achieve superior performance. c. To implement a strategy successfully, an organization's structure must be high in formalization and low in centralization. d. Strategy implementation does not affect resource allocation and power distribution within an organization. e. Strategy must follow organizational structure in order for firms to achieve superior performance.

b

About two decades ago Sony of Japan and Ericson of Sweden both pooled capital and resources to start a new company called Sony Ericson. Sony Ericson issued its own shares and was recognized as an independent company even though both Sony and Ericson owned equity in the new company. Sony and Ericson had: a. Engaged in a Merger b. Engaged in an acquisition c. Set up a joint venture d. Formed a horizontal alliance e. Formed an equity alliance

c

According to the article by the Economist that we have covered in class, spot transactions are best when handled by: a. Within the boundaries of the firm. b. Within team-production process c. In an open market. d. Through incomplete contracts. e. None of the above.

c

Amy recently got promoted as a buyer of cereal and breakfast bars at Walmart. She was invited to Kellogg's office to come try their new Pop tart flavors. At the end of the meeting, she was offered to take free samples of pop-tarts for her kids and other family members. She really liked the new-flavor Pop-tarts but wasn't sure if it will be ethical to take free samples for her family. Which of the following questions would help her decide if accepting the samples is ethical? a. Whether the intended course of action falls within the acceptable norms of Walmart's code of conduct? b. Would she feel comfortable explaining and defending the decision in public? c. Both a. and b. d. She should take the samples offered by Kellogg's as long she doesn't steal it.

c

At ACME Inc., managers actively encourage the sales team to pursue a high level of low margin sales activity. The low margin sales increase revenue for the firm, but not profits. If managers are mainly incentivized for increasing revenue, even though they should really be incentivized to increase profits, this is best described as an example of a problem with _______________. a. Core rigidly b. Founder imprinting c. Strategic control and reward systems d. Linear decision making e. Specialization

c

BioApple Inc. is located in Skaziland near the nation of Swaziland. BioApple Inc. is considering expanding into Swaziland. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. However, Swaziland and Skaziland have a long-standing dispute concerning the control of a fish and other natural resources in the river along their common border. Currently, Skaziland exploits this river. Which of the following would most likely prevent BioApple Inc. from expanding into Swaziland? a. Geographic distance b. Economic distance c. Political distance d. Cultural distance e. Cognitive distance

c

Jason is an inventor of shirts that "do not sweat" in a hot Nebraska summer. He is thinking to establish a factory to manufacture these shirts and is curious where he should establish this factory. He asks his friend, Michael, who is a consultant, in Lincoln Consulting Co., where he should locate his factory. Michael says that "because firms can now, more than ever, source inputs globally, he believes that location is diminishing in importance as an explanation of firm-level competitive advantage." So, it does not matter where he establishes his factory. Through his statement, Michael expressed the idea called: a. Globalization hypothesis. b. Location-matters hypothesis. c. Death-of-distance hypothesis. d. Globalization-standardization hypothesis. e. Local-responsiveness hypothesis.

c

The build-borrow-buy framework can be utilized by executives to determine the nature of cooperative strategy they must follow with respect to another firm. One of the factors involved is closeness. In this case closeness refers to -------------------------. a. How similar the firms are with respect to their size and assets. b. How similar the firms are with respect to their resource endowments c. How close the firms need to be to each other d. How similar the firms are with respect to how they define their industry e. None of the above

c

Tyson controls every step in their value chain, except for raising the chickens. Tyson's corporate strategy is one of ______________. a. Backward horizontal integration b. Forward horizontal integration c. Vertical integration d. Global strategy e. Supply chain strategy

c

In 2016, Zappos experienced great performance results. Tony Hsieh and his executive team believe that a key reason for the company's success is related to frequently surprising customers by delivering shoes overnight even though the customer only paid for five-day shipping. In 2016, the price of oil was relatively inexpensive, and the price of overnight shipping was only about twice as expensive as for five-day shipping. However, the forecast for 2018 is that the price of oil will rapidly increase, and the cost of overnight shipping will increase to more than four times the cost of five-day shipping. If in 2018, senior managers at Zappos insist on utilizing surprise overnight shipping the same way as in 2016, one could argue that Zappos has a problem with ________________. a. Global strategy b. Specialization c. Span of control d. Organizational inertia e. Multidivisional structure

d

Sam is a recent graduate of Ohio State University, In a recent job interview, he stated that he has interned at a major accounting firm. A start-up recruits Sam based on his stated credentials without verifying them. Two days into the job, Sam's team lead realizes that Sam does not know much of what he claimed to know during the interview. This scenario best exemplifies a. managerial opportunism. b. shareholder capitalism. c. moral hazard. d. adverse selection. e. corporate governance.

d

Which of the choices below does not reflect advantages of going global? a. Gain access to larger market share b. Enjoy location economies c. Develop new competencies d. More effectiveness for focused strategies e. All of the above are advantages of going global

d

Which of the following statement is not true about Nestlé's Maggi crisis in India? a. Nestle executives were so sure of their product and safety controls, they failed to imagine that other stakeholders (such as government regulators, press, media and consumers) wouldn't have the same confidence in quality of Maggi Noodles. b. Nestle executives were committed to dialogue with Indian officials and regulators, but they failed to think two steps ahead and plan for another possibilities to end this crisis. c. At first, Nestle executives handled the Maggi case purely as a technical issue, overlooking social and political factors. d. Nestle executives were not comfortable to communicate the details of this crisis with the press and the consumers because they knew that Maggi noodles has high levels of MSG and lead. e. Nestlé's public relation team was slow to communicate the details of this case to their consumers and press/media.

d

Given the independence of outside directors, they are more likely to watch out for the interests of shareholders. If that is true, boards should be composed of only outside directors who can be effective monitors of the firm's top management team. However, in reality, shareholders of most publicly traded companies also appoint CEOs of their firm as insider directors on their boards. This decision of the shareholders is most likely because CEO a. has good relationship with other board members. b. is more likely than other board members to take care of the stockholders. c. is also the CEO of other companies. d. cannot serve on the board of any other organization. e. is likely to provide the board with valuable inside information.

e

Mr. Jay Smith, CEO of Bombardier SA claimed that "Despite low growth in the diesel helicopter industry due to continuing cuts to military spending across the globe as well as growth of new generation electric helicopters by Boeing Co., we have maintained 58.3% of market share in a diesel helicopter industry for the last thirty years." Based on the information provided above and your knowledge of the Boston Consulting Group (BCG) matrix, Bombardier's diesel helicopter business described above can be best categorized as: a. star b. question mark c. underdog d. wild cat e. cash cow

e

Which of the below is not a reason why a firm needs to grow. a. Increase profits b. Lower costs c. Motivate management d. Reduce risk e. Avoid principal-agent problem

e