Strategic Management Final

Bailey Building and Loan Association, a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company—including the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders, who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to Bailey Building and Loan Association's board to achieve board independence?

7

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation?

A sweatshop owned by an MNE has an explosion that kills hundreds of workers

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

Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates.

Globex Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Omni Consumer Products, a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?

Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries.

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.

________ refers to the degree to which decision making is concentrated at the top of the organization.

Centralization

Greg is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders?

He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price.

________ 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

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.

One of Black Mesa's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "Always You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Black Mesa's competitors. Although the campaign has resulted in a 10 percent decline in profits, Black Mesa has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Black Mesa's culture, exemplified by the "Always You" campaign, fail to support a competitive advantage?

It does not increase economic value creation for the firm.

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

It reduces the trust of shareholders in the organization as a vehicle for value creation.

Paper Street Soap Company, a cosmetics firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Jennifer Watson, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Jennifer Watson as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true?

Jennifer Watson has a wide span of control.

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

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

Dinotopia is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Dinotopia in terms of cultural distance?

Maldonia, where people speak English and have a low standard of living

Which of the following is a feature of the Globalization 2.0 stage?

Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

Omni Consumer Products operates as a strategic business unit (SBU) under Total Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that

Omni Consumer Products is led by its own CEO (or equivalent general manager).

________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.

Organizational inertia

Fang and Bone Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fang and Bone 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 Fang and Bone take?

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

Los Pollos Hermanos is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should Los Pollos Hermanos take as it strives to become multinational?

Pursue a multidomestic strategy, customizing product offerings to suit local preferences

Carla recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Carla to undertake to help safeguard the company's financial health?

Request and review a copy of the firm's risk assessment plan, if such a plan exists.

Why does strategy implementation often require changes within an organization?

Strategy implementation transforms strategy into actions and business models.

Which of the following statements best supports the view that GE's Ecomagination strategy is in line with the shared value creation framework?

The Ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

How has China been affected by its one-child-per-family policy and appreciation of its currency?

The country's advantage in low-cost manufacturing is now reduced.

Which of the following is a common result of a hostile takeover of a company?

The new owner sells the company in pieces.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign-entry mode?

They reduce a firm's exposure to loss of reputation.

Maritza is trying to understand the relationship between what is legal and what is ethical. Tiffany explains that both of these terms are often synonymous in business. Your response is

Tiffany is incorrect; a manager's actions can be legal but ethically questionable.

Which of the following is true of the process of organizing for competitive advantage?

To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa's business?

a firm that relies on high output controls to tap into intrinsic motivation

Fierce domestic competition in Globex makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Globex's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in

a focal industry.

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

Stark Industries 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 Stark Industries?

acquiring an airplane parts manufacturer in another country

Domenick is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Domenick based on his stated credentials without verifying them. Two days into the job, Domenick's team lead realizes that Domenick does not know much of what he claimed to know during the interview. This scenario best exemplifies

adverse selection.

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

be prepared to restructure as the landscape changes.

The name for an agreed-upon code of conduct in business, based on societal norms, is

business ethics.

How did Canada, Mexico, and the United States reduce the administrative and political distance between them?

by establishing the North American Free Trade Agreement (NAFTA)

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

corporate governance.

Because of poor management, the stock price of Rearden Steel Inc. falls and many investors sell their shares. Soon Rearden Steel becomes the target of a hostile takeover, during which Dildred buys enough shares to exert control over the firm. In this scenario, Dildred performs the role of a(n)

corporate raider.

When two neighboring democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

Which of the following modes of entering a foreign market allows for the lowest level of control?

exporting

Tom is the inventor of a personal fitness tracking device, and he is in the process of hiring employees after receiving investment funding. When considering how to structure his company, he should

first establish a strategy and let that be him guide.

Vinny, the CEO of Rainholm Industries is looking to employ a ________ strategy, which would take advantage of economies of scale and location economies. He wishes to pursue and establish a global division of labor based on wherever best-of-class capabilities reside at the lowest possible cost for Rainholm Industries.

global standardization

Lucy wishes to have more control with her international strategy and is willing to increase her firms' investments in this foreign market. She considers creating a subsidiary but also wishes to build a manufacturing plant from the ground up. Lucy is most likely interested in pursuing a(n)

greenfield operations strategy.

There are some industries that are more competitive in some countries than others. In order to fully understand why this occurs, we need to examine Porter's Diamond framework. Which of the following below is NOT one of the four factors in this framework?

industry-specific forces

Adverse selection in a public stock company occurs when

information asymmetry increases the likelihood of selecting inferior alternatives.

Sirius Cybernetics Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country

is a world leader in the pharmaceutical industry.

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 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

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of

location economies.

Gordon's role in providing inside information to Pearson Specter Litt for the benefit of Pearson Specter Litt's stockholders and himself is an example of

moral hazard.

PolyCon's, a large and successful retail chain on the East Coast, decides to expand its operations across the United States. Which of the following organizational structures should PolyCon's use?

multidivisional

A trend observed during the Globalization 3.0 stage involves

multinational companies organizing as global-collaboration networks

Amy is the CEO of a line of accessories and cosmetics, Hooli Inc., which has retail stores and production units in five countries. In this scenario, Hooli Inc. is most likely a

multinational enterprise.

Sirius Cybernetics Corp. produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Sirius Cybernetics devices. In this scenario, Sirius Cybernetics would be best served to embrace

open innovation.

E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp 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, E Corp Inc. is most likely an organization that is

organic.

Macmillan Toys Inc. is located in the nation of Ruffino near the nation of East Fenwick. Macmillan Toys is considering expanding into Rusalka. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Ruffino rules this land. Which of the following would most likely prevent Macmillan Toys from expanding into Rusalka?

political distance

Hooper's Store Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, Hooper's Store defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, Hooper's Store developed a(n)

resistance to change.

Successful ________ requires managers to design and shape structure, culture, and control mechanisms.

strategy implementation

The MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after

the Hippocratic oath in medicine.

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help them climb out of poverty. This best exemplifies Michael Porter's suggestion that

the largest but poorest socioeconomic group can yield significant business opportunities.

Organizational design is

the process of creating, implementing, and modifying the structure of an organization.

Vanessa accepts a job as vice president for human resources at a paper manufacturing start-up. She discovers that the start-up believes that teamwork is so important that it plans to award all raises and bonuses by splitting them equally within a team rather than presenting them to individual employees. What action should Vanessa take regarding this plan?

Cancel the plan because under it, opportunistic employees will do little or no work.

Two leading home appliance companies, Globex Inc. and Pug Tech, are in competition for market share. In their quest for exciting new products, Globex employs an open innovation model, while Pug Tech pursues a closed innovation model. Which of the following statements is most likely true?

Pug Tech will protect its intellectual property with patents and trade secrets.

When Susan, the CEO of Gregarious Simulation Systems, expanded her operations to a different international market, she was surprised to see how little competition she faced. In her home country, the competition for simulation systems is incredibly fierce. As a result of her international expansion, her firm has been able to easily position themselves as a major player. Which of the four categories of Porter's Diamond framework best explains this advantage?

competitive intensity in the focal industry

Martha received a tip from a close friend who is an executive manager of a publicly traded company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of

information asymmetry.

Delos Inc. is an apparel manufacturer. The management at Delos Inc. prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

input controls.

All of the following are examples of external-governance mechanisms except

shareholders.

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

Employees learn about an organization's culture through the process of

socialization

The most important yet least visible element of organizational culture is

values.

Which of the following perspectives best supports the shared value creation framework?

Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Los Pollos Hermanos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. The firm's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's?

Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.

When firms sell their products overseas with little or no change to the products, they may increase the expropriation of intellectual property and increase the risk of piracy. This is considered a serious disadvantage when pursuing a(n) ________ strategy.

international

AT&T, IBM, Siemens, and Pfizer, have been shifting their innovation strategy toward a model designed to blend internal knowledge with external knowledge by sourcing strategic alliances. This example best represents the

open innovation framework.

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 Inc.'s performance. This scenario reflects

principal-agent problems.

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

to align incentives between shareholders and management