BUSA 4900 Exam 3
In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents ______.
a different investment strategy
What determines the allocation of resources and the organization and operations of workers?
a firm's organizational structure
What must financial statements by public companies do?
be audited by certified public accountants; adhere to generally accepted accounting principles (GAAP)
The shared value creation framework is a tool intended to help businesses ______.
benefit all stakeholders, not just shareholders
Narrowly defining public stock companies in terms of financial performance can lead to ______.
black swan events
What mechanism uses codified policies and procedures to define and direct employee behavior?
input controls
In regard to the public stock company, limited liability means that ______.
investors are not responsible for any debts incurred by the company and are only at risk of losing their invested capital
What is typical of an organic organization?
flexible division of labor
Incentives that are too high-powered, such as an outsized bonus, may cause individuals to ______.
focus too much attention on the incentive and not enough on strategic activities
What must strategic alliances do in order to create the foundation for a competitive advantage?
form unique resource combinations that obey the VRIO criteria
If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration.
forward
What are types of vertical integration along the industry value chain?
forward, backward
Kurtis loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kurtis the right to use its trademark and name, and Kurtis agrees to follow Benicio's Burritos guidelines. This is an example of ______.
franchising
A firm that is organized according to SBUs but also is decentralized in that different geographic locations are fully functional is likely organized in the ______ structure.
functional
What features are frequently associated with organic organizations?
greater employee creativity; high levels of employee satisfaction; fast decision making
Specialized assets have ______.
high opportunity cost
Strategy implementation is essentially ______.
how a firm performs its work
Which bodies regulate mergers and acquisitions?
European Commission, Federal Trade Commission
The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ______.
Germany
What is a true statement about the building blocks of an organizational structure?
Hierarchy is one of the building blocks of an organizational structure.
What is true regarding the government and horizontal integration?
Large horizontal integration activity typically needs to be approved by government authorities.
Why does management frequently fail at strategy implementation?
Managers cannot make needed adjustments because of their effect on the firm's resource allocation and power distribution.
Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy?
Peter's Pans is trying to overcome competitive disadvantage.
What are common reasons a firm might pursue a merger?
Principal-agent problems; Superior acquisition and integration capability; The desire to overcome competitive disadvantage.
True or false: A horizontal integration strategy leads to industry consolidation.
TRUE
True or false: According to the make-or-buy continuum, strategic alliances are more integrated than short-term contracts.
TRUE
True or false: It can be riskier to own parts of the supply chain than to rely on external supply chains.
TRUE
What best exemplifies the relational view of competitive advantage?
The strategic alliance between company A and company B creates more value than either company individually.
What is a true statement about strategic alliances?
They have a high failure rate.
What two statements accurately describe mechanistic organizations?
They have a tall hierarchy. They are highly specialized.
What statements about equity alliances is true?
They require larger investments than non-equity alliances.
Why might a firm want to enter into an equity alliance instead of a short- or long-term contract?
To take partial ownership in the other partner by buying stock or assets; To signal greater commitment to the partnership.
In ______, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.
a leveraged buyout
What is an example of the principal-agent problem even when the principal's goal is to create shareholder value?
a manager flying first class on all business trips
What structure is a combination of the multidivisional structure and the functional structure?
a matrix structure
What is the most observable element of organizational culture?
artifacts
What are the four essential aspects of an organizational structure?
centralization, formalization, hierarchy, specialization
Corporate governance is a system of ______.
checks and balances
According to agency theory, which managerial functions can be used to avoid adverse selection and moral hazard?
control and organization
The key question of where to compete is addressed by ______.
corporate strategy
In order to assess whether ______ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management.
diversification
A(n) ______ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of their individual business units.
diversification discount
What is an example of an application of agency theory?
employment contracts
The idea of corporate social responsibility (CSR) suggests that a firm's obligations should ______.
exceed the traditional imperative to increase profits
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as ______.
externalities
Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ______, leading to scandals and economic crises.
financial performance
According to agency theory, conflicts such as the principal-agent problem are considered ______ issues.
legal
What are the four characteristics of a public stock company that make it an attractive corporate form?
legal personality; limited liability for investors; separation of ownership and control; transferability of investor interests
In order to reconcile economic and social needs within the shared value creation network, managers need to focus on what?
making products affordable for the poorest socioeconomic groups in order to improve standards of living; creating new regional clusters and business centers; expanding value chains to include NGOs and other organizations committed to social goals
The main goal of a poison pill is to ______.
minimize the threat of a hostile takeover
A situation in which one party has an incentive to shirk their responsibility because the costs will fall to the other party is known as ______.
moral hazard
The most common type of alliance is a(n) ______.
non-equity alliance
What term encompasses a firm's members' shared values and norms?
organizational culture
Corporate governance addresses the ______ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind.
principal-agent
The Boston Consulting Group growth-share matrix locates a firm's individual SBUs in which dimensions?
relative market share, speed of market growth
What are functions of a board of directors beyond general strategic oversight?
selecting, evaluating, and compensating the CEO; assessing and mitigating risk; ensuring that the firm's accounting practices and reports are accurate
The interests of inside directors on the board of directors typically align with those of ______.
senior management
Ravi works for a small company. The company owner makes all strategic decisions and manages the day-to-day operations. Ravi's company has a ______ structure.
simple
Which of the following have significantly more value in their intended use than in their next-best use?
specialized assets
When a firm's employees have internalized norms and share the firm's core values, the firm is said to have a(n) ______ culture.
strong
What forms of agreement do non-equity alliances typically take?
supply, distribution, licensing
The two alternatives to vertical integration are...
taper integration, strategic outsourcing
Horizontal integration can reduce ______.
the threat of entry
An executive can legally earn a significant profit from stock options if ______.
the firm performs well and the actual price per share exceeds the negotiated strike price
An external governance mechanism that makes a poorly managed company vulnerable to takeover by outside investors is known as ______.
the market for corporate control
Which structure is divided into several distinct business units, each of which has its own profit-and-loss center?
the multi-divisional structure
What are the two significant issues regarding the CEO pay debate?
the relationship between firm performance and CEO pay; the size of the CEO compensation in relation to average employee pay
Why might a firm create a joint venture when entering a new geographic market?
to access local expertise, to adhere to local law, to access local contacts
Why do some firms choose alternatives to vertical integration?
to avoid the risks associated with vertical integration
What is the main goal of corporate venture capital investments?
to create real options in terms of gaining access to new technologies
What is the goal of organizational design?
to enable managers to translate their chosen strategy into a realized one
What is a reason why a firm needs to grow?
to reduce risk
What are critical aspects of maintaining good relationships between a firm and its stakeholders?
transparency and fairness
What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?
vertical market failure
How does horizontal integration affect Porter's Five Forces for the surviving firms?
It reduces rivalry among existing firms. It reduces the threat of entry.
When a manufacturer of computers starts to produce its own computer components, the manufacturer engages in ______ vertical integration.
backward
In a public stock company, the centerpiece of corporate governance is the ______.
board of directors
Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism.
incentives
A firm's unwillingness to alter how things are currently done is known as ______.
inertia
The functional areas present in a functional structure frequently correspond to what?
stages in the value chain