Business Policy Practice Tests: Chapters 4,6,8, and 10

__ exists when the value created by business units working together exceeds the value that those same units create working independently.

Synergy

Why will a firm often pay a premium to acquire a target?

The acquiring firm has difficulty determining the worth of a target firm.

Boston Pharmaceuticals acquired MediLab, one of its long-time service providers, several years ago because it saw the potential for synergies in the research and design of innovative new medications. The firm has been able to develop products that have given it a long-term competitive advantage in its markets. Which attribute explains this kind of success?

The consistent emphasis on innovation

In Singer Corporation, a large diversified firm, who likely has the responsibility to distribute capital to the firm's various businesses?

The corporate headquarters office

What happens when firms pursue a level of diversification that is appropriate for their resources and core competencies and the opportunities and threats in their country's institutional and competitive environments?

The firms can improve their strategic competitiveness.

Which of the following is believed to be the strongest determinant of whether a merger or an acquisition will be successful?

The integration process

Drexel is a publisher of textbooks. Drexel is purchasing M Solutions, another textbook publisher. Both companies sell to the same outlets and universities. The content for the two companies is different, with Drexel publishing accounting textbooks and M Solutions publishing management and statistics textbooks. Which of the following statements regarding this acquisition is true?

This a horizontal acquisition.

Which of the following statements regarding corporate governance is NOT true? a.Recent global emphasis on corporate governance stems mainly from the apparent failure of corporate governance mechanisms to adequately monitor and control top-level managers' decisions. b.Corporate governance involves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest. c.In modern corporations, a primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders. d.At its core, corporate governance is concerned with making sure a firm and its shareholders behave in an ethical manner.

d.At its core, corporate governance is concerned with making sure a firm and its shareholders behave in an ethical manner.

When virtually exclusive reliance is placed on financial controls because the board of directors is outsider-dominated, which of the following is NOT a likely result of top-level managers' actions to reach the financial goals set by the board? a.Increased diversification in the firm b.Higher levels of compensation c.Reduced investments in research and development (R&D) d.Better strategic decision making

d.Better strategic decision making

Which of the following is an example of a value-creating activity associated with the cost leadership strategy? a.Providing accurate and timely delivery of goods to customers b.Ensuring the receipt of high-quality supplies c.Investing in an effective promotion and advertising program d.Building economies of scale and efficient operations

d.Building economies of scale and efficient operations

Employee stock option plans (ESOPs), recapitalization, issuance of additional debt, and share buybacks are actions associated with which of the following hostile takeover defense strategies? a.Standstill agreement b.Golden parachute c.Greenmail d.Capital structure change

d.Capital structure change

Which of the following is NOT an inbound logistic? a.Materials handling b.Warehousing c.Inventory control d.Collecting products

d.Collecting products

Which of the following concepts is an important influence in Japanese corporate governance? a.Individualism b.Competition c.Innovation d.Consensus

d.Consensus

Which of the following enhances a firm's ability to reduce costs while, hopefully, increasing the value of its products for customers? a.Raw materials from international sources b.Employee training materials c.Easy access to critical supplies d.Continual process improvements

d.Continual process improvements

Why are some firms that reduced their vertical integration now beginning to reintegrate?

To gain better control over the quality and timing of their supplies.

Why would a firm's top-level executives continue to pursue a particular diversification strategy even if early indications are that the strategy would be value-reducing?

To increase compensation.

Which of the following is NOT a reason for using a leveraged buyout as a restructuring strategy?

To reduce debt for the new owners

Which of the following statements is true of managerial motives to diversify?

Top-level executives' diversification decisions may be held in check by concerns for their reputation

_____ are expenses incurred when firms use acquisition strategies to create synergy.

Transaction costs

MeadowBrook Corp. is trying to create value through financial economies. It has developed a plan that would create value by developing a portfolio of businesses that have different risk profiles. MeadowBrook is undertaking what type of diversification strategy?

Unrelated

The term "conglomerate" is most closely associated with which type of diversification strategy?

Unrelated

__ refers to the absence of direct links between businesses.

Unrelated

What type of acquisition gives a firm increased market power by giving it control of additional parts of the value chain?

Vertical acquisition

_____ allows the firm to gain market power as it develops the ability to save on its operations, avoid sourcing and market costs, improve product quality, possibly protect its technology from imitation by rivals, and potentially exploit underlying capabilities in the marketplace.

Vertical integration

Which of the following best describes the main concern of corporate-level strategy in managing the businesses of a diversified firm?

What product markets and businesses the firm should compete in

Which of the following is a situation where activity sharing is risky due to ties among a firm's businesses that create links between outcomes?

When demand for one business's product is reduced and sufficient revenues are not generated to cover the fixed costs required to operate the shared facilities.

A firm making a vertical acquisition would purchase:

a distributor of one of its products.

Market power exists when:

a firm is able to sell its products above existing competitive level or reduce the costs of its primary and support activities below the competitive level, or both.

RTC made a bid to purchase ZD Consulting. ZD's reaction to the bid was positive. This suggests that:

a friendly transaction will take place.

Which of the following acquisitions would be considered the least related?

a landscaping business and a bakery that makes croissants

Chuck's Chicken 'N Biscuits, a fast-food restaurant chain specializing in fried and grilled chicken, has been buying its chicken from Southern Poultry for more than a decade. Chuck's recent bid to acquire Southern Poultry should give the restaurant chain greater market power because the firm is buying:

a supplier in a highly related industry.

In cases where intellectual property rights in the emerging economy are not well protected, the number of firms in the industry is growing fast, and the need for global integration is high, which of the following entry modes are preferred? a.A joint venture or a wholly owned subsidiary b.A strategic alliance or exporting c.Licensing or acquisition d.Importing or licensing

a.A joint venture or a wholly owned subsidiary

Gilbreth Electronics is being targeted for a takeover by CSC Technologies. As a defense tactic, managers at Gilbreth have drawn up a contract specifying that CSC will not purchase additional shares of Gilbreth for a specified period of time in exchange for a fee paid by Gilbreth. Which of the following defense strategies is Gilbreth's managers employing? a.A standstill agreement b.A golden parachute c.Greenmail d.A poison pill

a.A standstill agreement

_____ strategy indicates the choices the firm has made about how it intends to compete in individual product markets. a.Business-level b.Cooperative c.Corporate-level d.Global-competition

a.Business-level

Which of the following are examples of narrow customer groups? a.Buyers with special needs and buyers located in specific geographic regions b.Buyers looking for the lowest costs and buyers interested in generics c.Buyers with passive decision making and buyers interested in non-brand names d.Buyers wanting a narrow delivery window and buyers wanting a narrow extent of offerings

a.Buyers with special needs and buyers located in specific geographic regions

Which of the following is NOT an agency problem that often exists in modern corporations? a.CEOs who feel constrained by governance mechanisms are less likely to seek external advice. b.The principal and the agent have different interests and goals. c.Shareholders lack direct control of large publicly traded corporations. d.An agent makes decisions that results in pursuing goals that conflict with those of the principals.

a.CEOs who feel constrained by governance mechanisms are less likely to seek external advice.

Which of the following countries is considered an emerging market that may appeal to a firm that uses an international strategy and is looking to gain access to more consumers? a.China b.Canada c.Russia d.Portugal

a.China

What is the essence of a business-level strategy? a.Choosing to perform activities differently or to perform different activities than rivals b.Establishing a cost structure for the firm c.Targeting a specific group of customers d.Satisfying the needs of the firm's customers

a.Choosing to perform activities differently or to perform different activities than rivals

Which of the following summarizes Michael Porter's analysis of why and how some industries within nations are more competitive relative to those industries in other nations? a.Conditions or factors in a firm's home base either hinder or support the firm's efforts to use an international business-level strategy for the purpose of establishing a competitive advantage in international markets. b.Cultural factors in the international market affect a firm's competitiveness. c.Differences in culture are always a limiting factor for competition in the international business-level strategy. d.Political and economic institutions are the primary factors in the model of international competition.

a.Conditions or factors in a firm's home base either hinder or support the firm's efforts to use an international business-level strategy for the purpose of establishing a competitive advantage in international markets.

Which of the following can create difficulties when a firm competes by using an international strategy? a.Different cultures and institutional practices b.Firm capability advantages c.Value-added core competencies d.Increased management expertise

a.Different cultures and institutional practices

Macy's, a national department store, sells many of the same name-brand product lines as its competitors. In recent years, its market share has declined and its differentiation strategy has failed, indicating that it has succumbed to which of the following inherent risks in this strategy? a.Failing to provide crisp and identifiable differentiation to customers in its products b.Counterfeiting c.Offering differentiated features that exceed target customers' needs d.Too much focus on cost reductions

a.Failing to provide crisp and identifiable differentiation to customers in its products

Which of the following is NOT a type of factors of production? a.Generic b.Specialized c.Basic d.Advanced

a.Generic

When discussing the foremost economic risks of using an international strategy, which of the following factors most likely affect the local economy and foreign investments in a country? a.Government oversight and control of economic and financial capital b.Cultural diversification c.Geographic diversification d.The global price differential of individual products

a.Government oversight and control of economic and financial capital

What are the primary reasons for failure when firms use strategic alliances as an entry mode? a.Incompatible partners and conflict between the partners b.Differing equity positions of partners and differing cultures of partners c.Years in business and differing professional affiliations of partners d.Extreme costs and lack of positive returns to partners

a.Incompatible partners and conflict between the partners

What is the trend for the number of firms using a transnational international corporate-level strategy? a.Increasing b.Decreasing c.About the same (no increases or decreases) d.No clear trend

a.Increasing

_____ denote the probability of disruption of the operations of multinational enterprises by political forces or events whether they occur in host countries, home country, or result from changes in the international environment. a.Political risks b.Economic risks c.Counterfeit risks d.Risks against firm mission and vision

a.Political risks

Which of the following best explains why German executives aren't dedicated to the maximization of shareholder wealth to the degree that their counterparts are in the United Kingdom and the United States? a.Private shareholders rarely have major ownership positions in German firms. b.Large institutional investors control large blocks of corporate stock in German firms. c.German boards of directors are more simply structured and less involved in monitoring and controlling managerial decisions and actions. d.The roles of CEO and chair of the board of directors are usually combined in German firms, allowing for widespread wrongdoing and rash decisions.

a.Private shareholders rarely have major ownership positions in German firms.

_____ is an especially critical dimension for social networking sites in that the value these firms create for users is to connect them with others. a.Reach b.Richness c.Affiliation d.Effective management

a.Reach

Which classification of board member is defined as having some relationship with the firm, contractual or otherwise, that may create questions about their independence, but are not involved with the corporation's day-to-day activities? a.Related outsiders b.Insiders c.Unrelated outsiders d.Outsiders

a.Related outsiders

Which of the following is a risk of a focus strategy? a.Industry-wide competitors use their resources to serve a wider range of customers' needs than the focuser has been serving. b.Focused competitors use their resources to serve a wider range of customer needs. c.Core competencies of a competitor attract a more broadly defined segment. d.Core competencies of a competitor are used to focus on an even more narrowly defined segment, thereby skimming off the most desired customers.

d.Core competencies of a competitor are used to focus on an even more narrowly defined segment, thereby skimming off the most desired customers.

_____ is where a large number of shareholders with small holdings and few, if any, large-block shareholders exist, producing weak monitoring of managers' decisions. a.Institutional ownership b.Excessive appropriation c.Ownership concentration d.Diffuse ownership

d.Diffuse ownership

Which of the following statements regarding incentives to use international strategy is NOT true? a.Key supplies of raw materials (especially minerals and energy) are critical to firms' efforts in some industries to manufacture their products. b.In industries where labor costs account for a significant portion of a company's expenses, firms may choose to establish facilities in other countries to gain access to less expensive labor. c.As nations industrialize, the demand for some products and commodities appears to become more similar. d.Engaging in an international strategy has the potential to help a firm shorten the life cycle of its products.

d.Engaging in an international strategy has the potential to help a firm shorten the life cycle of its products.

_____ is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options. a.Managerial opportunism b.Management specialization c.Ownership concentration d.Executive compensation

d.Executive compensation

What is the determinant of national advantage that fosters the growth of certain industries and varies greatly from nation to nation? a.Demand conditions b.Factors of production c.Related and supporting industries d.Firm strategy, structure, and rivalry

d.Firm strategy, structure, and rivalry

Which of the following is NOT a basic benefit of using an international strategy? a.Increased market size b.Economies of scale and learning c.Location advantages d.Improved communications

d.Improved communications

Which of the following is NOT a reason that technology drives globalization? a.In emerging markets, the increasingly rapid adoption of technologies such as the Internet and mobile applications permits greater integration of trade, capital, culture, and labor. b.Technologies are the foundation for efforts to bind together disparate markets and operations across the world. c.Increases in global communications facilitate the ability of people in different countries to visualize and model lifestyles in other cultures. d.In industries where labor costs account for a significant portion of a company's expenses, firms may choose to establish facilities in other countries.

d.In industries where labor costs account for a significant portion of a company's expenses, firms may choose to establish facilities in other countries.

Starla Mfg. has pioneered "cheap chic" pens that resemble Mont Blanc pens and offers them at relatively low prices. To expand its products into more businesses to be used as advertising promotions, Starla uses sophisticated designers and effective means of managing costs. These are all characteristics of which business-level strategy? a.Differentiation b.Cost leadership c.Focus d.Integrated cost leadership/differentiation

d.Integrated cost leadership/differentiation

_____ typically own at least 5 percent of a company's issued shares. a.Related outsiders b.Angel investors c.Insiders d.Large-block shareholders

d.Large-block shareholders

_____ is a set of costs associated with various issues firms face when entering foreign markets, including unfamiliar operating environments; economic, administrative, and cultural differences; and the challenges of coordination over distances. a.Global competition b.Global efficiency c.Regionalization d.Liability of foreignness

d.Liability of foreignness

Which of the following statements about incentives is NOT true? a.Annual bonuses may provide incentives to pursue short-run objectives at the expense of the firm's long-term interests. b.Long-term incentives tie a manager's overall wealth to the firm in a way that is inflexible. c.Long-term, performance-based incentives may reduce the temptation to underinvest in the short run. d.Long-term incentives decrease executive exposure to risks associated with uncontrollable events.

d.Long-term incentives decrease executive exposure to risks associated with uncontrollable events.

_____ includes the threat of job loss, loss of compensation, and loss of managerial reputation. a.Corporate governance b.Agency relationship c.Managerial opportunism d.Managerial employment risk

d.Managerial employment risk

_____ is a process used to cluster customers with similar needs into individual and identifiable groups. a.Business-level strategy b.Consumer marketing c.Total quality management (TQM) d.Market segmentation

d.Market segmentation

Your firm is expanding to overseas markets. While most executives agree that they should use the transnational strategy, Melissa argues that it isn't needed. Which of the following would she most likely use to support her argument? a.Local flexibility is too difficult to maintain when using the transnational strategy. b.Integrating domestic and overseas markets isn't necessary. c.Political entanglements can cause trouble in both domestic and overseas markets. d.Most multinational firms try to compete at the regional level rather than at the country level.

d.Most multinational firms try to compete at the regional level rather than at the country level.

Which of the five business-level strategies is considered to be superior to the others? a.Cost leadership b.Differentiation c.Integrated cost leadership/differentiation d.None of the strategies is superior to the others.

d.None of the strategies is superior to the others.

Which of the following is the basis for each international strategy that a firm uses to achieve strategic competitiveness in the form of improved performance and enhanced innovation? a.Cultural customization b.Employment law differences c.Pressure to use local sources d.One or more core competencies

d.One or more core competencies

_____ is an example of self-serving and opportunistic managerial behavior. a.Maximizing shareholder wealth b.Related-constraint diversification c.Shareholder optimal diversification d.Overdiversification

d.Overdiversification

Airbnb is an online service that connects property owners who have rooms to rent with travelers who want to stay in accommodations other than traditional hotels and motels. Airbnb is an example of which type of business model? a.Franchise b.Subscription c.Advertising d.Peer-to-peer

d.Peer-to-peer

A.D. Industries has been aggressively buying up stock in B.C. Enterprises, and the firm now possesses close to 20 percent of B.C.'s shares. The other B.C. shareholders are concerned that A.D. is getting ready for a hostile takeover, which will result in the termination of B.C.'s CEO and other executives. Which of the following managerial defense strategies would allow B.C.'s shareholders to block A.D. by diluting its existing stake in B.C.? a.Standstill agreement b.Litigation c.Corporate charter amendment d.Poison pill

d.Poison pill

Company XYZ is being targeted for a hostile takeover by Company ABC. Which of the following defense strategies that Company XYZ could employ would likely be the most successful? a.Corporate charter amendment b.Capital structure change c.Golden parachute d.Poison pill

d.Poison pill

Firms' relationships with customers are characterized by which of the following three dimensions? a.Connection, concern, and interaction b.Customized products, service, and pricing c.Facilitation, growth, and connection d.Reach, richness, and affiliation

d.Reach, richness, and affiliation

Which of the following is NOT a reason that firms are willing to accept the challenge of managing different consumer tastes and practices linked to cultural values or traditions in different markets? a.The potential to enhance the firms' size b.The potential to enhance the firms' performance c.Limited growth opportunities in their domestic market d.Reduced taxes and tariffs

d.Reduced taxes and tariffs

Which of the following statements regarding the Sarbanes-Oxley Act (SOX) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is NOT true? a.SOX is intended to align financial institutions' actions with society's interests. b.Dodd-Frank is the most sweeping set of financial regulatory reforms in the United States since the Great Depression. c.Dodd-Frank includes provisions related to the categories of consumer protection, systemic risk oversight, executive compensation, and capital requirements for banks. d.While the implementation of SOX has been controversial to some, most believe that it has led to generally positive results in terms of protecting stakeholders and shareholders' interests.

a.SOX is intended to align financial institutions' actions with society's interests.

Which of the following two parties are the focus of corporate governance? a.Shareholders and managers b.Managers and the board of directors c.The board of directors and shareholders d.The president of the corporation and the chairman of the board of directors

a.Shareholders and managers

Carter Inc. has begun to diversify geographically. Which of the following may be the most compelling reason for Carter's success or failure? a.The actual strategic choices managers make b.The tax rate in the country where the firm diversifies c.Whether robotics is involved in the production process d.Cultural differences between the domestic and international operations

a.The actual strategic choices managers make

Jones Company has decided to pursue an international strategy. Which of the following will NOT affect the degree of benefit the firm will capture through a location advantage? a.The firm's research and development ability b.The firm's manufacturing and distribution costs c.The nature of international customers' needs d.The influences of cultural and formal country institutions

a.The firm's research and development ability

If interdependencies between the outsourcing firm and the suppliers become too great, what is the likely result? a.The supplier may increase the price of the good or service, harming the outsourcing firm and its ability to maintain a low-cost competitive advantage. b.The supplier may submit inferior goods, since it knows that the outsourcing firm needs them and must ship them right away. c.The supplier may omit value-added parts of its process, since it knows that the outsourced firm will work with them exclusively. d.The outsourcing firm will have little leverage at contract time, since the supplier knows that the interdependency exists.

a.The supplier may increase the price of the good or service, harming the outsourcing firm and its ability to maintain a low-cost competitive advantage.

Which of the following statements about firms implementing the cost leadership strategy is true? a.They often outsource various functions. b.They strive to keep their costs higher than those of competitors. c.They typically sell customized products or services. d.They are more focused on maintaining status quo than on innovation.

a.They often outsource various functions.

What is the purpose of a business-level strategy? a.To create differences between the firm's position and those of its competitors b.To establish a cost structure for the firm c.To target a specific group of customers d.To satisfy the needs of the firm's customers

a.To create differences between the firm's position and those of its competitors

Gander Software, which is based in the United States, developed a game that has been popular in the U.S. market. Which of the following incentives is encouraging Gander executives to export the game to overseas markets? a.To extend the product's life cycle b.To gain easier access to raw materials c.To realize economies of scale d.To develop a competitive advantage through location

a.To extend the product's life cycle

Soulful Shoe Company has long been a cost leader in the running shoes market. Over time, Soulful's competitors have learned how to imitate its strategy, threatening its cost leader position. Soulful might react by: a.adding differentiated features to its shoes that create value for customers while maintaining price. b.selling its shoes at a higher price to give a perception of higher value. c.producing distinctive shoes for customers who value differentiated features more than low cost. d.allowing counterfeiters to imitate its shoes.

a.adding differentiated features to its shoes that create value for customers while maintaining price.

Each business-level strategy can help the firm establish and exploit a particular competitive _____ as the basis for how it will create value for customers within a particular competitive _____. a.advantage; scope b.scope; advantage c.geographic area; market d.cost; activity

a.advantage; scope

Christina's contract with Nationwide Mutual Insurance Company is an example of: a.an agency relationship. b.managerial opportunism. c.corporate governance. d.a strategic alliance.

a.an agency relationship.

The Dodd-Frank Act includes provisions related to all of the following categories EXCEPT: a.bankruptcy laws. b.capital requirements for banks. c.executive compensation. d.systemic risk oversight.

a.bankruptcy laws.

A _____ describes what a firm does to create, deliver, and capture value for its stakeholders. a.business model b.strategic plan c.business-level strategy d.corporate-level strategy

a.business model

A firm reaps the benefit of location advantages of an international strategy when its facilities in international locations provide easier access to all of the following EXCEPT: a.capital investments. b.lower cost labor. c.energy. d.natural resources.

a.capital investments.

Managing the business units of a geographically diverse multinational firm requires skill, not only in managing a _____ set of businesses, but also coordinating _____ points of view emerging from businesses located in countries and regions. a.decentralized; diverse b.centralized; diverse c.centralized; analogous d.decentralized; analogous

a.decentralized; diverse

Two courses of action to meet the needs of customers while reducing the workforce include: a.developing a flexible workforce by cross-training employees and paying extra attention to the best customers. b.implementing self-serve methods to compensate for lack of employees and customer loyalty programs to retain customers. c.outsourcing human resources and customer service. d.repositioning the firm in a complementary industry where customer service is minimal, thereby attracting different types of customers.

a.developing a flexible workforce by cross-training employees and paying extra attention to the best customers.

In contrast to managers, shareholders may prefer that free cash flow be: a.distributed to them as dividends. b.used to reduce debt of the firm. c.reinvested in lucrative corporate assets. d.used for purposes of further diversifying the firm.

a.distributed to them as dividends.

To manage her investment risk as a shareholder, Jennifer should maintain a(n) _____ portfolio by investing in several companies to _____ her overall risk. a.diversified; reduce b.large; increase c.undervalued; reduce d.international; increase

a.diversified; reduce

All of the following are competitive risks of using the cost leadership strategy EXCEPT: a.experience can narrow customers' perceptions of the value of a product's unique features. b.the processes used by the cost leader to produce and distribute its product could become obsolete because of competitors' innovations. c.too much focus by the cost leader on cost reductions may occur at the expense of trying to understand customers' perceptions of competitive levels of differentiation. d.competitors sometimes learn how to imitate the cost leader's strategy.

a.experience can narrow customers' perceptions of the value of a product's unique features.

Pursuing international strategies, particularly an international diversification strategy, typically leads to growth in _____ and _____. a.firm size; complexity in operations b.consumer tastes; competition c.above-average returns; consumer demand d.consumer demand; cultural practices

a.firm size; complexity in operations

The problems of central coordination and integration are mitigated if the firm's international operations compete in: a.friendly, geographically close countries with cultures like the culture of the international firm in question. b.geographically dispersed countries with cultures different than the culture of the international firm in question. c.culturally different countries that are close geographically. d.countries with lower gross domestic products (GDPs) than that of the international firm in question.

a.friendly, geographically close countries with cultures like the culture of the international firm in question.

International corporate-level strategy focuses on the scope of a firm's operations through _____ diversification. a.geographic b.political c.economic d.social

a.geographic

Conrad Cabinets Company implements a cost leadership strategy to produce its cabinets with features that are acceptable to its customers at the lowest cost relative to that of its competitors. Conrad Cabinets' value-creating activities might include all of the following EXCEPT: a.having a specially trained unit to provide after-sales service. b.building economies of scale and efficient operations. c.using low-cost modes of transporting its products. d.offering lower prices for high sales volumes.

a.having a specially trained unit to provide after-sales service.

With _____ degrees of ownership concentration, the probability is _____ that managers' decisions will be designed to maximize shareholder value. a.high; greater b.average; lower c.low; greater d.high; lower

a.high; greater

A _____ is an acquisition of a target company by an acquiring firm that is accomplished not by coming to an agreement with the target company's management but by going directly to the company's shareholders or fighting to replace management in order to get the acquisition approved. a.hostile takeover b.golden parachute c.capital structure change d.poison pill

a.hostile takeover

How firms integrate the activities they complete within each business-level strategy demonstrates: a.how they differ from one another. b.how profitable they will be. c.what their cost structure is. d.whether they will have the lowest costs.

a.how they differ from one another.

In emerging economies, a significant economic risk related to industry leaders having sufficient electrical power in national grids to meet their usage needs requirements is generally referred to as availability of: a.infrastructure. b.technology. c.monetary exchange. d.capital.

a.infrastructure.

Value-chain activities include all of the following EXCEPT: a.management information systems. b.operations. c.marketing. d.distribution.

a.management information systems.

Research suggests that having a competitive advantage in logistics creates _____ value with a _____ strategy than with a _____ strategy. a.more; cost leadership; differentiation b.less; cost leadership; differentiation c.more; differentiation; focus d.less; cost leadership; focus

a.more; cost leadership; differentiation

Powerful customers can force a cost leader to reduce its prices, but not below the level at which the cost leader's: a.next-most-efficient industry competitor can earn average returns. b.least efficient industry competitor can earn average returns. c.next-most-efficient industry competitor can earn above-average returns. d.next-most-efficient industry competitor can earn below-average returns.

a.next-most-efficient industry competitor can earn average returns.

Agency costs do NOT include _____ costs. a.opportunity b.incentive c.monitoring d.enforcement

a.opportunity

Some research suggests that a firm performs better if: a.outside directors own significant equity stakes in the firm. b.the board of directors includes employees as voting members. c.the board of directors is relatively homogenous in its makeup. d.the CEO also holds the chair of the board title.

a.outside directors own significant equity stakes in the firm.

In general, ownership concentration's influence on strategies is _____, and ownership concentration's influence on firm performance is _____. a.positive; positive b.positive; negative c.negative; positive d.negative; negative

a.positive; positive

Principals establish governance and control mechanisms to: a.prevent agents from acting opportunistically. b.force agents to seek external advice. c.ensure decisions are thoroughly researched before being implemented. d.ensure the proper documentation of all decisions.

a.prevent agents from acting opportunistically.

Activist pension funds are _____ in nature, while activist hedge funds are _____. a.reactive; proactive b.assets; equity c.similar; dissimilar d.increasing; decreasing

a.reactive; proactive

Managerial employment risk is _____ with increased diversification because a firm and its upper-level managers are less vulnerable to the _____ in demand associated with a single or limited number of product lines or businesses. a.reduced; reduction b.increased; increase c.increased; reduction d.reduced; increase

a.reduced; reduction

A _____ focus allows a firm to marshal its resources to compete effectively rather than spreading its limited resources across multiple country-specific international markets. a.regional b.local c.national d.universal

a.regional

The separation of ownership and managerial control allows shareholders to purchase stock, but the right to purchase stock and the potential to receive income from the firm's operations requires them to take a risk. This risk is that they will receive income only if the firm's _____ exceed(s) its _____. a.revenues; expenses b.assets, liabilities c.liabilities; equities d.net income; free cash flow

a.revenues; expenses

China's economy exhibits traits of both _____ and _____. a.socialism; market orientation b.communism; market orientation c.consensus; competition d.centralization; decentralization

a.socialism; market orientation

By sharing resources and knowledge between units and network partners across country borders, firms learn how to create a.synergy. b.expertise. c.unity. d.intellectual property rights.

a.synergy.

Strategic competitiveness results only when: a.the firm satisfies a group of customers by using its competitive advantages as the basis for competing in individual product markets. b.the firm satisfies markets where supply equals demand. c.the firm needs to find new customers in order to stay in business. d.returns earned by the firm from current customers are below-average.

a.the firm satisfies a group of customers by using its competitive advantages as the basis for competing in individual product markets.

From a strategic perspective, a basic need of all customers is to buy products that create _____ for them. a.value b.challenges c.questions d.encounters

a.value

A firm developed a system for nurse practitioners to organize their notes taken during routine office assessments of patients. The same firm recently acquired a firm specializing in physician assistants to record patient evaluations. The firm is hoping to:

achieve economies of scope.

In an acquisition, financing is easier and less costly to obtain when the:

acquiring firm has financial slack.

Jeston Company and Louis Incorporated are two mid-size pharmaceutical companies. After extensive negotiations, the two firms reached an agreement in which Jeston bought controlling interest in Louis and Louis became a subsidiary business. This strategy is known as a(n):

acquisition.

What is the Japanese "keiretsu"? a.The banks owning the largest shares of stock in the firm b.A group of firms tied together by cross-shareholdings c.Company unions, which are a type of governance system d.Management structures related to total quality management (TQM) systems

b.A group of firms tied together by cross-shareholdings

_____ is a popular entry mode because it allows a firm to connect with an experienced partner already in the market. a.A greenfield venture b.A strategic alliance c.Licensing d.Exporting

b.A strategic alliance

Which of the following is NOT a consequence of the Sarbanes-Oxley Act (SOX)? a.A decreased number of foreign firm listings resulted on U.S. stock exchanges. b.An increased number of IPOs (initial public offerings) were legislated. c.Internal auditing scrutiny in firms' financial reporting improved. d.Section 404 increased costs for firms.

b.An increased number of IPOs (initial public offerings) were legislated.

Historically, which type of firm occupied the center of the German corporate governance system? a.Utilities b.Banks c.Mining firms d.Manufacturing firms

b.Banks

Why are the five business-level strategies considered to be generic in nature? a.Because they are not listed in any certain order b.Because they can be used in any organization competing in any industry c.Because they are risk-free d.Because they all incorporate the value chain

b.Because they can be used in any organization competing in any industry

Which of the following statements about a global strategy is true? a.The global strategy offers fewer opportunities to take innovations developed at the corporate level and apply them in other markets. b.Compared to a multidomestic strategy, the global strategy seeks greater levels of standardization of products across country markets. c.The global strategy is difficult to use because of its conflicting goals. d.A global strategy is most appropriate for use when the differences between the markets a firm serves and the customers in them are significant.

b.Compared to a multidomestic strategy, the global strategy seeks greater levels of standardization of products across country markets.

Which of the following is NOT a business-level strategy used by firms to establish and defend their desired strategic position against competitors? a.Cost leadership b.Delineation c.Focused cost leadership d.Focused differentiation

b.Delineation

Which of the following statements about diffuse ownership is true? a.As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions strengthens. b.Diffuse ownership makes it difficult for owners to effectively coordinate their actions. c.Diffuse ownership often results in increased shareholder value. d.Diffuse ownership occurs when an individual holds both the CEO and chair of the board titles.

b.Diffuse ownership makes it difficult for owners to effectively coordinate their actions.

_____ risks include fundamental weaknesses in a country or region's economy with the potential to cause adverse effects on firms' efforts to successfully implement their international strategies. a.Political b.Economic c.Social d.Financial

b.Economic

What is the determinant of national advantage that refers to the inputs necessary for a firm to compete in any industry? a.Demand conditions b.Factors of production c.Related and supporting industries d.Firm strategy, structure, and rivalry

b.Factors of production

Which of the following statements regarding exporting is NOT true? a.By exporting, firms avoid the expense of establishing operations in host countries in which they have chosen to compete. b.Firms avoid marketing expenses by using exporting. c.Firms must establish some means of distributing their products when exporting. d.Firms typically form contracts with host-country firms to handle distribution of their products.

b.Firms avoid marketing expenses by using exporting.

Which of the following is a limit to the positive effects of the diversification associated with international strategies? a.Monopolies b.Increased costs of coordination between units c.Government oversight d.Poor product quality

b.Increased costs of coordination between units

_____ are financial institutions, such as mutual funds and pension funds, that control large-block shareholder positions. a.Outsiders b.Institutional owners c.Insiders d.Boards of directors

b.Institutional owners

Which of the following is a benefit that product diversification can create for top-level managers that shareholders do not enjoy? a.It increases top-level managers' employment risk. b.It provides an opportunity for top-level managers to increase their compensation. c.It allows top-level managers the opportunity to make strategic decisions that maximize their personal welfare. d.It decreases the complexity of managing a firm.

b.It provides an opportunity for top-level managers to increase their compensation.

Where corruption can be a problem, which type of market entry is preferred? a.Acquisition b.Joint venture c.Licensing d.New wholly owned subsidiary

b.Joint venture

Your firm has entered the market in several foreign countries. However, the governments in some countries will not allow your company software to collect data like it does in the United States. Which of the following explains this difference? a.Global integration b.Liability of foreignness c.Regionalization d.Scale economies

b.Liability of foreignness

_____ top management teams often have a greater knowledge of international markets and their idiosyncrasies. a.Well-educated b.More culturally diverse c.Younger d.More innovative

b.More culturally diverse

Which of the following is NOT an international corporate-level strategy? a.Global strategy b.Multicultural strategy c.Multidomestic strategy d.Transnational strategy

b.Multicultural strategy

Which of the following represents newly designed production and distribution methods and techniques that allow the firm to operate more efficiently? a.Supply-chain management b.Process innovations c.Outbound logistics d.Differentiation

b.Process innovations

Which of the following is critical to successful use of the differentiation strategy? a.A competitive advantage in logistics b.Product innovation c.Outsourcing d.Process innovations

b.Product innovation

Which of the following is a means considered to improve the effectiveness of outside directors? a.Requiring that outside directors act objectively, having no ownership interest in the firm b.Requiring outside directors to own significant equity stakes in the firm as a prerequisite to holding a board seat c.Mandating that all outside directors come from government or academia rather than industry as a prerequisite for holding a board seat d.Requiring that outside directors be former executives of the firm as a prerequisite to holding a board seat

b.Requiring outside directors to own significant equity stakes in the firm as a prerequisite to holding a board seat

Which of the following statements about ownership concentration is NOT true? a.Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders. b.Research evidence suggests that ownership concentration is associated with higher levels of firm product diversification. c.Ownership concentration as a governance mechanism has received considerable interest, because large-block shareholders are increasingly active in their demands that firms adapt effective governance mechanisms to control managerial decisions so that they will best represent owners' interests. d.Research indicates that institutional activism may not have a strong direct effect on firm performance, but it may indirectly influence a targeted firm's strategic decisions (including those concerned with social issues).

b.Research evidence suggests that ownership concentration is associated with higher levels of firm product diversification.

Amazon has capitalized on which dimension with customers in order to build customer-centric relationships? a.Reach b.Richness c.Affiliation d.Pricing

b.Richness

_____ is a customer dimension concerned with the depth and detail of the two-way flow of information between the firm and customers. a.Reach b.Richness c.Affiliation d.Effective managemen

b.Richness

_____ firms are the most harmed by bribery. a.Large multinational b.Small- and medium-sized c.Small- and large-sized d.Medium- and large-sized

b.Small- and medium-sized

Which of the following popular entry modes can facilitate the development of new capabilities and possibly core competencies that may contribute to the firm's strategic competitiveness? a.Acquisitions b.Strategic alliances c.Licensing d.Exporting

b.Strategic alliances

_____ defines the path that provides the direction of actions to be taken by leaders of the organization. a.Capability b.Strategy c.Competitive advantage d.Market segmentation

b.Strategy

For just $3 a month, Dollar Shave Club ships high-quality razors and blades, plus occasional sample products, to its customers. Dollar Shave Club is an example of which type of business model? a.Franchise b.Subscription c.Freemium d.Advertising

b.Subscription

Which of the following is NOT a typical risk of a differentiation strategy? a.Widely available counterfeit goods may be acceptable to customers. b.Suppliers of raw materials gouge a differentiation firm's profit margin with price increases. c.Experience with other products can narrow customers' perceptions of a product's differentiated features. d.Customers may decide the price differential between the differentiator's product and the cost leader's product is too large.

b.Suppliers of raw materials gouge a differentiation firm's profit margin with price increases.

Which of the following statements regarding acquisitions is NOT true? a.They are an increasingly popular way to enter the international market. b.They are typically without costs due to the way they are structured. c.They are not easy to successfully complete. d.They are not easy to successfully operate.

b.They are typically without costs due to the way they are structured. d.They are not easy to successfully operate.

Who are typically assumed to be responsible for an undervalued firm's poor performance? a.The board of directors b.Top-level managers c.Institutional owners d.Shareholders

b.Top-level managers

Which of the following is NOT a reason why the transnational strategy is becoming increasingly necessary for competing in international markets? a.The continuing increases in the number of viable global competitors challenge firms to reduce their costs. b.Transnational strategy is easier to use than a multidomestic or global strategy. c.The increasing sophistication of markets with greater information flows pressures firms to differentiate their products in local markets. d.Differences in culture and institutional environments require firms to adapt their products and approaches to local environments.

b.Transnational strategy is easier to use than a multidomestic or global strategy.

Which of the following is a reason why it can be difficult for boards of directors to effectively assess top-level managers' decisions on a regular basis? a.Boards do not have access to information other than financial documentation. b.Typically, the effects of top-level managers' decisions are stronger on the firm's long-term performance than its short-term performance. c.Typically, boards only meet every other year. d.insider board members are reluctant to disclose issues resulting from poor decisions to all board members.

b.Typically, the effects of top-level managers' decisions are stronger on the firm's long-term performance than its short-term performance.

Research results suggest that stock option incentives: a.are linked to poor managerial decision making and lower performance. b.can be associated with top-level managers' fraudulent behavior, such as earnings manipulation. c.are more motivating to top-level managers than salaries and bonuses. d.are a more important part of compensation packages for top-level managers pursuing an international strategy than for top-level managers leading U.S. firms.

b.can be associated with top-level managers' fraudulent behavior, such as earnings manipulation.

In the current complex competitive landscape, successful use of a business-level strategy results from the firm learning how to integrate the activities it performs in ways that: a.generate above-average dividends for stockholders. b.create superior value for customers. c.increase profit margins. d.reduce production costs.

b.create superior value for customers.

Firms using the cost leadership strategy must understand that in terms of sources of differentiation accompanying the cost leader's product, the term "acceptable" is defined by the: a.firm delivering the product. b.customer receiving the product. c.firm's closest competitor. d.firm's shareholders.

b.customer receiving the product.

A _____ strategy is an international strategy in which a firm's home office determines the strategies that business units are to use in each country or region. a.universal b.global c.multidomestic d.transnational

b.global

The _____ strategy offers greater opportunities to take innovations developed at the corporate-level, or in one market, and apply them in other markets. a.universal b.global c.multidomestic d.transnational

b.global

A _____ is a lump-sum payment of cash that is given to one or more top-level managers when the firm is acquired in a takeover bid. a.hostile takeover b.golden parachute c.standstill agreement d.poison pill

b.golden parachute

A _____ is an entry mode through which a firm invests directly in another country or market by establishing a new wholly owned subsidiary. a.licensing agreement b.greenfield venture c.cross-border acquisition d.strategic alliance

b.greenfield venture

Businesswoman Marybeth Johnson just purchased an additional 2,000 shares of Western Telecomm, which means she now possesses about 7 percent of the firm's issued shares. This makes her a(n): a.angel investor. b.large-block shareholder. c.insider. d.institutional owner.

b.large-block shareholder.

New entrants to a market must be willing to accept _____ until they gain the experience required to approach the cost leader's efficiency. a.profit losses b.less than average returns c.inferior goods from suppliers d.disgruntled shareholders

b.less than average returns

When selecting a business-level strategy, firms evaluate two types of potential competitive advantages: _____ or _____. a.the cost leadership strategy; the number of competitors b.lower cost than rivals; the ability to differentiate and command a premium price that exceeds the extra cost of doing so c.internal resources; the ability to command a premium price for value-added capabilities d.the industry as a whole; the core competencies of competitors

b.lower cost than rivals; the ability to differentiate and command a premium price that exceeds the extra cost of doing so

The effectiveness of each of the five business-level strategies is contingent on the _____ in a firm's external environment and on the _____ derived from the firm's resource portfolio. a.strengths and weaknesses; opportunities and threats b.opportunities and threats; strengths and weaknesses c.core competencies and target market; strengths and weaknesses d.competitors and target market; opportunities and threats

b.opportunities and threats; strengths and weaknesses

Rocco Company is considering expanding to an overseas market, but has some concerns about the stability of the national government and the effects that any government instability may have on its investments. To deal with these concerns, Rocco should conduct a(n) _____ analysis. a.economic risk b.political risk c.SWOT d.internal

b.political risk

Corporate governance does NOT include: a.ensuring that top-level managers' interests are aligned with the interests of stakeholders. b.resolving conflicts among corporate employees. c.establishing and maintaining harmony between the firm's owners and its top-level managers whose interests may conflict. d.using mechanisms to determine and control the strategic direction and performance of organizations.

b.resolving conflicts among corporate employees.

Commonly, those managing small firms own a _____ percentage of the firm, which means there is _____ separation between ownership and managerial control. a.significant; more b.significant; less c.small; more d.small; less

b.significant; less

Corporate governance is the set of mechanisms used to manage the relationships among stakeholders and to determine and control the _____ of organizations. a.selection of products and markets b.strategic direction and performance c.revenues, expenses, and profit margins d.opportunities and threats

b.strategic direction and performance

International strategy makes it possible for firms to use _____ to organize their operations into a seamless whole. a.operations research b.technologies c.marketing d.human resources

b.technologies

Lower costs result from: a.providing customers with fewer activities. b.the firm's ability to perform activities differently than rivals. c.the firm's internal resources. d.the core competencies of competitors.

b.the firm's ability to perform activities differently than rivals.

All of the following are internal governance mechanisms used in the modern corporation EXCEPT: a.executive compensation. b.the market for corporate control. c.the board of directors. d.ownership concentration.

b.the market for corporate control.

The amount of diversification in a firm's international operations that can be managed: a.is the same for all firms, regardless of their size. b.varies from company to company. c.is not affected by managers' abilities to deal with ambiguity and complexity. d.is immaterial.

b.varies from company to company.

When selecting a business-level strategy geared toward customers, the firm determines all of the following EXCEPT: a.what needs those target customers have that it will satisfy. b.when to start implementing the strategy. c.how the needs of target customers will be satisfied. d.who will be served.

b.when to start implementing the strategy.

Renee is a manager at Gyrod, a company that has successfully negotiated a number of acquisitions over the past several years. As a result, Gyrod has grown much larger than when Renee began working there nine years ago. Renee has noticed that Gyrod has been relying on more formal supervisory and behavioral rules and feels that these _____ controls are limiting her flexibility as a manager.

bureaucratic

A rule approved by the U.S. Securities and Exchange Commission (SEC) allows large shareholders (owning 1 to 5 percent of a company's stock) to nominate up to _____ percent of a company's board of directors. a.5 b.10 c.25 d.50

c.25

_____ involves viewing the world through the customer's eyes and constantly seeking ways to create more value for the customer. a.Reach b.Richness c.Affiliation d.Demographics

c.Affiliation

Where does the principal source of financial advice and monitoring of large public firms come from in Japan? a.Stock brokerage companies b.The government c.Banks d.The boards of directors

c.Banks

Why is a differentiation strategy effective in controlling the power of product substitutes in an industry? a.Because substitute products are lower quality b.Because differentiating firms can always lower prices c.Because customers develop brand loyalty d.Because customers have low switching costs

c.Because customers develop brand loyalty

Which of the following strategies helps a firm concentrate on understanding its customers and their needs with greater clarity as a foundation for innovation? a.Market segmentation strategy b.Business model strategy c.Digital strategy d.Cost leadership strategy

c.Digital strategy

What is a critical element for developing and managing technology-based capabilities while using strategic alliances? a.Establishing proper rollout procedures for the technology between partners b.Establishing profit performance measures between partners c.Establishing trust between partners d.Flowcharting the new technology between partners

c.Establishing trust between partners

Which of the following statements about the effectiveness of boards of directors is NOT true? a.Research suggests that diverse boards help firms make more effective strategic decisions and perform better over time. b.One of the changes to enhance the effectiveness of the board of directors is the creation of a "lead director" role that has strong powers with regard to the board agenda and oversight of non-management board member activities. c.Evidence suggests that boards have been highly effective in monitoring and controlling top-level managers' decisions and subsequent actions. d.The performances of individual board members and entire boards are being evaluated more formally and with greater intensity than in years past.

c.Evidence suggests that boards have been highly effective in monitoring and controlling top-level managers' decisions and subsequent actions.

What are three sources of flexibility that help a firm implement the integrated cost leadership/differentiation strategy successfully? a.Outsourcing, reengineering, and flexible manufacturing systems b.Flexible manufacturing systems, reengineering, and total quality management systems c.Flexible manufacturing systems, total quality management systems, and information networks d.Outsourcing, total quality management systems, and information networks

c.Flexible manufacturing systems, total quality management systems, and information networks

Delilah's Delicacies, a food truck that specializes in organic foods, sets up in "high-end" designated areas for street cuisine. What type of strategy is Delilah's implementing? a.Differentiation b.Cost leadership c.Focused differentiation d.Integrated cost leadership/differentiation

c.Focused differentiation

Which of the following is NOT one of the types of distances commonly associated with liability of foreignness? a.Economic b.Cultural c.Global d.Administrative

c.Global

Which of the following hostile takeover defense strategies involves the repurchase of the target firm's shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover? a.Capital structure change b.Golden parachute c.Greenmail d.Poison pill

c.Greenmail

Which of the following is NOT one of the five modes of entry into international markets available to firms? a.Exporting b.Acquisitions c.Importing d.Licensing

c.Importing

What type of strategy does a firm use to sell its goods or services outside its domestic market? a.Country strategy b.Majority strategy c.International strategy d.Public strategy

c.International strategy

Which of the following is an entry mode in which an agreement is formed that allows a foreign company to purchase the right to manufacture and sell a firm's products within a host country's market? a.Strategic alliance b.Acquisition c.Licensing d.Exporting

c.Licensing

Which of the following hostile takeover defense strategies has a positive effect on shareholder wealth? a.Greenmail b.Standstill agreement c.Litigation d.Corporate charter amendment

c.Litigation

Which of the following are characteristics of licensing? a.High cost, low control b.Shared costs, shared resources, shared risks, problems of integration c.Low cost, low risk, little control, low returns d.Complex, often costly, time consuming, high risk, maximum control, potential above-average returns

c.Low cost, low risk, little control, low returns

Markham Food Services contracts with elementary schools in three states to supply meals for children. In order to increase profits, Markham uses substandard ingredients in these meals but has passed its quality investigations with the various school districts. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a.The head of contract services for the school districts b.Employees directly involved in the wrongdoing c.Markham's board of directors d.The director of food services for Markham

c.Markham's board of directors

Which of the following approaches to differentiation would present a high-end, luxury handbag and footwear designer with the best opportunity to differentiate itself from competitors? a.Responsive customer service b.Technological leadership c.Perceived prestige and status d.Rapid product innovations

c.Perceived prestige and status

Which of the following is an example of political risk? a.Debt of various countries b.Devaluation of a country's currency c.Potential nationalization of invested assets d.Uncertain prices for critical commodities

c.Potential nationalization of invested assets

Which of the following is a typical risk for a firm that uses the cost leadership strategy? a.Excessive differentiation causing the customer base to become too small b.Loss of customer loyalty c.Production and distribution processes becoming obsolete d.Inability to balance high differentiation with low price

c.Production and distribution processes becoming obsolete

Which of the following is a trend becoming prominent largely because where a firm chooses to compete can affect its strategic competitiveness? a.Global competition b.Global efficiency c.Regionalization d.Liability of foreignness

c.Regionalization

Which of the following statements about the preferences of shareholders and top-level managers with regard to a firm's level of diversification is true? a.In general, shareholders prefer less focused diversification. b.Top-level managers prefer lower levels of product diversification than do shareholders. c.Shareholders seek a level of diversification that reduces the risk of the firm's total failure while simultaneously increasing its value. d.Top-level managers prefer that a firm's diversification increases their employment risk and employment opportunities.

c.Shareholders seek a level of diversification that reduces the risk of the firm's total failure while simultaneously increasing its value.

What is the governance mechanism most closely connected with deterring unethical behaviors by holding top-level managers fully accountable for developing and supporting an organizational culture in which only ethical behaviors are permitted? a.Executive compensation systems b.The market for corporate control c.The board of directors d.Ownership concentration

c.The board of directors

Which of the following statements about corporate governance in Germany is NOT true? a.Agency problems are not as prevalent in many private German firms. b.Employees, union members, and shareholders appoint members to the Aufsichtsrat (the supervisory tier of the board). c.The management board (Vorstand) is elected by the firm's employees. d.The Vorstand of a German corporation makes decisions about strategy and management.

c.The management board (Vorstand) is elected by the firm's employees.

Which of the following is an external governance mechanism that is active when a firm's internal governance mechanisms fail? a.A corporate charter b.Executive compensation c.The market for corporate control d.Capital structure

c.The market for corporate control

Which of the following is NOT one of the groups that board of directors' members are generally classified into? a.Related outsiders b.Insiders c.Unrelated outsiders d.Outsiders

c.Unrelated outsiders

Which of the following statements regarding the use of defense tactics by the target firm during a hostile takeover is NOT true? a.Defense tactics vary in their effectiveness as a defense to takeovers. b.In general, managers' use of defense tactics is considered to be self-serving in nature. c.Using takeover defenses increases the amount of pressure managers feel to seek short-term performance gains. d.Defense tactics can have both positive and negative effects on shareholder wealth.

c.Using takeover defenses increases the amount of pressure managers feel to seek short-term performance gains.

The separation between owners and managers creates a(n) _____ relationship. a.control b.dependent c.agency d.governance

c.agency

Firms use _____ to implement value-creating strategies. a.cost control b.targeting c.core competencies d.cross-training

c.core competencies

A company that is unable to effectively integrate the value-chain activities and support functions needed to create value when implementing the cost leadership strategy typically lacks: a.the ability to earn average returns. b.bargaining power. c.core competencies needed to use the cost leadership strategy successfully. d.the ability to successfully imitate competitors.

c.core competencies needed to use the cost leadership strategy successfully.

Vendors across the country offer sunglasses that look virtually identical to those made by Chanel, Prada, Gucci, and other luxury brands—including the trademark logos—but cost far less. These products are the result of: a.competition. b.imitation. c.counterfeiting. d.evolving consumer preferences.

c.counterfeiting.

In recent years, the number of individuals who are large-block shareholders has: a.slightly increased. b.remained steady. c.declined. d.skyrocketed.

c.declined.

All of the following are factors that contribute to the positive effects of international diversification EXCEPT: a.potential economies of scale and experience. b.location advantages. c.decreased market share. d.the opportunity to stabilize returns.

c.decreased market share.

All of the following are determinants of national advantage as identified by Michael Porter EXCEPT: a.demand conditions. b.factors of production. c.economies of scale. d.firm strategy, structure, and rivalry.

c.economies of scale.

The _____ strategy is an integrated set of actions taken to produce products that serve the needs of a particular segment of customers. a.differentiation b.cost leadership c.focus d.integrated cost leadership/differentiation

c.focus

A business model is a _____ for how the firm will create, deliver, and capture value while a business-level strategy is the set of commitments and actions that yields the _____ the firm intends to follow to gain a competitive advantage by exploiting its core competencies in a specific product market. a.path; framework b.high-level strategy; path c.framework; path d.high-level strategy; map

c.framework; path

In general, large international markets offer _____ potential returns and pose _____ risk for the firm choosing to invest in those markets. a.lower; less b.lower; more c.higher; less d.higher; more

c.higher; less

Thompson Manufacturing is looking to enhance the effectiveness of its board of directors. All of the following are ways this can be done EXCEPT: a.increasing the diversity of the backgrounds of board members. b.strengthening internal management and accounting control systems. c.increasing stock options as part of board members' compensation. d.establishing and consistently using formal processes to evaluate board members' performance.

c.increasing stock options as part of board members' compensation.

All of the following are fundamental issues affecting efforts to build trust between strategic alliance partners EXCEPT: a.partner interactions. b.external events. c.internal events. d.the negotiation process to arrive at an agreement.

c.internal events.

Effectively using executive compensation as a governance mechanism is particularly challenging for firms implementing _____ strategies. a.corporate-level b.merger and acquisition c.international d.business-level

c.international

A(n) _____ strategy is a strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into a potentially large number of geographic locations or markets. a.political risk b.economic risk c.international diversification d.greenfield venture

c.international diversification

The amount of rivalry between competitors can be reduced when firms form: a.labor unions. b.cost leaders. c.joint ventures. d.entry barriers.

c.joint ventures.

Ownership concentration is defined by the number of _____ and the _____. a.outside directors; total percentage of the firm's shares they own b.outside directors; parties they represent c.large-block shareholders; total percentage of the firm's shares they own d.large-block shareholders; parties they represent

c.large-block shareholders; total percentage of the firm's shares they own

Most firms introduce their _____ lines of business into regional markets first. a.most innovative b.oldest c.largest and strongest d.most culturally appropriate

c.largest and strongest

Research suggests that firms in which families own enough equity to have influence without major control tend to: a.earn below-average returns. b.earn profits approximately equal to their competitors. c.make the best strategic decisions. d.have the most conflict between top-level managers and board members.

c.make the best strategic decisions.

Firms use the integrated cost leadership/differentiation strategy because: a.global markets allow for a much broader competitive scope. b.most large firms require more than one strategy and this allows for a multi-faceted strategy. c.most consumers want to pay low prices for products with somewhat highly differentiated features. d.this strategy allows firms to adapt to changing customer perceptions, unlike the other strategies available.

c.most consumers want to pay low prices for products with somewhat highly differentiated features.

Firms use the integrated cost leadership/differentiation strategy because: a.global markets allow for a much broader competitive scope. b.most large firms require more than one strategy and this allows for a multi-faceted strategy. c.most consumers want to pay low prices for products with somewhat highly differentiated features. d.this strategy allows firms to adapt to changing customer perceptions, unlike the other strategies available.

c.most consumers want to pay low prices for products with somewhat highly differentiated features.

A _____ strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for the purpose of allowing each unit the opportunity to tailor products to the local market. a.global b.transnational c.multidomestic d.multidimensional

c.multidomestic

The Dodd-Frank Wall Street Reform and Consumer Protection Act does all of the following EXCEPT: a.provides a new framework to regulate derivatives. b.establishes new corporate governance requirements. c.prescribes significant transparency improvement on internal control associated with accounting and auditing. d.regulates credit rating agencies and securitizations.

c.prescribes significant transparency improvement on internal control associated with accounting and auditing.

Firms implementing a focus strategy: a.shift into a global market. b.target a typical customer in the industry. c.serve the needs of a particular industry segment. d.offer both differentiated and low-cost goods.

c.serve the needs of a particular industry segment.

In general, family-controlled businesses will outperform nonfamily-controlled businesses because they: a.have fewer large-block shareholders. b.are more risk averse. c.want to maintain the family legacy. d.have more insiders on their boards of directors.

c.want to maintain the family legacy.

Large businesses that are not related to each other and make no efforts to share activities or to transfer core competencies between or among are typically known as:

conglomerates

As a strategy, downsizing will be far more effective when managers:

consistently use human resource practices that ensure procedural justice and fairness in decisions.

A __ specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

corporate-level strategy

Firms using the related constrained diversification strategy share activities across businesses in order to:

create value.

Acquisitions made between companies with headquarters in different countries are called _____ acquisitions.

cross-border

Newburg, a U.S. company, is looking to grow its business. Research has indicated that the European market would be ideal for its products, but Newburg has had difficulty getting its products into that market. Newburg would be best served if it considers a(n):

cross-border acquisition of a European distributor.

Integration processes tend to generate uncertainty and often resistance because of _____ and _____.

cultural clashes; organizational politics

Which of the following tax effects created an incentive for diversification?

In the 60's and 70's, dividends were taxed more heavily than were capital gains.

Which of the following will NOT help a company pursuing vertical integration gain market power over its competitors?

Increased bureaucratic costs

Which of the following is NOT a potential problem in achieving success with acquisitions strategies?

Increased market power

What type of financial economy would be used to reduce risk among the firm's businesses when using unrelated diversification strategy?

Internal capital allocations

Through which financing option are risky acquisitions financed with debt that provides a large potential return to lenders?

Junk bonds

Which of the following is NOT a barrier to transferring competencies by moving key people into new management positions as discussed in the text?

Managerial competencies are not easily transferable to different organizational cultures.

A furniture manufacturer is considering acquiring an upholstery fabric manufacturer. Among the hundreds of items under review in the due-diligence process, which of the following is NOT something that executives, bankers, and other stakeholders are concerned about?

Marketing strategies to be implemented after the acquisition

Which of the following is NOT true of merger activity during the 1980s?

More than 79 percent of all mergers were conglomerate in nature.

Research shows that about 20 percent of mergers and acquisitions are successful and that _____ percent are clear failures.

20

One reason managers may choose acquisitions over new product development is that an estimated _____ percent of innovations fail to achieve adequate returns.

88

Which of the following is required to take advantage of international research and development (R&D) investments? a.Training personnel b.Specialized equipment c.Outsourcing d.A strong R&D system already in place

d.A strong R&D system already in place

Of the five entry modes, which is often the quickest means for firms to enter international markets? a.Licensing b.Strategic alliance c.Exporting d.Acquisition

d.Acquisition

Which of the following statements about a flexible manufacturing system (FMS) is NOT true? a.Used properly, an FMS allows the firm to increase its effectiveness in responding to changes in its customers' needs, while retaining low-cost advantages and consistent product quality. b.An FMS is a computer-controlled process that allows firms to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention. c.The goal of an FMS is to eliminate the "low cost versus product variety" trade-off that is inherent in traditional manufacturing technologies. d.An FMS allows a manufacturer to connect with its suppliers, distributors, and customers, which enables it to satisfy customer expectations in terms of product quality and delivery speed.

d.An FMS allows a manufacturer to connect with its suppliers, distributors, and customers, which enables it to satisfy customer expectations in terms of product quality and delivery speed.

Why should shareholders of the acquiring firm be concerned about paying a premium for the target firm?

Paying excessive premiums to acquire a firm can have a negative impact on the acquisition.

What are the two things that firms can share to create operational relatedness?

Primary or support activities

Shares of Prospect, Inc. were selling for $46.50 before the firm was purchased in a leveraged buyout. What can investors expect to see happen to the firm's stock now that the leveraged buyout is complete?

Prospect's stock will no longer be traded publicly.

Tina is new to investing. After doing some research into both Ewing Co. and Wallingford Co., two mid-size wooden pallet manufacturers, she decided to purchase stock in Wallingford. This week, the two firms announced that Ewing will be acquiring Wallingford. As a stockholder in Wallingford, what can Tina expect?

Above-average returns

What is one of the risks in using acquisitions as a means of product development and innovation?

Acquisitions may become too much of a substitute for true internal innovation.

Which of the following is NOT a reason for acquisitions?

Addition of employees

Which of the following is a value-neutral reason for diversification?

Reacting to new tax laws

Reeve Inc. recently downsized by 5 percent. What short-term outcome can it expect?

Reduced labor costs

Quality Construction Supply is a building materials provider headquartered in eastern Canada. The firm's leadership team has recognized that intense rivalry in the region is having a negative impact on the firm's growth and profitability. What is the primary reason behind the firm's decision to acquire a similar building materials supplier serving the northeastern United States?

Reducing the firm's dependence on the eastern Canadian market will reshape the firm's competitive scope.

Mulberry Inc. and Persimmon Company are two mid-size canned fruit manufacturers. They just announced that Mulberry will be acquiring Persimmon. What can a current stockholder in Mulberry expect?

Returns that are close to zero

Which of the following companies simultaneously creates economies of scope through both operational and corporate relatedness?

Amazon

Which of the following is NOT an incentive to diversify that comes from a firm's internal environment?

Antitrust regulations

Why is it difficult for high-technology firms and service-based companies to restructure assets and sell them profitably?

Both have few tangible assets.

When semiconductor producer Qualcomm's value declined due to regulatory challenges, its leading competitor, Broadcom, attempted to purchase the firm. Qualcomm's board viewed this move as an attempt at a hostile takeover. What can we determine about the nature of the offer based on this description?

Broadcom's bid was unsolicited.

How is successful unrelated diversification through restructuring typically accomplished, as exemplified by the Danaher Business System?

By focusing on mature, low-technology businesses

Historically, Cisco Systems was in the computer hardware business, focused on building the infrastructure that allows the Internet to work. Recently, however, the firm has sought out acquisitions in the software business and has focused on cloud computing, still with the mission of connecting people, processes, and data. What is the primary reason for the firm's acquisition strategy?

Cisco Systems has recognized changing needs in its industry, so it has focused on acquiring firms with different but related and complementary capabilities.

What is the "Achilles heel" for firms that use the unrelated diversification strategy in a developed economy?

Competitors can imitate financial economies more easily than they can replicate the value gained from the economies of scope developed through operational relatedness and corporate relatedness.

Kevin has been charged with recommending a target company for his firm's acquisition. He found a number of potential candidates and has narrowed that list down to three. Kevin knows that the acquisition will have a higher likelihood of success if the acquired firm has resources that are complementary to his firm's core business. How can he identify the firm with the strongest complementarities?

Conduct a due diligence of the firms.

Which of the following terms exemplifies complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience, and expertise?

Corporate-level core competencies

A furniture manufacturer recently completed a hostile takeover of a family-run upholstery manufacturer, and the former owners of the acquired firm have been ousted from the company. Which of the following challenges is the furniture manufacturer most likely to face in the integration process?

Difficulty in creating synergy

Jinx Entertainment wants to shift its focus to developing apps for online distribution. However, Jinx found that it could not devote proper attention to this goal while still maintaining its full-length motion picture division because the requirements are so different. So it spun off the motion picture division into a new company. This is an example of what restructuring strategy?

Downscoping

When a firm chooses to divest itself of businesses that are unrelated to the firm's core business, which restructuring strategy is it using?

Downscoping

Which type of restructuring strategy generally leads to more positive outcomes in both the short and long term?

Downscoping

Why does downscoping have a more positive effect on firm performance than downsizing?

Downscoping causes firms to refocus on their core business.

Which of the following is NOT an expected outcome of a management buyout?

Downsizing

Which type of restructuring strategy is of more tactical than strategic value?

Downsizing

_____ is a restructuring strategy in which the number of a firm's employees is reduced without necessarily changing the composition of businesses in the company's portfolio.

Downsizing

What might a firm expect to happen as a result of having a dominant-business diversification strategy and managing only a very small set of businesses?

Economies of scale and efficient use of resources

In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. By using its faculty as consultants, what is the university trying to gain?

Economies of scope

Jersey Pharmaceuticals is negotiating the acquisition of MassBioTech, but the two firms have very different opinions on the value of the target firm. How can Jersey Pharmaceuticals make sure it doesn't overpay to acquire MassBioTech?

Effectively conduct the due-diligence process.

Why would a firm that has excess capacity in its sales force want to pursue related diversification as an effective means of diversifying?

Excess capacity of a tangible resource, such as a sales force, can be used to diversify more easily.

Which of the following statements regarding the allocation of capital is true?

External sources of capital have a limited ability to understand operational dynamics within large organizations

What value-creating reason for diversification is associated with an unrelated diversification strategy?

Financial economies

__ are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.

Financial economies

__ integration exists when a company owns its own source of output distribution.

Forward

Which attributes of successful acquisitions are most likely to lead to lower premiums paid by the acquiring firm?

Friendly acquisition and effective due diligence

Brooklyn Corp. has had to issue four profit warnings in the last six months and has seen a 28 percent drop in the price of its stock over the last two years. One of the problems in the past was that Brooklyn got too large. Some management changes have been made, some businesses have been divested, and things are starting to get back on track for the company. What can be done to prevent value-reducing diversification in the future?

Governance mechanisms can be put in place.

_____ and _____ provided incentives for U.S. firms to diversify in the 1960s and 1970s.

Government antitrust policies; tax laws

Zed Company is considering spinning off one of its divisions into a new company. What long-term outcomes can it expect?

Higher performance

Which of the following statements regarding the market for corporate control is true? a.Activist pension funds identify firms whose performance could be improved and then invest in them. b.For top-level managers, board acceptance of the acquiring firm's offer usually leads to job loss because the acquiring firm wants new leadership; if the offer is refused, however, the job loss risk is minimal. c.Research shows that most institutional investors support the use of hostile takeover defense strategies. d.Research suggests that the market for corporate control is an imperfect governance mechanism due to the fact that investors sometimes use the market for corporate control to take an ownership position in firms that are performing well.

d.Research suggests that the market for corporate control is an imperfect governance mechanism due to the fact that investors sometimes use the market for corporate control to take an ownership position in firms that are performing well.

Which of the following is NOT an incentive of using an international strategy? a.Extension a product's life cycle b.Easier access to raw materials c.Opportunities to integrate operations on a global scale d.Shared costs, risks, and resources

d.Shared costs, risks, and resources

Your small company makes a product that your European cousins believe will be popular in their country. You have no foreign manufacturing expertise, but you can manufacture the product here in your firm's domestic facility and ship it to your cousins in Europe, whose firm will market and distribute the product for you. This is an example of: a.a greenfield venture. b.a strategic alliance. c.licensing. d.exporting.

d.exporting.

Borderless demand for globally branded products develops from: a.more restrictive trade barriers. b.the adoption of additional tariffs. c.the adoption of dissimilar capital market structures. d.growing similarities in lifestyle in developed nations.

d.growing similarities in lifestyle in developed nations.

In the majority of cases, _____ are the principal means by which the market for corporate control is activated. a.capital structure changes b.poison pills c.standstill agreements d.hostile takeovers

d.hostile takeovers

Superior integration of business-level strategy activities _____ the likelihood of being able to gain an advantage over competitors and to earn _____ returns. a.increases; minimal to average b.decreases; average c.decreases; below-average d.increases; above-average

d.increases; above-average

If the cost leader in the computer printer market is losing market share to its nearest rival competitor, which produces very similar products in a similar way, the cost leader should respond by: a.lowering its prices even more. b.exiting the market. c.shifting to a differentiation strategy. d.increasing the value of its products.

d.increasing the value of its products.

A widely accepted view is that a board of directors with a significant percentage of _____ provides relatively _____ monitoring and control of managerial decisions. a.outsiders; weak b.related outsiders; strong c.related outsiders; weak d.insiders; weak

d.insiders; weak

A total quality management (TQM) system is particularly valuable for firms using the _____ strategy. a.focused differentiation b.cost leadership c.focused cost leadership d.integrated cost leadership/differentiation

d.integrated cost leadership/differentiation

Firms failing to perform the value-chain activities and support functions in an optimum manner when implementing the _____ strategy become "stuck in the middle." a.cost leadership b.focus c.differentiation d.integrated cost leadership/differentiation

d.integrated cost leadership/differentiation

A product substitute becomes a concern for the cost leader when a.increased margins of competitors are above the cost leader. b.there is no differentiation strategy available. c.the cost leader has no flexibility to reduce the price of its goods. d.its features and characteristics, in terms of cost and differentiation, are potentially attractive to the firm's customers

d.its features and characteristics, in terms of cost and differentiation, are potentially attractive to the firm's customers

All of the following are factors that influence the degree of rivalry between competitors EXCEPT: a.a firm's dependence on a particular market. b.prior competitive interactions between firms. c.resources possessed by rivals. d.less flexibility than competitors when faced with product substitutes.

d.less flexibility than competitors when faced with product substitutes.

As their loyalty to a brand increases, customers become: a.more aware of imitation efforts by rivals. b.less accepting of price increases. c.more aware of price decreases. d.less sensitive to price increases.

d.less sensitive to price increases.

The key to Southwest Airlines Co.'s success has been its ability to maintain _____ costs across time while providing customers with _____ levels of differentiation. a.average; acceptable b.below-average; below-average c.high; acceptable d.low; acceptable

d.low; acceptable

A multidomestic strategy focuses on competition within each country because: a.the focus is on national products without customization. b.decisions are centralized for individual countries to tailor products to the national market. c.the firm's need for local responsiveness is low while its need for global integration is high. d.market needs are thought to be segmented by country boundaries.

d.market needs are thought to be segmented by country boundaries.

The outcomes a firm achieves by using a global strategy become more desirable when the strategy is used in areas in which _____ integration among countries is occurring. a.geopolitical b.multinational c.national d.regional

d.regional

Fred's Fitness, a new entrant in the fitness equipment market, has decided to implement a differentiation strategy. In order for the strategy to be effective in helping Fred's earn above-average returns, the firm must have a thorough understanding of all of the following EXCEPT: a.the value its target customers seek. b.the relative importance that its customers attach to the satisfaction of different needs. c.the features for which its customers are willing to pay a premium. d.the continuous efforts it must make to reduce costs to levels that are lower than those of its competitors.

d.the continuous efforts it must make to reduce costs to levels that are lower than those of its competitors.

The use of multidomestic strategies usually expands the firm's local market share because: a.multidomestic strategies minimize a firm's competitive response to the idiosyncratic requirements of each market. b.multidomestic strategies result in greater knowledge sharing for the corporation. c.multidomestic strategies are cheaper. d.the firm focuses its attention to the local clientele's needs.

d.the firm focuses its attention to the local clientele's needs.

China has been an attractive market for foreign retailers for all the following reasons EXCEPT: a.its large population. b.the growing economic capabilities of Chinese citizens. c.the opening of the Chinese market to foreign firms. d.the lack of access to online retailing.

d.the lack of access to online retailing.

The decision about which entry mode to use is primarily the result of all of the following factors EXCEPT: a.the industry's competitive conditions. b.the country's situation and government policies. c.the firm's unique set of resources, capabilities, and core competencies. d.the product characteristics.

d.the product characteristics.

All of the following are ways that firms develop and use total quality management (TQM) systems EXCEPT: a.to increase customer satisfaction. b.to cut costs. c.to reduce the amount of time required to introduce innovative products to the marketplace. d.to achieve competitive advantage.

d.to achieve competitive advantage.

RXL and NuVal are two major telecommunications companies. They are in advanced talks for RXL to acquire NuVal, and RXL has hired an investment bank to exclusively complete the due-diligence process. RXL's acquisition performance will likely _____ because of this decision.

decrease

The ability to simultaneously create economies of scope by sharing activities (operational relatedness) and transferring core competencies (corporate relatedness) is:

difficult for competitors to understand.

Research has shown that __ and __ are highly correlated.

diversification; firm size

Engall's Foods makes a variety of snack crackers and is well established in the markets it serves. It would like to expand its product line to include other types of snack items but does not have the experience in making those products. Engall's is considering the acquisition of a related firm in order to:

diversify.

Overdiversification often leads to a decision to:

divest some units.

When using the unrelated diversification corporate-level strategy, firms:

do not seek either operational relatedness or corporate relatedness

With the __ diversification strategy, the firm generates between 70 and 95 percent of its total revenue within a single business area.

dominant-business

When there are significant operational and/or strategic relationships between the acquiring and the acquired firm, _____ can be an appropriate restructuring strategy.

downsizing

The difference between downsizing and organizational decline is that:

downsizing is an intentional managerial strategy.

French cement supplier Lafarge acquired Swiss building material supplier Holcim. However, the newly formed Lafarge-Holcim soon discovered that their organizational cultures were very different and the two firms were not a strategic fit. This indicates a lack of _____ on the part of Lafarge.

due diligence

A firm uses horizontal acquisition to achieve greater market power by:

exploiting cost-based and revenue-based synergies.

CSI recently acquired NetResources. Because this was a friendly acquisition, CSI can expect:

faster and more effective integration.

Compared with related constrained firms, related linked firms share _____ resources and assets between their businesses and concentrate mainly on _____ between the businesses.

fewer; transferring knowledge and core competencies

Paying excessive acquisition premiums often causes mergers to:

focus on achieving short-term returns

With complementary assets, the acquiring firm can:

focus on its core business.

A firm uses a related acquisition to create value through:

generating synergy by integrating resources and capabilities.

Debt holders try to improve the value of their investments by taking stakes in businesses with _____ growth and _____ prospects.

high; profitability

Prime Equity is planning a leveraged buyout of ElWays Enterprises. Prime Equity expects to see an emphasis on strategic controls in the short term, which should lead to the long-term outcome of:

higher performance.

The _____ the barriers to market entry, the _____ the probability that a firm will acquire an existing firm to overcome them.

higher; greater

When firms are purchased in the same industry, this is known as:

horizontal acquisition

Ocean's Bounty and Santino's Seafoods are similarly sized seafood distributors serving the restaurant market on the West Coast. Santino's has decided to purchase Ocean's Bounty, which means this is a:

horizontal acquisition.

All of the following issues affect firms' efforts to merge on a coequal basis EXCEPT:

how to determine the stock price per share for the merged company.

All of the following are limitations of vertical integration EXCEPT:

imitation of core technology by potential competitors.

The ultimate reason that firms use merger and acquisition strategies is to:

improve their ability to create value for all stakeholders.

During a financial downturn, diversification __ firm performance.

improves

Recently, insurance giant Cigna Corp. announced its offer to acquire Express Scripts, a pharmacy-benefit manager, for $54 billion, which included a 31 percent premium to Express Scripts' shareholders. On the day of the announcement, Cigna's share price dropped by 12 percent. The negative response in the stock market reflects:

investors' skepticism about Cigna's ability to achieve the synergies required to justify the 31 percent premium paid for Express Scripts.

Acquisition is often viewed as:

less risky than internal product development.

If a firm wants to reduce the negative effect of an intense rivalry on financial performance, it may use acquisitions to:

lessen market dependencies.

JKL Inc. recently acquired Mumford Company. Because the merged firm has been able to maintain a moderate debt position, it can expect:

lower risk.

Value-creating influences that affect diversification strategy include all of the following EXCEPT:

managerial motives to diversify.

Because managers must be involved in searching for viable acquisition candidates, completing due diligence, preparing for negotiations, and managing the integration process:

managers can become overly focused on acquisitions.

Nobles Co. recently acquired Bille Inc. The merged firm has experienced fast integration and achievement of synergy. This suggests that Nobles:

manages change well and is flexible and adaptable.

While U.S. firms use downscoping as a restructuring strategy,

many Asian and Latin American conglomerates have also chosen to downscope.

Perio and Lewisohn, two mid-size publishing houses, decided to integrate their operations on a relatively coequal basis. This strategy is known as a(n):

merger.

Commonly, Walgreens may be found in very close proximity to a CVS Pharmacy. Diversification of this type, where two similar businesses are simultaneously competing in the same geographic markets, is called:

multipoint competition

Red Company and Green Company are both diversified firms simultaneously competing in the same geographical markets. These companies are engaging in:

multipoint competition

Caterpillar's various businesses share marketing activities because all of their equipment is sold to firms in the construction and mineral extraction industries. This is an example of:

operational relatedness

Firms seek to create value from economies of scope through two basic kinds of operation economies:

operational relatedness and corporate relatedness

Firms that are more broadly diversified compared to their competitors may have __ performance.

overall lower

Geier Inc. and Gladstone Ltd. are two mid-size furniture manufacturers. Geier wanted to grow its business and felt the best way to do this was to make a bid to purchase Gladstone and make it a subsidiary. Geier feels that Gladstone is not properly managed and is not reaching its potential. Because Geier feels that Gladstone would be worth more under its ownership, Geier is willing to pay a(n) _____ to purchase Gladstone.

premium

Wexford Commercial Packaging, a leading manufacturer of boxes, bags, and other containers, believes that acquiring Tennessee Paper, a large paper mill, will increase its ability to earn above-average returns, which is why the firm is willing to pay a(n) ________ to acquire Tennessee Paper.

premium

Poole Company recently acquired Carroll Inc. The two firms did not have identical assets, but they are complementary in unique ways. This makes it possible for them to generate:

private synergy.

All of the following are challenges associated with integration processes EXCEPT the need to:

raise the funds to complete the acquisition.

Rupert Information is a multinational publisher of newspapers, magazines, and popular fiction books. In the last few years, it has purchased a K-12 educational publisher and an online news service. Both of these purchases are:

related acquisitions.

Acme Drug Company has three major groups (prescription drugs, over-the-counter drugs, and hospital IV drugs). These groups share resources and activities. Based on this information, Acme is using a(n) _____ diversification strategy.

related constrained

When the links between the diversified firm's businesses are rather direct—meaning they use similar sourcing, throughput, and outbound processes—it is termed a(n) _____ diversification strategy.

related constrained

The __ diversification strategy is associated with intangible resources that cannot be easily imitated.

related link

If a firm exhibits a high level of corporate relatedness but a low level of operational relatedness, it is most likely using a(n) __ diversification strategy.

related linked

The diversified company with a portfolio of businesses that have only a few links between them is using the _____ diversification strategy.

related linked

Xander Company is high in both operational relatedness and corporate relatedness. Xander is most likely using a(n) __ diversification strategy.

related linked

All of the following are value-creating reasons for diversification EXCEPT:

risk reduction for the firm.

Creating operational relatedness is achieved by:

sharing activities

A(n) __ diversification strategy is a corporate-level strategy wherein the firm generates 95 percent or more of its sales revenue from its core business area.

single-business

All of the following are governance mechanisms that may limit managerial tendencies to over diversify EXCEPT:

surveillance equipment and technology.

Samuel Ltd. and Grayson Company are two mid-size toy manufacturers. Management at Grayson was pleased with the size and strength of the company. However, Samuel wanted to grow its business and felt the best way to do this was to make a bid to purchase Grayson and make it a subsidiary. This strategy is known as a:

takeover.

Due diligence to evaluate the relative health of an acquisition target would include all of the following EXCEPT:

target's willingness to be acquired.

Companies in emerging markets frequently use the unrelated diversification strategy because of:

the absence of a "soft infrastructure" in those markets.

The value of a corporate-level strategy is ultimately determined by:

the degree to which the businesses in the portfolio are worth more under the management of the company than they would be under any other ownership.

The term "synergy" is derived from the Greek word "synergos," which means working together. When used in reference to acquisitions, it is said that synergy has been created when:

the value created by units working together exceeds the value those units could create when working independently.

If the level of diversification is more constrained, that generally indicates

there are more linkages among businesses owned by an organization

A firm that seeks to create value through corporate relatedness would use the related linked diversification strategy to:

transfer corporate-level core competencies

Estelle Inc. is a highly diversified firm that has no relationships between its businesses. Estelle follows the __ diversification strategy.

unrelated

Denny's Dairy makes and sells high-quality ice cream using fresh milk and cream. It has an ice cream stand at its farm and also sells bulk ice cream at area ice cream shops. Denny's recently decided to purchase the local chain of ice cream shops. This purchase is a:

vertical acquisition.

Jennie's Jams produces jams and jellies. It owns fruit-growing operations. This is an example of a business that is:

vertically integrated.

A product proliferation strategy represents a form of __ diversification.

within-industry

Crates for You, Inc., provides inexpensive crates to canneries providing canned goods to institutional units, such as schools and prisons. The company has always competed on a cost leadership basis. Most of its products are purchased by a few institutions, so it is fairly dependent on these institutions for selling its product. The next most-efficient competitor compared to Crates for You is The Box Company, which earns average returns. Crates for You earns above-average returns. The institutional budgets are being squeezed, and these institutions are putting pressure on Crates for You to reduce its prices. If Crates for You reduces its prices below those of The Box Company's, it is likely that: a.both Crates for You and The Box Company will devise additional ways to become more efficient in their production processes. b.Crates for You will be unable to absorb the lower cost and will go out of business. c.both Crates for You and The Box Company will go out of business, leaving the customers with fewer alternative sources of crates for canned goods. d.The Box Company will go out of business, and Crates for You will gain higher power over its customers.

d.The Box Company will go out of business, and Crates for You will gain higher power over its customers.

_____ is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors. a.A broad market segment b.The focus strategy c.The differentiation strategy d.The cost leadership strategy

d.The cost leadership strategy

Which of the following statements about determining which customer needs to satisfy is NOT true? a.In a general sense, needs are related to a product's benefits and features. b.Customers prefer to buy customized products. c.The most effective firms strive continuously to anticipate changes in customers' needs. d.The generalized forms of value that products provide are either high cost with acceptable features or similar features with acceptable cost.

d.The generalized forms of value that products provide are either high cost with acceptable features or similar features with acceptable cost.

Which of the following is NOT a factor that affects shareholders' preferences for a diversified position? a.The intensity of rivalry among competitors in the firm's primary industry b.The firm's perceived expertise in the new business and its effects on other firm strategies c.The top management team's experience with implementing diversification strategies d.The magnitude of executive compensation as compared to mid-level management compensation

d.The magnitude of executive compensation as compared to mid-level management compensation

Which of the following statements about corporate governance in China is NOT true? a.The state still relies on direct and/or indirect controls to influence the strategies employed by most firms. b.Corporate governance in China may be tilting toward the Western model. c.Firms with higher state ownership tend to have lower market value and more volatility across time. d.There has been a gradual increase in the equity held in state-owned enterprises while the number and percentage of private firms has declined.

d.There has been a gradual increase in the equity held in state-owned enterprises while the number and percentage of private firms has declined.

Which of the following statements about focus strategies is true? a.They are subject to more failure than industry-wide strategies. b.They can avoid global risk by focusing on pointed national or regional markets. c.They are protected from risks associated with industry-wide strategies due to a position focus. d.They are faced with more risks than are industry-wide strategies.

d.They are faced with more risks than are industry-wide strategies.

Burns Co. is implementing an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness. Burns is using which of the following international strategies? a.Universal b.Global c.Multidomestic d.Transnational

d.Transnational

A _____ allows a firm from one country to acquire a stake in or purchase all of a firm located in another country. a.new wholly owned subsidiary b.greenfield venture c.strategic alliance d.cross-border acquisition

d.cross-border acquisition

The owner of an upscale, online children's clothing boutique would most likely use _____ factors as the basis for segmenting her customers. a.consumption b.geographic c.psychological d.demographic

d.demographic