Corporate Strategy Exam 3

Selection of an insider as a new CEO indicates a firm's desire to encourage innovation and strategic change.

False

Tacit collusion is explicitly illegal in the United States.

False

The CEO, COO, President, CFO, mid level managers, and CMO would be considered the top management team

False

The experience that results from long tenure in a firm is known to extend the breadth of an executive's knowledge base.

False

The members of the board of directors are a firm's key stakeholders and a company's legal owners.

False

The primary responsibility of the franchisor is to transfer capital to the franchisee.

False

chairman of the board responsible for the firm's strategic policies but not the leaders of the firm

False

corporate charter amendment are very successful and improve shareholder wealth

False

economies of scale a proportionate saving in costs gained by an decreased level of production.

False

formulation and implementation are not related to successful strategic actions

False

This is which cycle • Speed up development of new goods or services • Speed up new market entry • Maintain market leadership • Share risky R&D expenses • Form an industry technology standard • Overcome uncertainty

Fast

composed of individuals with different functional backgrounds, experience, and education.

heterogenous top management team

1. The effective development and management of the firm's ___________ may be the primary determinant of its sustainable competitive advantage.

human capital

________refers to the knowledge and skills of a firm's entire workforce. From the perspective of ________, firms view employees as a capital resource requiring continuous investment.

human capital

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for:

increased diversification of Sierra Industries.

_____consists of a firm's opportunities for managerial positions and the qualified employees within it.

internal managerial labor market

Research suggests that boards of directors perform better if:

outside directors own significant equity in the organization.

What is not a reason to do slow cycle?

overcome uncertainty

On the HBO show Succession many of the family owners (the Roy Family) are discontent with certain leader and polices of the family firm. Resulting in them acting out which leads infighting that undermines the firms effectiveness. What type of governance problem is this?

ownership

defined by the number of large-block shareholders and the total percentage of the firm's shares they own.

ownership concentration

A CEO feels that his salary is insufficient for his role in the firm. So he makes decisions that benefit him financially in the expense of the firm. What type of governance problem is this?

problems with compensation

Tesla has a board that is mostly scientist and have personal connection with Elon Musk the CEO of the firm. This undermines the boards effectiveness to hold Musk accountable. What type of governance problem is this?

quality of the board

In contrast to managers, shareholders may prefer that free cash flows be:

returned to them as dividends.

A firm hires an outside accountant for auditing if the information is incorrect the accountant bears the risk. This is an example of which type of agency relationship?

risk bearing relationship

A firm has a linkedin page of a 1 million followers and 500,000 connections. This is an example of

social capital

capital involves relationships inside and outside the firm that help in efforts to accomplish tasks that create value for stakeholders.

social capital

Firms in ________ markets cooperate to pool resources and gain market power.

standard-cycle

The primary component of the large compensation packages of CEOs is (are):

stock and stock options.

Having Starbucks coffee shops in Barnes & Noble bookstores allowed customers to peruse new books while enjoying a fresh cup of coffee. Both firms profited! This is an example of

strategic alliance

a cooperative strategy in which firms combine some of their resources to create a competitive advantage

strategic alliance

A firm is acquiring new businesses to be more competitive this is an example of

strategic change

_______is change resulting from selecting and implementing a firm's strategies.

strategic change

the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

strategic leadership

The partnership between French-based Renault SA and Japan-based Nissan Motor Company that was formed in 1999 is a __________ because, among other outcomes, the firms seek to create economies of scope by sharing their resources to develop manufacturing platforms that can be used to produce cars that will carry either the Renault or the Nissan brand. Later the firms added Mitsubishi to this alliance to become the largest automotive alliance in the world. In 2017, the partners sold more than 10.6 million vehicles.

synergistic strategic alliance

is a strategy in which firms share some of their resources to create economies of scope.

synergistic strategic alliance

All of the following are business-level cooperative strategic alliances EXCEPT:

synergistic strategic alliances.

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in:

tacit collusion.

typically own at least 5 percent of a company's issued shares.

Large-block shareholders

Antitrust charges and inadequate disclosure are examples of the grounds on which the target firm could file.

Litigation Lawsuits that help the target firm stall hostile takeover attempts:

Litigation Lawsuits that help the target firm stall hostile takeover attempts rank ____ on success as a strategy and _____ on shareholders wealth

Low, Positive

the seeking of self-interest with guile.

Managerial opportunism

An action the target firm takes to make its stock less attractive to a potential acquirer.

Poison pill

Who is involved in the day to day operations?

President

Carnival Corporation, owner and operator of Carnival Cruise Line, formed two joint ventures with state-owned China Merchants Group, which is a conglomerate with businesses in financial investments and property development as well as transportation. One venture between the two firms focuses on shipbuilding while the second concentrates on developing new ports and travel destinations in and around China. The launching of China's first domestic cruise brand that will target Chinese customers is one outcome associated with the collaborations between the two companies. Carnival's interest with these joint ventures is to compete in China where the cruise industry is beginning to grow rapidly. Interestingly, Carnival has delayed a major entry into the cruise market in China, citing high demand for its cruise ships in Australia. However, Carnival's commitment to the Chinese market continues as it signed a contract for the manufacture of two large cruise ships in China to be delivered in 2023. This is an example of a

Slow-Cycle Markets

A company that focuses a lot of time in R&D would be

Slow-market cycle

This is which cycle cycle? • Gain market power (reduce industry overcapacity) • Establish better economies of scale • Meet competitive challenges from other competitors • Learn new business techniques • Pool resources for very large capital projects • Overcome trade barriers • Gain access to complementary resources

Standard

A contract between the target firm and the potential acquirer specifying that the acquirer will not purchase additional shares of the target firm for a specified period of time in exchange for a fee paid by the target firm.

Standstill agreement

Ownership Concentration brings in _______ governance and _________ diversification

Strong, Weak

A CEO considering various strategies for the firm to pursue is considered determining strategic direction

True

A company that has a culture that promotes innovation would rank high on leadership and growth on a balanced scorecard

True

A company that has good governance in the high on the internal business processes

True

A firm has leadership who all have completely different experience. This would fall under heterogenous top management team

True

A firms workforce would be considered human capital

True

An airline is an example of standard cycle

True

An alliance can be used to test whether the partners would benefit from a future merger.

True

Because of the global economy's complexity, strategic leaders must learn how to influence human behavior effectively, often in uncertain environments.6 By word and by personal example.

True

Effective strategic leadership starts with mission and values

True

External environment, characteristics of an organization, and characteristics of the manager are all a part of manager discretion

True

Financial controls focus on the short term outcomes of strategic actions. Strategic controls focus on the content of strategic actions

True

Heterogeneous top management teams are more likely to change their firm's strategies and to support innovation.

True

Homogenous is limited on ideas and changes in strategy

True

In general, managerial interests do not prevail when governance mechanisms are strong.

True

Joint venture is good at passing tacit knowledge because the core competences are developed

True

Poison pill is very high on effectiveness and improving shareholders wealth

True

Processes used to elect members of the firm's board of directors, the general management of CEO pay and more focused supervision of director pay, and the corporation's overall strategic direction are examples of oversight and good cooperate governance

True

Standard-cycle markets are markets in which the firm's competitive advantages are partially shielded from imitation and imitation is moderately costly, volume is important to businesses in these industries

True

Standard-cycle markets are often large and gain economies of scale through cooperative alliances.

True

Successful Strategies should lead to above average returns in the end

True

The primary responsibility of the franchisee is to transfer capital to the franchisor.

True

The quality of the board of directors and rules they have to follow depends on the firm

True

Ultimately, it is the board of directors who is to blame when organizational strategy fails.

True

a mutual fund that owns 20 percent of a business would be considered both a Large-block shareholders and institutional owners

True

salary and stock options are the best option for executive compensation

True

top management and the board of directors are usually strategic leaders?

True

Who is involved in the big picture strategy?

CEO

Dilution of the target firm's stock, making it more costly for an acquiring firm to continue purchasing the target's shares. Employee stock option plans (ESOPs), recapitalization, issuance of additional debt, and share buybacks are actions associated with this strategy.

Capital structure change

• Tolerance for ambiguity • Commitment to the firm and its desired strategic outcomes • Interpersonal skills Aspiration level • Degree of self-confidence

Characteristics of the Manager

• Size • Age Culture • Availability of resources • Patterns of interaction among employees

Characteristics of the Organization

An amendment to the target firm's charter for the purpose of staggering the elections of members to its board of directors so that all are not elected during the same year. This change to the firm's charter prevents a potential acquirer from Installing a completely new board in a single year.

Corporate charter amendment

the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.

Corporate governance

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.

Executive Compensation

• Industry structure • Rate of market growth • Number and type of competitors • Nature and degree of political/legal constraints • Degree to which products can be differentiated

External Environment

A CEO being selected outside the firm is considered a internal managerial labor market

False

A company that has a good public image would rank low on customer on a balanced scorecard

False

A firm that has a lot of financial capital and good financial growth would rank high on the customer on balanced scorecard

False

A manager who is cunning and uses deceit to achieve his goal would not be considered to be an example of managerial opportunism

False

Amelia Smith, is the sole owner of the successful restaurant chain, Amelia's Café. Ms. Smith has taken a no-interest loan from the company in order to build a seaside house for herself in Carmel, California. This constitutes a classic agency problem.

False

In a company the owners are considered the agents, the managers the principal the people who make decisions

False

In general, managerial interests prevail when governance mechanisms are strong.

False

It is not advisable for directors to have a stake in the firm

False

Ownership concentration is when there is a large amount of owners

False

Why can an alliance can be used to test whether the partners would benefit from a future merger?

Because its not as binding as a partnership and good way to evaluate the potential

Micron Technology, Inc. and Seagate Technology LLC are competitors in manufacturing storage solutions, a competitive arena in which establishing sustainable competitive advantages is all but impossible. Because of this, innovation is critical to their success as well as for others operating in this industry given the ________ nature of the storage-solution market. Micron and Seagate formed a strategic alliance to combine the firms' innovation and expertise. Resulting from this collaboration, the partners believe, will be an ability to provide customers with "industry-leading" storage solutions. In turn, Micron and Seagate believe that customers buying the products that will flow from the collaboration will be able to innovate faster while producing their goods and services. Micro also has other alliances designed to provide technological solutions for specialized markets which is the goal of a joint development program it has with Intel. This is an example of

Fast-Cycle Market

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.

Golden parachute

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.

Greenmail

some of the world's largest pharmaceutical firms, including Pfizer, Bristol-Myers Squibb, GlaxoSmithKline, and Eli Lilly, are sharing some of their proprietary assets through a collaboration organized by the U.S.-based National Institutes of Health. The primary purpose of this five-year partnership is to more quickly discover and produce drugs that cure challenging and historically intractable diseases. This example of

Horizontal complementary strategic alliance

An _______ exists when one party delegates decision-making responsibility to a second party for compensation.

agency relationship

Which of the following is NOT likely to encourage change in a firm's strategy?

a homogeneous top management team

Lets assume that Apple needs some new technology for their products and this technology is offered by two firms. Firm A is the better option however the CEO selects to go with firm B due to the fact that firm B bribed the CEO to accept their deal. Due to the actions of the CEO the board is forced to remove him. This is an example of

agency cost

the sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent.

agency costs

Lets assume that Apple needs some new technology for their products and this technology is offered by two firms. Firm A is the better option however the CEO selects to go with firm B due to the fact that firm B bribed the CEO to accept their deal. This is an example of an

agency problem

a tool firms, including family-owned firms, use to determine if they are achieving an appropriate balance when using strategic and financial controls as a means of positively influencing

balanced scorecard

a group of elected individuals whose primary responsibility is to act in the owners' best interests by formally monitoring and controlling the firm's top level managers.

board of directors

Which is not a reason firms develop strategic alliance

both are

A firm intends to do to gain a competitive advantage in specific product markets. Thus, the firm forms a ________ when it believes that combining some of its resources with those of one or more partners will create competitive advantages that it can't create alone and will lead to success in a specific product market.

business-level cooperative strategy

a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets.

business-level cooperative strategy

Firms in a standard-cycle market may form alliances in order to:

capture economies of scale.

are business-level alliances in which firms share some of their resources in complementary ways to create a competitive advantage.

complementary strategic alliances

________________ strategic alliances have stronger focus on creation of value than do ___________ strategic alliances.

complementary, competition reducing

As noted above, this is the situation for Google, Intel, and TAG Heuer in that none of these firms could create the specific smartwatch the firms intended to develop without the combination of the three companies' resources. This is an example of?

cooperative strategy

a means by which firms collaborate to achieve a shared objective.

cooperative strategy

________are also attractive compared with mergers, and particularly acquisitions, because they require fewer resource commitments and permit greater flexibility in terms of efforts to diversify partners' operations.

corporate-level cooperative strategy

a strategy through which a firm collaborates with one or more companies to expand its operations

corporate-level cooperative strategy

Airbus Group NV and Korea Aerospace Industries Ltd. The goal of this partnership is to build at least 300 military and civilian helicopters in South Korea.89 Complexity is suggested by the fact that the partners are committed to designing and producing "next-generation light civilian and military helicopters" that will satisfy South Korean customers. Risks include those of relying on unique, firm-specific cultures and practices as the foundation for designing next-generation products in an acceptable time and producing those products at acceptable costs. Despite the risks, firms such as Airbus and Korea Aerospace have developed __________partly because companies competing internationally tend to outperform domestic-only competitors.

cross-border strategic alliance

a strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage.

cross-border strategic alliance

involves specifying the vision and the strategy to achieve the vision.

determining strategic direction

Companies using this strategy typically seek to enter new markets (either domestic or outside of their home setting) with existing products or with newly developed products. Managing diversity gained through alliances has fewer financial costs but often requires more managerial expertise. The need for expertise in managing diversity is heightened by the fact that the focal firm has less control over the partner. Managers must coordinate and build trust in order to coordinate alliance activities. Additionally, they have to work at understanding their diverse partners and their capabilities in order to successfully coordinate within the alliance.

diversifying strategic alliance

a strategy in which firms share some of their resources to engage in product and/or geographic diversification.

diversifying strategic alliance

Competition is good at creating value because

due to competition with competing business they try to create better value to compete and beat out its competitors

1. A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of ____________ resulting from an alliance.

economies of scale.

Firms entering into synergistic strategic alliances expect to attain:

economies of scope.

A firm that wants to control over the assets they put into their alliance would want to use

equity strategic alliance

Yet, firms from emerging market countries such as China also use _________ when entering foreign markets. Control of firms' resources, especially intellectual capital, can be quite important when R&D alliances are formed.

equity strategic alliance

an alliance in which two or more firms own different percentages of a company that they have formed by combining some of their resources to create a competitive advantage.

equity strategic alliance

the collection of managerial career opportunities and the qualified people who are external to the organization in which the opportunities exist.

external managerial labor market

Without complete information about the reasons and expected outcomes of strategic initiatives, an outsider-dominated board of directors may emphasize:

financial evaluations.

McDonalds is an example

franchising

In 1999, abcd company board of directors selected John doe to be CEO of the company. Since his appointment John has built a lot of trust with both the board and the owners of abcd. Which term can this example be used for?

good agency relationship

GM and China-based SAIC Motor Corp., China's largest automobile manufacturer by sales volume, recently formed a _______ to develop new cars that cater specifically to Chinese tastes. Called Shanghai GM Co., each partner controls 50 percent of this cooperative strategy. The partners intend to invest a total of 100 billion yuan, or approximately $16.4 billion, between 2016 and 2020 for the purpose of developing at least "10 all-new or face-lift" models during each of the five years included within the investment time horizon. These companies have partnered in other ways. For example, SAIC and GM recently agreed for SAIC to take over GM's Opel manufacturing plant in India, which allows SAIC to enter India's automobile market.

joint venture

a strategic alliance in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage.

joint venture

Which type of strategic alliance is best at passing tacit knowledge between firms?

joint ventures

Determining the strategic direction for the firm refers to developing a:

long-term vision of the firm's strategic intent.

Standstill agreement rank ____ on success as a strategy and _____ on shareholders wealth

low, negative

Golden Parachute rank ____ on success as a strategy and _____ on shareholders wealth

low, negligible

Recent evidence shows that ownership concentration is associated with:

lower levels of diversification.

A CEO is hired for his expertise in a new market segment the firm wants to enter. This is an example of which type of agency relationship?

managerial decision making specialist relationships

Qualcomm was able to escape the hostile takeover attempt of Broadcom. But Qualcomm shareholders now have higher expectations for improved Qualcomm performance because the stock price offered was higher under the takeover bid than after the deal was disapproved by regulators. The stock price during the takeover bid could be considered _______ because it can't be controlled by management and keeps them in check?

market for corporate control

an external governance mechanism that is active when a firm's internal governance mechanisms fail.

market for corporate control

Capital structure change rank ____ on success as a strategy and _____ on shareholders wealth

medium, inconclusive

Greenmail rank ____ on success as a strategy and _____ on shareholders wealth

medium, negative

The more heterogeneous the top management team, the:

more difficult it will be for the team to implement strategies.

Global Partner Network, Cisco has formed alliances with a host of companies including IBM, Emerson, Hitachi, CA Technologies, Fujitsu, Intel, Nokia, and Wipro. Cisco uses alliances to drive its growth, differentiate itself from competitors, enter new businesses areas, and create competitive advantages. Recently, Cisco's annual revenues earned from its alliances exceeded $5 billion.

network cooperative strategy

a strategy by which several firms agree to form multiple partnerships to achieve shared objectives.

network cooperative strategy

Licensing agreements, distribution agreements, and supply contracts are examples of

nonequity strategic alliance

an alliance in which two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage.

nonequity strategic alliance

In this type of alliance, firms do not establish a separate independent company and therefore do not take equity positions. For this reason, ________ are less formal, demand fewer partner commitments than do joint ventures and equity strategic alliances, and generally do not foster an intimate relationship between partners; nonetheless, research evidence indicates that they can create value for the involved firms.

nonequity strategic alliances

A group of people elected by the stockholders of a corporation to set the policies for the corporation.

the Board of Directors

is composed of the individuals responsible for making certain the firm uses the strategic management process, especially to select and implement strategies.

top management team

The risk goes ___ for manager and goes ____ for shareholders as we ascend the diversification list? dominant business, related-constrained, related linked, Unrelated Businesses

up, down

Companies recognize that today's consumers are more connected than ever as they use various devices such as smartphone applications, GPS systems, and the wireless Internet. AT&T has built alliances with multiple companies, such as Rockwell automation, Emerson, and LoJack, an anti-car-theft company, to develop technology-based products that satisfy the needs of current and future customers. It is integrating the technology-based products with AT&T's network such as sprinkler heads made by HydroPoint to develop smart irrigation systems. Ralph de la Vega, CEO of AT&T's mobile and business solutions, explained that "This is much, much different from trying to procure a piece of technology and trying to optimize the price. This is an example of

vertical complementary strategic alliance