Exam 2 (Ch 6. - Ch. 8)

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

By lowering competitive intensity in the industry overall

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

Centralization

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

Coordination costs

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration.

Which of the following statements is true of explicit knowledge?

Explicit knowledge is shared in nonequity alliance firms.

Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test?

Firms can apply the VRIO framework for the second test.

DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently.

Focus on research and development as a form of nonprice competition.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?

Increase investment in the personal health monitoring unit to encourage future growth.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

How has Kraft Foods benefited from its hostile takeover of Cadbury PLC?

It has access to convenience stores and a new distribution channel.

Which of the following is a disadvantage of a horizontal integration corporate strategy?

It increases the potential for legal repercussions.

Why is the optimal organizational structure a multidivisional structure?

Its focus is on driving down costs.

Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy?

M-Form with centralized decision-making power (cooperative multidivisional)

Sarah, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Sarah?

Once the firm starts growing and attracting more customers she is likely to feel overloaded

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

Promised synergies never take place.

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.?

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take?

Seek an alliance with a company or companies that will complete the value chain.

Dev is a strategist for the firm Stark Industries, which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called LENS Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Dev to suggest?

Stark Industries should acquire LENS.

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

The desire to gain a new capability

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity

The Estelle Leonard Talent Agency recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision?

The increased span of control for remaining managers may lead to higher levels of stress and possible burnout.

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?

The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.

Yubaba Inc., a fidget spinner manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Bill has worked at Yubaba for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

Yubaba Inc. has a flat organizational structure.

Angelika is the Chief Operating Officer of One Spice Inc., a firm that grows and processes the Naga Viper pepper, one of the world's hottest peppers. Angelika wants to better understand the relationship between her firm's organizational culture and the ability to achieve competitive advantage. The relationship between these two states that

a firm can achieve competitive advantage if their organizational culture follows the VRIO principles.

Which of the following accurately describes an organic organization?

a flexible organization that fosters fast decision making and high employee motivation

Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate?

a joint venture

Delos Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Delos Autos controlling interests in the start-up company. However, Delos Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Delos Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

a real-options perspective.

Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success.

building interorganizational trust

Sean is having hard time replicating his competitors' strong organizational culture because of ________ and ________, which stem from the VRIO framework.

casual ambiguity; social complexity

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation

Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under

dogs.

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

Jerry is the proud owner of American BBQ Eateries LLC. They currently operate in the southeast and have recently entered into a nonequity alliance with Big Bills BBQ Grills Inc., with a promise of sharing codified information via a licensing agreement. Which of the following best represents this level of sharing knowledge?

explicit knowledge

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

first establish a strategy and let that be him guide.

Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy.

forward vertical integration

The University of Central Florida has a typical College of Business which houses several specific mini-departments such as management, marketing, finance, accounting, economics, and real estate. This College of Business best resembles a(n) ________ structure.

functional

Bill Lewis is the CEO of Nordic Technologies Inc., a firm that offers a limited line of standard products that competes in a similar manner with a narrow, local market focus and whose competitive advantage is a focus on low cost derived from gaining economies of scale. Bill should use a

functional structure

Paul runs an organization that implements a cost-leadership strategy. This business-level strategy supports both a ________ and ________ structure.

functional; mechanistic

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks?

higher costs

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

input controls

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly developed economies. One way firms are grappling with this issue is by

introducing results-only-work-environments to tap intrinsic motivations.

Why is the optimal organizational structure a multidivisional structure?

its focus on driving down costs

Which of the following is an example of explicit knowledge?

knowing how to assemble semiconductors

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

lowering costs

Umbrella Corp is a notebook manufacturing company based in Ohio. Umbrella Corps' main market is Texas. It aims at providing its products at better prices than its competitors. Which of the following structures is Umbrella Corp likely to use if it has functional setup?

mechanistic

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

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

multidivisional

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

________ describes the collectively shared values and norms of an organization's members.

organizational culture

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

organizational inertia

What causes the winner's curse?

overpaying for an acquisition

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to

preempt its competitors from buying Waze.

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

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

resistance to change

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are

similar to those that need to be developed and superior to those of competitors in the targeted area.

A high degree of formalization in an organization is most likely to

slow down decision making.

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

structure

The downside of equity alliances is

the amount of investment that can be involved.

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

Organizational design is

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

Why does strategy implementation often require changes within an organization?

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

A drawback of short-term contracting as an alternative to making a component in-house is that

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.