MAN 4720

The risks of international entrepreneurship include all the following EXCEPT a. unstable foreign currencies. b. problems with market efficiencies. c. limitations on market size. d. strong "buy-domestic" programs.

D

When a new CEO is selected from outside the firm, a change of strategy is likely, especially if the top management team is homogenous and highly cohesive.

F

While both incremental and radical innovations can create value, incremental innovations have the potential to contribute more significantly to a firm's efforts to earn above-average returns.

F

While smaller firms must use cooperative strategies as a means of producing innovations, larger firms with large R&D units such as P&G and 3M can produce most if not all innovations internally.

F

13. Companies and business units of large diversified firms using the cost leadership strategy should use strategic controls.

False

16. Research shows that structure has a more important influence on strategy than the reverse and hence the emphasis of the chapter on the subject of structure.

False

18. Research has consistently shown that there is one best way to structure all organizations, regardless of competitive strategy.

False

22. Specialization refers to the extent to which authority for decision making is retained at higher managerial levels.

False

8. With a related diversification corporate-level strategy, financial controls are used by corporate leaders to verify the sharing of appropriate strategic factors such as knowledge, markets, and technologies across businesses.

False

A merger is defined as a strategy in which one firm purchases controlling interest in another firm. a. True b. False

False

An advantage of using horizontal, vertical, or related acquisitions is that they are not subject to regulatory review. a. True b. False

False

Citigroup's acquisition strategy (Chapter 7 Strategic Focus) was effective in that it created a firm that was not overdiversified or too large, and that was able to realize synergies between its units. a. True b. False

False

Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required. a. True b. False

False

Large or extraordinary debt is defined as overpaying for an acquired firm. a. True b. False

False

Private synergies exist between a potential acquisition target and all firms seeking to acquire it. a. True b. False

False

A heterogeneous top management team is composed of individuals with a. different functional backgrounds, experience, and education. b. similar commitments to the organization's core ideology and culture. c. a high level of education and industry expertise. d. long tenure in the organization who have held various functional positions.

A

A large, but declining, city in the Midwest is trying to lure businesses to relocate there and to encourage local entrepreneurs to start new businesses. In order to do this, the city has changed its tax laws and regulations concerning business creation and operations. This is an example of a. institutional entrepreneurship. b. autonomous strategic behavior. c. induced strategic behavior. d. corporate entrepreneurship.

A

A successful ____ innovation will be less risky but less profitable than a successful ____ innovation. a. incremental, radical b. radical, incremental c. alliance-generated, acquisition-generated d. acquisition-generated, alliance-generated

A

To be successful, an autonomous process for developing new products relies on a. the diffusion of tacit knowledge. b. the acquisition of innovative firms. c. strategic alliances with other firms. d. internal corporate venturing.

A

Typically, in a failed acquisition, the organization will a. restructure. b. go into bankruptcy. c. focus on building private synergy. d. increase integration.

A

When the top management team is homogeneous and a new CEO is selected from inside the firm, it is a. unlikely that the current strategy will change. b. likely that product innovation will continue. c. likely there will be a change in strategy. d. unlikely the new CEO will have a long tenure.

A

When used effectively, cross-functional teams will often bring about a. faster product development processes. b. an increased need for additional information. c. conflicting information about the business environment. d. future cooperative alliances.

A

Which of the following is NOT one of the four perspectives in the balanced scorecard framework? a. entrepreneurial b. financial c. customer d. learning and growth

A

Which of the following is NOT one of the three main restructuring strategies? a. realigning b. downsizing c. downscoping d. leveraged buyouts

A

In a merger a. one firm buys controlling interest in another firm. b. two firms agree to integrate their operations on a relatively coequal basis. c. two firms combine to create a third separate entity. d. one firm breaks into two firms.

B

In the implementation of internal innovations, formal and informal processes are best supported through ____ organizational structures. a. vertical b. horizontal c. functionally-oriented d. multidivisional

B

Induced strategic behavior as a form of internal innovation is a(an) ____ process. a. bottom-up b. top-down c. free-flowing d. external

B

Research suggests that _________ is needed to encourage entrepreneurial behavior. a. individualism rather than collectivism b. a balance between individualism and cooperative behavior c. collectivism rather than individualism d. limited autonomy and incentives

B

Successfully creating innovations through internal means requires a. a highly individualistic culture. b. significant spending on R&D. c. acquisitions of innovative firms. d. venture capital.

B

The March 2011 announcement that AT&T was acquiring T-Mobile USA from Deutsche Telekom is a (BLANK) acquisition and is intended to (BLANK) a. vertical; increase diversification. b. horizontal; increase market power. c. vertical; overcome entry barriers. d. related; increase speed to market.

B

A CEO gains power from all of the following circumstances EXCEPT a. when many of the outside directors are appointed by the CEO. b. when the CEO is also the chairman of the board. c. when tenure of the top management team is shorter than the tenure of the board. d. the fact that inside board members report to the CEO.

C

A characteristic of the manager that may affect managerial discretion is his/her a. amount of industry experience. b. level of education. c. tolerance for ambiguity. d. length of tenure.

C

151. (Refer to Case Scenario 3) What is the corporate structural form used by Jewell?

C. SBU M-Form

Problems associated with acquisitions include all of the following EXCEPT a. managers overly focused on acquisitions. b. integration difficulties. c. large or extraordinary debt. d. excessive time spent on the due diligence process.

D

Roland has developed and patented an inexpensive and organic way to enhance the fertility of clay soils without the addition of chemical fertilizers. But established agricultural chemical companies have rejected his proposals. After six months of promoting his invention during his time off from his regular job, Roland has decided to set his dream aside. Roland lacks a key characteristic of successful entrepreneurs, which is a. the ability to identify opportunities. b. a corporate sponsor. c. financial slack. d. passion for his invention.

D

The CEO of CLEO, Inc., in all her communications to employees consistently refers to her dream of CLEO becoming the company of choice for employee assistance programs. She keeps this theme uppermost and it is reflected in the firm's motto, the title of its Web newsletter, and even on the company t-shirts and mugs. This is an example of the firm's a. core ideology. b. organizational culture. c. strategy. d. envisioned future.

D

3M's new abrasive, Cubitron II, was created through a process of induced strategic behavior involving cooperation among 3M business units.

T

A CEO may gain power by holding the titles of both CEO and Chairman of the Board.

T

A firm's ability to act in a variety of competitively relevant ways is termed competitive agility.

T

A innovation developed through autonomous strategic behavior will probably take the firm into new markets not addressed by its current strategy.

T

A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally.

T

A society's cultural characteristics influence a nation's rate of entrepreneurship and its related practices.

T

An entrepreneurial mind-set, cross-functional product development teams, and shared values/leadership are the three ways that firms implement internal innovations.

T

As a process, entrepreneurship results in the "creative destruction" of existing products (goods or services) or methods of producing them and replaces them with new products and production methods.

T

As the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive advantage.

T

Because of the current changing competitive landscape and varying levels of performance, an increasing number of boards of directors are turning to insiders to succeed CEOs.

T

Board members with substantive expertise in the firm's core functions and businesses aids the effectiveness of the top management team.

T

Compared to homogeneous top management teams, heterogeneous top management teams are more likely to change their firm's strategies when necessary and to support innovation.

T

Criteria such as asset utilization improvements and changes in employee turnover rates are part of the internal business processes perspective of the balanced scorecard.

T

Effectively managing the firm's resource portfolio (financial, human, social, and organizational capital) may be the most important strategic leadership task.

T

Entrepreneurial opportunities exist because of competitive imperfections in the markets and among the factors of production.

T

Entrepreneurial ventures often produce more radical innovations than do their larger, more established counterparts.

T

Entrepreneurship is the economic engine driving national economic growth in many nations.

T

External environmental factors that may affect managerial discretion include industry structure, rate of market growth, and degree to which products an be differentiated.

T

External social capital is increasingly critical to firm success as few if any companies have all the resources to successfully compete against their rivals.

T

In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational structure and reward systems of a firm.

T

Including talent from both the internal and external labor markets increases the likelihood that the firm will be able to form an effective top management team.

T

Incremental changes to a firm's culture can be used to implement strategies effectively.

T

Innovation is the means by which the entrepreneur creates wealth.

T

Internal labor markets consist of the career opportunities for managers within the firm for which they currently work.

T

Political activity that is centered on the allocation of resources to the different functions may limit the effective use of cross-functional teams.

T

Research has shown that internationally diversified firms are generally more innovative.

T

Rewarding those who use proper channels and procedures to report observed wrongdoings is an example of an action that should be taken by a strategic leader to develop an ethical organizational culture.

T

Rosalie has become totally preoccupied by her idea for creating a business leasing horses to riders on the same principle as time-shares on condominiums. Rosalie is researching the legal, financial, and insurance aspects of her idea and is preparing a prospectus to take to banks to ask for a business loan. Rosalie's significant other is complaining that she "sleeps, eats, and drinks" this concept. Rosalie has the entrepreneurial characteristic of passion.

T

Some of the new products to be produced by the joint venture between Intel and Nokia integrating smartphones and computers would be considered radical innovations.

T

Strategic control focuses on the content of strategic actions rather than their outcomes.

T

The CEO is the individual with primary responsibility for effective strategic leadership within an organization.

T

The strategic direction of a firm usually focuses on the coming three to five years.

T

31. The cooperative form is an M-form structure in which horizontal integration is used to bring about interdivisional cooperation.

True

38. The competitive form of the M-form structure is characterized by complete independence among the form's divisions. Unlike the divisions included in the cooperative structure, divisions that are part of the competitive structure do not share common strengths.

True

39. Internal competition for corporate resources is effective for companies with an unrelated diversification strategy, but dysfunctional for companies with a related constrained strategy.

True

4. Strategy has an important influence on structure, although once in place, structures influence strategy.

True

41. The organizational structure for an internationally diversified firm requires trade-offs between global integration and local market responsiveness.

True

44. The worldwide product divisional structure has centralized decision-making authority in the worldwide division headquarters to coordinate and integrate decisions and actions among business units.

True

46. A strategic network can be characterized as a loose federation of partners revolving around a strategic center firm.

True

9. Strategic controls are largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company's competitive advantages.

True

A horizontal acquisition involves two firms in the same industry. a. True b. False

True

A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate. a. True b. False

True

A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis. a. True b. False

True

A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all activities, while the staff merely serves as an extension of the manager's supervisory authority.

True

Distributed strategic networks are the organizational structure used to manage international cooperative strategies.

True

Downscoping makes management of the firm more effective because it allows the top management team to better understand the remaining businesses. a. True b. False

True

Junk bonds are a financing option through which risky acquisitions are financed with debt that provides a large potential return to bondholders. a. True b. False

True

Research shows that in times of high or increasing stock prices, due diligence is relaxed and firms often overpay for acquisitions and the long-run performance of the newly formed form suffers. a. True b. False

True

Research suggests (Chapter 7 Strategic Focus) that government ownership of emerging economy firms leads to overpayment in cross-border acquisitions and that overpayment reduces value for minority shareholders (nongovernment shareholders). a. True b. False

True

Research suggests that emerging economy firms pay a higher premium than other firms when making cross-border acquisitions (Chapter 7 Strategic Focus). a. True b. False

True

Synergy is created by the efficiencies derived from economies of scale and economies of scope and by sharing resources across the businesses in the merged firm. a. True b. False

True

Takeovers are unfriendly acquisitions where the target firm does not solicit the acquiring firm's bid. a. True b. False

True

The quickest and easiest way for a firm to diversify its portfolio of businesses is to make acquisitions. a. True b. False

True

The worldwide geographic area structure differs from the worldwide product divisional structure in the level of centralization of decision making.

True

Top manager participation in and overseeing the activities required for making acquisitions can divert managerial attention from other matters that are necessary for long-term competitive success. a. True b. False

True

Traditionally, leveraged buyouts were used as a restructuring strategy to correct managerial mistakes or because the firm's managers were making decisions that primarily served their own interests rather than those of the shareholders. a. True b. False

True

When a firm becomes highly diversified through acquisitions, managers often focus on financial controls rather than strategic controls. a. True b. False

True

An agency relationship exists when one party delegates a. decision-making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party

a

As globalization grows, adequate corporate governance is becoming an important requirement for doing business with a foreign firms and in foreign countries. a. True b. False

a

Attitudes toward corporate governance in Japan are affected by the concepts of obligation, family, and consensus. a. True b. False

a

Because of recent ineffective performance, boards of directors are experiencing increasing pressure from shareholders, lawmakers, and regulators to be more effective in preventing managers from acting in their own interest. a. True b. False

a

Boards of directors are now becoming more involved in a. the strategic decision-making process. b. selecting new CEOs. c. the firm's tax issues. d. governmental relations

a

Boards with many members from the firm's top management team tend to have weak monitoring and control systems for managerial decisions. a. True b. False

a

Dynamic alliance networks work best in industries a. characterized by frequent product innovations and short product life cycles. b. that are mature and stable in nature. c. where the coordination of product and global diversity is critical. d. that are characterized by predictable market cycles and demand

a

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests. a. True b. False

a

Hedge funds, as part of the market for corporate control, identifies a firm that is underperforming and then invests in it with the goal of improving that firm's performance. a. True b. False

a

Large German firms must include employees, union members, and shareholders in the formal governance structure. a. True b. False

a

Long-term incentives facilitates the firm's efforts through the board of directors' pay-related decisions to avoid potential agency problems by linking managerial compensation to the wealth of common shareholders. a. True b. False

a

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ______ management approach. a. cost minimization b. trust but verify c. opportunity maximization d. pragmatic realism

a

Only about 50 percent of cooperative strategies succeed. a. True b. False

a

Reduction of competition can be accomplished through all of the following EXCEPT a. predatory alliances. b. explicit collusion. c. tacit collusion. d. mutual forbearance

a

54. Organizational structure

a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes.

Franchising is most attractive in concentrated industries. a. True b. False

b

________ is an important influence in Japanese corporate governance structures. a. Innovation b. Consensus c. Competition d. Individualism

b

The fewest integrative devices are used in the ____ structure.

b. competitive multidivisional

119. A multidomestic strategy would be associated with

b. informal coordination among units.

129. McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(n)

b. strategic network.

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) ______ alliance because it allows the firms to share resources and capabilities across multiple functions. a. synergistic b. opportunistic c. horizontal d. diversifying

a

The market for corporate control may not be as efficient as a governance device as theory suggests because takeover targets are not always low performers with weak governance. a. True b. False

a

The most effective defense against a hostile takeover is the poison pill strategy. a. True b. False

a

In the United States, a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers

c

When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before other forms of international expansion. a. True b. False

a

While the implementation of the Sarbanes-Oxley Act in 2002 has been controversial to some, most believe that it has had positive results in terms of protecting stakeholders and certain stockholder interests. a. True b. False

a

The premise of the balanced scorecard is that firms jeopardize future performance possibilities when they a. overemphasize financial controls and neglect strategic controls. b. overemphasize strategic control and neglect financial controls. c. overemphasize strategic and financial controls and neglect ethical controls. d. neglect short-term controls of all kinds in favor of long-term strategic controls.

A

The strategy of Citigroup under CEO Sanford Weill was to create a "financial supermarket" where customers shop for a variety of financial services within the same company. This strategy was executed via a series of acquisitions but ultimately failed. This situation was the result of a. Citigroup's managers focusing too much on acquisitions at the expense of managing their existing businesses. b. key managers leaving from the acquired firms, which left the firms with inferior management talent. c. the firm becoming too vertically integrated. d. the firm becoming too focused on its core businesses.

A

Without effective due diligence the a. acquiring firm is likely to overpay for an acquisition. b. firm may miss its opportunity to buy a well-matched company. c. acquisition may deteriorate into a hostile takeover, reducing the value creating potential of the action. d. firm may be unable to act quickly and decisively in purchasing the target firm.

A

____ involves internally developed incremental and radical innovations that result from deliberate efforts. a. Internal corporate venturing b. Autonomous strategic behaviors c. Bottom-up strategic behaviors d. Product championing

A

____ provide information about the results of past actions, but do not communicate the drivers of the firm's future performance. a. Financial controls b. Accounting information systems c. Policies and procedures d. Strategic feedback systems

A

A negative effect of acquiring other firms for the purpose of innovation is a. innovations cannot be transferred between organizations. b. the effect it can have on the firm's own ability to produce innovations. c. innovations may not actually be present in the firm after the purchase is completed. d. the acquired firm's employees usually leave.

B

A primary reason for a firm to pursue an acquisition is to a. avoid increased government regulation. b. achieve greater market power. c. exit a hyper-competitive market. d. achieve greater financial returns in the short run.

B

A(n) (BLANK) occurs when one firm buys a controlling, or 100 percent interest, in another firm. a. merger b. acquisition c. spin-off d. restructuring

B

68. Functional structures work best for firms for all of the following strategies EXCEPT

c. related constrained diversification strategy.

Financial controls are most important in the strategy.

c. unrelated diversified

85. Typically, a successful firm pursuing a differentiation strategy will

c. use cross-functional development teams.

52. An important lesson from the Chapter 11 Opening Case about Borders is that

c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy

The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors

d

77. Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy?

d. integration

59. One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so

d. suggests that the firm's previous choices were not the best ones.

Which of the following statements is TRUE regarding effective organizational cultures? a. Once a corporate culture is developed, strategic leaders can focus on other activities. b. A strategy that is historically new for a firm should be implemented by incremental changes in the organization's culture. c. A central task of strategic leaders is to revise the corporate culture on an annual basis after analyzing the changes occurring in the competitive environment. d. Organizational culture can be a source of competitive advantage because it influences employee behavior and how the firm's conducts its business.

D

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT a. large debt and increased financial risk. b. failure to invest in R&D. c. risk-averse management. d. inefficient operations.

D

150. (Refer to Case Scenario 2). All of the following structural characteristics are important to implementing Mettolink's strategy EXCEPT

D. a focus on process improvements in manufacturing

Bill Kroganski is the owner of a moderately successful industrial services firm. His reaction to the introduction of a new process technology that could be a direct competitor to the process his firm utilizes is fear. He spends his time considering ways to isolate his firm from this new technology. Bill has characteristics consistent with the entrepreneurial mind-set.

F

Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions characterizing the entrepreneurial mind-set.

F

Corporate entrepreneurship describes the opportunity seeking and exploitation of innovations in new start-up enterprises.

F

Cross-functional work teams are best supported by vertical organizational structures.

F

Evidence demonstrates that large firms with well-funded R&D operations are more effective at innovation than are smaller firms.

F

Evidence suggests that women are a qualified source of talent as strategic leaders that have been fully utilized especially given the current competitive landscape.

F

Financial controls provide feedback about the outcomes of the firm's past actions and predictions about the results of the firm's future actions.

F

Firms that continually change their strategic context and strategies because of the continuous changes in the current competitive landscape are in danger of losing sight of their main competitive strengths.

F

For firms to be entrepreneurial, they must stress individualism in their employees above all other characteristics.

F

GM's newest CEO, Dan Akerson, is building new capabilities in technology development and marketing, especially in customer service. This is an example of a CEO developing a dynamic capability as part of the key leadership action " Developing Human Capital and Social Capital."

F

Given the rapid rate of technological change, patents are not a useful gauge of a firm's entrepreneurial prowess.

F

In order to be successful, a new entrepreneurial enterprise should be sheltered from the global environment until it is firmly established in domestic markets.

F

Induced strategic behavior does not result in true innovation because it is a top-down process rather than a bottom-up process.

F

Innovations can only be produced by actions and activities within the firm.

F

Invention is defined as the adoption of a similar innovation by different firms.

F

Larger and well-established firms often have more resources and capabilities to produce more radical innovations than do smaller entrepreneurial firms.

F

Most large, complex firms innovate through cooperative strategies or strategic alliances, but not through internal activities.

F

The essence of entrepreneurship is to capture most of the existing markets from less aggressive and innovative competitors.

F

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

F

The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.

F

The more homogeneous a top management team, the more likely those managers will be innovative and willing to pursue strategic change.

F

The underlying premise of the balanced scorecard is that firms jeopardize their future performance possibilities when strategic controls are emphasized at the expense of financial controls.

F

To influence employees' judgment and behavior, ethical practices must shape the firm's decision-making process, but should be a peripheral part of organizational culture.

F

Typically, a vice president would NOT be considered to hold a high enough position to be included in the top management team of an organization.

F

14. Companies and business units using the differentiation strategy should emphasize financial rather than strategic controls.

False

25. Centralized and formalized procedures allow for greater flexibility, an important factor for firms using a cost leadership strategy.

False

27. Firms using the differentiation strategy need to respond quickly to environmental opportunities and threats. The structural features that are best for these requirements are centralization, specialization, and many rules and procedures.

False

29. Firms switch from a functional structure to a multidivisional structure because greater levels of environmental complexity and uncertainty make it necessary for the firm to develop cooperative relationships with its stakeholders.

False

30. The three multidivisional structures that are used to implement a diversification strategy are the competitive form, the strategic business unit form, and the integrated form.

False

48. For firms in a vertical complementary alliance (such as between Toyota and its suppliers), it is more difficult to identify the strategic center firm than in a horizontal complementary alliance (for example, airline alliances).

False

49. Alliances of organizations in the same position on the value chain are known as vertical alliances.

False

50. If firms band together in a large number of vertical complementary strategic alliances, there is a danger that the government will suspect them of illegal collusive activities.

False

7. Organizational inertia often prompts top management to initiate structural change when organizational performance levels drop.

False

An acquisition of a firm in a highly related industry is referred to as a horizontal acquisition. a. True b. False

False

As noted in the Chapter 7 Strategic Focus, the current Chinese cross-border strategy is to focus on buying global brands, sales networks, and goodwill in in branded products. a. True b. False

False

Downscoping represents a reduction in the number of a firm's employees and sometimes in the number of its operating units, but it may or may not represent a change in the composition of businesses in the corporation's portfolio. a. True b. False

False

Firms can increase their speed to market for new products by pursuing an internal product development strategy rather than an acquisition strategy. a. True b. False

False

Horizontal acquisitions and related acquisitions tend to contribute less to a firm's competitiveness than do unrelated acquisitions. a. True b. False

False

Hostile acquisitions provide greater financial returns to the acquiring company as it is easier for managers to integrate the firms. a. True b. False

False

In the current global landscape, firms from North America and Europe use the acquisition strategy more frequently than firms from other nations. a. True b. False

False

According to the Chapter 7 Opening Case, the difference between Facebook's acquisition approach and the approaches of Microsoft and Google is that a. Facebook tends to acquire earlier-stage companies, whereas Microsoft and Google tend to acquire later- stage companies. b. none of Facebook's acquisitions have survived as independent companies, whereas those of Microsoft and Google have continued to operate as subsidiaries. c. Facebook's approach is to acquire earlier-stage companies, whereas Microsoft and Google tend to acquire later-stage companies. d. Microsoft's and Google's acquisitions have all been friendly, whereas Facebook's have all been hostile.

B

AgroPharm is searching for a top-level executive. AgroPharm has marketed its products only to U.S. farmers and agribusinesses in the past. Now, the company plans to expand operations to Mexico and Central America in the next two years. To maximize the chances of success it is critical that the new executive a. be of Hispanic descent. b. have international experience. c. possess an advanced degree in animal science. d. have a background in managing agribusiness firms.

B

All of the following are external environmental sources that affect managerial discretion EXCEPT a. industry structure. b. corporate culture. c. market growth rate. d. potential for product differentiation.

B

All of the following were results of Citigroup's acquisition strategy EXCEPT (Chapter 7 Strategic Focus) a. overly diversified. b. a much smaller, though global, business financial service firm. c. too large. d. lacking in synergy.

B

Junk bonds are now used more frequently to finance acquisitions primarily because of the belief that debt disciplines managers. a. True b. False

False

The development of the original personal computer (PC) was a(n) ____ innovation at the time, whereas adding a different kind of whitening agent to a soap detergent in an example of a(n) ____ innovation. a. incremental; radical b. radical; incremental c. concentric; radical d. radical; concentric

B

The effective development and management of the firm's ____ may be its only sustainable competitive advantage. a. capital base b. human capital c. technology d. organizational culture

B

Research evidence suggests that horizontal acquisitions of firms with dissimilar characteristics result in higher performance levels. a. True b. False

False

Research has shown that the more different the acquired firm is in terms of competencies and resources than the acquiring firm, the more likely the acquisition is to be successful. a. True b. False

False

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b. it is difficult and time intensive for companies to develop products that differ from their current product line. c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.

B

The fastest growing group of entrepreneurs in the U.S. are a. Baby Boomers leaving corporate jobs. b. women. c. recent immigrants. d. ethnic minorities.

B

The presence of barriers to entry in a particular market will generally make acquisitions (BLANK) as an entry strategy. a. less likely b. more likely c. prohibitive d. illegal

B

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle (a software firm) is an example of a horizontal acquisition. a. True b. False

False

The term "leverage" in leveraged buyouts refers to the a. firm's increased concentration on the firm's core competencies. b. amount of new debt incurred in buying the firm. c. fact that the employees are purchasing the firm for which they work. d. process of removing the firm's stock from public trading.

B

The use of high levels of debt in acquisitions has contributed to a. the increase in above-average returns earned by acquiring firms. b. an increased risk of bankruptcy for acquiring firms. c. the confidence of the stock market in firms issuing junk bonds. d. an increase in investments that have long-term payoffs.

B

Through the work of cross-functional teams, product development stages are grouped into ____ processes. a. short-term and long-term b. parallel or overlapping c. serially ordered d. complementary

B

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to (BLANK) by making an acquisition. a. increase new product speed to market b. broaden its competitive scope c. increase its economies of scale d. overcome entry barriers

B

Which of the following factors most encourages stability in a firm's strategy? a. A new CEO hired from outside the firm but within the industry. b. Internal CEO succession and a homogeneous top management team. c. External CEO succession and a heterogeneous top management team. d. A new CEO hired from outside the industry.

B

All of the following statements are correct EXCEPT a. immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. b. shareholders of acquired firms often earn above-average returns from an acquisition. c. the majority of acquisitions increase long-term value for the acquiring firm. d. shareholders of acquiring firms typically earn returns from the transaction that are close to zero.

C

Caterpillar's payment of a 32 percent premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of a. integration difficulties. b. inability to achieve synergy. c. large or extraordinary debt. d. managers overly focused on acquisitions.

C

Commercialization of ideas is more difficult than idea creation as suggested by the fact that ____ percent of R&D occurs in large firms, yet the same firms produce fewer than ____ percent of patents. a. 50; 50 b. 50; 80 c. 80; 50 d. 80; 80

C

Determining the strategic direction of a firm involves a. implementation of a balanced scorecard. b. developing an entrepreneurial mind-set. c. specifying the vision and the strategy to achieve that vision over time. d. exploiting and maintaining core competencies.

C

Due diligence includes all of the following activities EXCEPT assessing a. differences in firm cultures. b. tax consequences of the acquisition. c. the level of private synergy between the two firms. d. financing for intended transaction.

C

Entrepreneurs tend to have all the following characteristics EXCEPT a. willing to take responsibility for projects. b. passionate. c. prefer certainly about projects. d. optimistic.

C

Evidence suggests that firms using acquisitions as a substitute for internally developed innovations a. are able to offset the loss of research and development competencies by competencies in other areas. b. extend their time-to-market for new product launches. c. eventually encounter performance problems. d. can leverage their core competencies across a broader range of products.

C

Exploiting and maintaining core competencies is part of the key strategic leadership action "Effectively Managing the Firm's Resource Portfolio." Which of the following is most important for developing and using core competencies? a. extensive financial assets. b. transformational leadership. c. high-quality human capital. d. an ethical organizational culture.

C

The intent of the owners in a whole-firm leveraged buyout may be to increase the efficiency of the bought-out firm and resell it in 5-8 years. This tends to make the managers of the boughtout firm highrisk takers, since they will probably not survive the resale and thus have little to lose. a. True b. False

False

The lower the barriers to entry, the more likely firms will use acquisition as a means to enter a market. a. True b. False

False

The post-acquisition integration phase is less important for acquisition success than characteristics of the deal itself. a. True b. False

False

United Technologies Corp. (UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy. a. True b. False

False

Faced with declining enrollment and increased competition from not-for-profit organizations offering inexpensive art courses for new hobbyists, the for-profit Delta Academy of Art has steadfastly stayed true to its mission of offering high-quality classical art instruction for both beginners and advanced artists at high tuition. Delta has been noted for the excellence of its artistic training for decades. This is an example of a. competitive agility. b. lack of an envisioned future. c. competence becoming a liability. d. failure to have a clear core ideology.

C

The top management team is composed of the a. heterogeneous group of advisors selected by the CEO. b. CEO and chairperson of the board. c. key individuals who are responsible for selecting and implementing a firm's strategy. d. officers listed in a firm's annual report and the board of directors.

C

There are few true mergers because a. few firms have complementary resources. b. integration problems are more severe than in outright acquisitions. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

C

To successfully implement a firm's strategy, the workforce must be viewed as a a. variable cost. b. depreciating asset. c. resource to be maximized. d. renewable asset.

C

WayWard Products has a deliberate strategy to encourage internal innovations. It has established processes to support autonomous strategic behavior as well as induced strategic behavior. WayWard Products is involved in a. entrepreneurial incubation. b. creative destruction. c. internal corporate venturing. d. cooperative innovation strategies.

C

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.

C

Which of the following is NOT a factor that determines the amount of a manager's decision discretion? a. characteristics of the manager b. characteristics of the organization c. cohesiveness of the board of directors d. the external environmental

C

Which of the following is NOT associated with heterogeneous top management teams? a. higher firm performance b. innovation and strategic change c. diminished debate among top managers d. better strategic decisions

C

Which of the following is true? For firms to be entrepreneurial, they require a culture with a. an emphasis on individualism in Western nations and an emphasis on collectivism in Eastern nations. b. an exceptionally high level of collectivism. c. a balance of individualism and collectivism. d. an exceptionally high level of individualism.

C

Which of the following statements is FALSE? a. Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios. b. Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm. c. Private synergy is easy for competitors to understand and imitate. d. Private synergy is more likely when the two firms in an acquisition have complementary assets.

C

Which of the statements about CEO duality is FALSE? a. CEO duality is associated with high CEO power. b. CEO duality has been blamed for slow response to change by the organization. c. CEO duality is relatively rare in the U.S. except in large Fortune 500 firms. d. If the CEO acts a steward, CEO duality facilitates effective decisions and actions.

C

____ are individuals, acting independently or as part of an organization, who see an opportunity and then take risks to develop an innovation to exploit it. a. Leaders b. Innovators c. Entrepreneurs d. Transformative leaders

C

152. (Refer to Case Scenario 3). The centralization of Jewell's operations can be described as

C. partially centralized in SBUs or divisions.

Wilberforce Press is a small book publishing firm in Iowa that has been owned by the same family since 1895. It is being purchased by Ozarka Publishing, another family-run business in Nebraska, which has been a specialty publisher for 77 years. Each company is known for its unique culture passed down from its founders. Executives and employees in both firms have "grown up" with their companies. Since both these companies have a long, stable history in highly related industries, this acquisition has a high probability of success. a. True b. False

False

Acquisitions are a means of extending the company's product line and increasing revenues. The capital market values growth. Therefore, some firms make acquisitions to improve their standing in the capital markets.

T

Employees usually have a strong preference for firms to use the internal managerial labor market when selecting top management team members and the CEO.

T

Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market.

T

Firm size, firm age, the executive's tolerance for ambiguity, and his or her commitment to strategic outcomes are all factors that may affect managerial discretion.

T

If the company's workers have scant existing knowledge, their "absorptive capacity" to learn new knowledge will be limited.

T

In the past, companies had a preference for insiders to fill top-level management positions because of the desire for continuity and a continuing commitment to the firm's current vision, mission, and chosen strategies.

T

Joseph Schumpeter suggested that firms engage in three types of innovative activity when managing the innovation process: imitation, invention, and innovation.

T

Larger, established firms, mainly those competing globally, use their R&D labs to create competence-destroying new technologies and products.

T

Most innovations are incremental, not radical.

T

Strategic leaders are most likely to integrate ethical values into their decisions when the company has explicit ethics codes which are integrated into the business through extensive ethics training.

T

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

T

The CEO of YorkMark, Inc., has an exceptional amount of power in the organization. It is likely the board of directors is composed of sympathetic outside members and insiders who report to the CEO.

T

The advantages of long tenure (firm-specific human and social capital, knowledge, and power) seem to outweigh the disadvantages of rigidity and maintaining the status quo.

T

The balanced scorecard focuses on both financial and non-financial controls.

T

The decision making discretion of top-level managers is determined partly by external environmental factors such as the industry structure, the industry's rate of growth, and the degree to which products can be differentiated.

T

The firm's core ideology motivates the firm's employees through the company's heritage.

T

The iPod likely resulted from autonomous strategic behavior at Apple, though the iPhone was more the result of induced strategic behavior.

T

The most critical ability of a strategic leader is the ability to attract and then manage human capital.

T

The network of strategic alliances built by an organization is a form of intellectual capital from which the organization can draw to develop innovations.

T

The training of future strategic leaders yields a competitive advantage for a firm, in part because knowledge and skills are necessary for successful execution of strategy.

T

Toyota's Prius, the first mass-produced hybrid-electric car is an example of a radical innovation as changed the industry by providing new functionalities for users.

T

A cross-functional product development team has been examining a proposed new product intensively for six months. The team has decided that although the product is unique and technologically-advanced, the cost of production will exceed the price that the consumer would be willing to pay. At this point, the product development team should a. engage in creative destruction. b. recommend that the product be sold at a loss in order to create a new market. c. turn over the product evaluation to a new product-development team which may have more passion for the product. d. recommend that the project be set aside.

D

Two key strategic leadership actions include a. monitoring the hiring of key employees and focusing on growth but not learning initiatives. b. designing and then implementing the balanced scorecard. c. setting appropriate financial targets and establishing an effective business level synergy. d. determining strategic direction and establishing balanced organizational controls.

D

Which key strategic leadership action plays a key role in influencing how the firm conducts its business and regulates and controls employees' behavior? a. Effectively Managing the Firm's Resource Portfolio. b. Determining Strategic Direction. c. Regulating and Controlling Employees. d. Sustaining an Effective Organizational Culture.

D

Which of the following is NOT an attribute of a successful acquisition? a. The acquiring firm has a large amount of financial slack. b. The acquired and acquiring firms have complementary assets and/or resources. c. Innovation and R&D investments continue as part of the firm's strategy. d. Investments in advertising and image building are made quickly.

D

Which of the following is NOT related to a CEO having long tenure in his or her position? a. more effective strategic control b. greater influence on board decisions c. more limited perspective d. a broader knowledge base

D

Which of the following is one of the barriers to effectiveness when using cross-functional teams to integrate organizational functions? a. dissension within the top management team b. informal organizational processes within the firm c. the firm's strategic orientation d. organizational politics

D

28. The integrated cost leadership/differentiation strategy needs structural features that are partially centralized and partially decentralized, jobs that are semi-specialized, and rules and procedures that call for some formal and some informal job behavior.

True

32. To implement a related constrained strategy, firms should use the cooperative form of the multidivisional structure.

True

34. The matrix organization has a dual structure combining functional specialization and business product or project specialization.

True

35. To implement a related linked strategy, a firm usually needs an SBU structure.

True

36. An SBU structure consists of at least three levels: the top level, the corporate headquarters; the next level, the strategic business units (SBUs); and the final level, SBU divisions.

True

42. Firms implementing the multidomestic strategy often attempt to isolate themselves from global competitive forces by establishing protected market positions or by competing in industry segments that are most affected by differences among local countries.

True

45. In the hybrid form of the combination structure, some divisions are oriented toward products while others are oriented toward market areas.

True

47. Arnold Schwartz, CEO and founder of Schwartz Engineering, has repeatedly rebuffed efforts by other firms to draw Schwartz Engineering into strategic alliances. Schwartz Engineering has built its highly successful business around proprietary processes invented by Mr. Schwartz in the 1980s. Mr. Schwartz is concerned that his firm will be required to share the sources of its competitive advantage with alliance partners. This is a reasonable fear.

True

5. Over time, large and complex organizations must customize their structure to fit their unique strategic needs.

True

6. Organizational structures must be both stable and flexible.

True

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions. a. True b. False

True

Although Citigroup (Chapter 7 Strategic Focus) is still involved in many financial services sectors, those that will remain after its restructuring will be more solidly focused on its main business, consumer, and investment banking. a. True b. False

True

An acquisition occurs when one firm buys a controlling or 100 percent interest in another firm and the acquired firm becomes a subsidiary business. a. True b. False

True

China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult. a. True b. False

True

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, human resources, and management. a. True b. False

True

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms. a. True b. False

True

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry. a. True b. False

True

In the final analysis, firms use merger and acquisition strategies to improve their ability to create value for all stakeholders, including stockholders. a. True b. False

True

It is relatively common for a firm to develop new products internally to diversify its product lines. a. True b. False

True

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June. a. True b. False

True

Most acquisitions that are designed to achieve greater market power entail buying a competitor, a supplier, a distributor, or a business in a highly related industry. a. True b. False

True

One of the most effective ways to test the feasibility of a future merger or acquisition is for the firms to first engage in a strategic alliance. a. True b. False

True

One of the potential problems associated with acquisitions is that the additional costs required to manage the larger firm will exceed the benefits of economies of scale and additional market power. a. True b. False

True

P&G's acquisition of Gillette reshaped its competitive scope by giving P&G a stronger presence in some products for whom men are the target market. a. True b. False

True

Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company. a. True b. False

True

Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself. a. True b. False

True

Restructuring refers to changes in the composition of a firm's set of businesses or its financial structure. a. True b. False

True

The Chapter 7 Strategic Focus shows that the first attempts at cross-border acquisitions by Chinese companies ended in failure. a. True b. False

True

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence. a. True b. False

True

The selection of an organizational structure for an internationally diversified firm should consider the international corporate-level strategy the firm is using.

True

The simple structure is used by owner-managed firms which are characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems.

True

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies. a. True b. False

True

When the actual results of an acquisition strategy fall short of the projected results, firms consider using restructuring strategies. a. True b. False

True

55. The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE?

a. Amos should consider adopting the multidivisional structure

After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to

a. reduce transaction costs.

64. Andermeyer Jewelers, which specializes in high-end jewelry, has been in existence since the 1870s and has served generations of wealthy families. Owned and managed by the Andermeyer family since its founding, it has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the structure.

a. simple

125. IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as ___, and the appropriate organizational structure to implement this strategy is the ___ structure.

a. transnational; combination

101. When a corporation pursues a related constrained diversification strategy, financial controls may not add value to strategy implementation efforts because it is difficult to

a. use them without reducing cooperation among divisional managers.

A _______ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance. a. joint venture b. synergistic strategic alliance c. diversifying strategic alliance d. dynamic alliance network

b

A board composed primarily of outside directors will have better insights as to the firms intended strategic initiatives, the reasons for the initiatives, and the outcomes expected from them than will inside directors. a. True b. False

b

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to a. get venture capital from Pet Resort. b. gain access to Pet Resort's tacit knowledge. c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta. d. join in a vertical complementary alliance with Pet Resort

b

A cooperative agreement between a hotel chain and a casino operator would be viewed as a horizontal complementary strategic alliance because as separate entities, the two firms would compete for the same customer. a. True b. False

b

A cooperative strategy a. is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. b. is a strategy in which firms work together to achieve a shared objective. c. is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. d. specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets

b

A major risk of a network cooperative strategy is that firms gain access to their partner's partners thus exposing their proprietary processes to loss or theft. a. True b. False

b

A network strategy involves a series of horizontal acquisitions by firms that are committed to dominating a particular industry. a. True b. False

b

A nonequity strategic alliance exists when a. two firms join together to create a new company. b. two or more firms have a contractual relationship to share resources and capabilities. c. two partners in an alliance own unequal shares in the combined entity. d. the partners agree to sell bonds instead of stock in order to finance a new venture

b

A stable alliance network is used in industries characterized by frequent product innovations and short product life cycles. a. True b. False

b

Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors b. shareholders and managers c. the board of directors and managers d. None of the these options are correct

b

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT a. a host nation may forbid a merger or acquisition. b. opportunistic behaviors are less likely. c. cooperative strategies require fewer resources. d. cooperative strategies allow greater flexibility in diversifying the firm's portfolio

b

For top-level managers, board acceptance of the acquiring firm's offer usually leads to job loss as the acquiring firms wants new leadership. If the offer is refused, however, the job loss risk is minimal. a. True b. False

b

Foreign investors are playing a relatively minor role in the governance of firms in many countries. a. True b. False

b

In a vertical complementary alliance, firms share some of their resources and capabilities from the same stage of the value chain to create a competitive advantage. a. True b. False

b

In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets

b

In free-market economies, ______ must decide how rivals can collaborate with their competitors without violating established regulations. a. the invisible hand b. the government c. consumers d. the business community

b

In general, cross-border alliances are more ________ and _______ than domestic alliances, especially in emerging markets. a. uncertainty reducing; diversifying b. complex; risky c. highly leveraged; tightly monitored d. flexible; trust-based

b

The Renault Nissan alliance discussed in the Opening Case is an example of a _______ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. a. joint venture b. synergistic alliance c. horizontal complementary alliance d. dynamic alliance network

b

86. Which of the following is a TRUE statement about organizational structures for implementing business-level strategies?

b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions.

79. ____ is the degree to which decision-making authority is retained at higher managerial levels.

b. Centralization

114. Megaline, Inc., with five divisions, follows the competitive form of the multidivisional structure. One division has not met the rate-of-return goals for the past year. Another division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office must decide where to allocate capital in the next year. Which scenario is the MOST likely?

b. The highest-performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year.

80. Successfully implementing a cost leadership strategy requires

b. centralization of authority.

Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the structure.

b. competitive multidivisional

83. Firms seeking to compete on the basis of cost leadership particularly need support from the functions.

b. manufacturing; process R&D

120. Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the ___ strategy.

b. multidomestic

65. Typically, an organization using a simple structure would be

b. small.

104. A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems, so the administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the ____ organizational structure.

b. strategic business unit multidivisional

Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dismissed

c

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that a. firms will have to accept greater risks. b. trust will be eroded. c. spontaneous opportunities are minimized. d. power coalitions will still develop

c

One means that is considered to improve the effectiveness of outside directors is a. mandating that all outside directors be drawn from government or academia rather than industry. b. requiring that outside directors be former executives of the firm. c. requiring outside directors to own significant equity stakes in the firm. d. requiring that outside directors be truly objective by having no ownership interest in the firm

c

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last 2 years. b. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. c. The CEO/chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules

c

Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type lighting in non-traditional style homes. Smith has invested 40 percent and Revelation has invested 60 percent into the new operation. This is an example of a(n) a. joint venture. b. nonequity alliance. c. horizontal complementary strategic alliance. d. vertical complementary strategic alliance

c

The Renault Nissan alliance (Chapter 9 Opening Case) is an example of a scope by sharing resources and capabilities. a. diversifying strategic alliance b. vertical complementary alliance c. synergistic strategic alliance d. nonequity-based horizontal complementary alliance

c

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n) a. collusive tactic. b. merger. c. cross-border strategic alliance. d. international acquisition

c

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 a. excessive cooperation. b. joint ventures. c. tacit collusion. d. horizontal strategic alliances

c

The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. usually on the verge of bankruptcy. b. typically under-performing their industry. c. often performing above their industry averages. d. always outperforming their industry

c

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to a. learn about the brand and technology from the franchisee. b. test the franchisee for potential future acquisition. c. transfer to the franchisee knowledge and skills needed to compete at the local level. d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient

c

The separation between firm ownership and management creates a(n) ________ relationship. a. governance b. control c. agency d. dependent

c

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter ________ markets in Europe and Asia. The steel industry is an example of a typically use alliances to gain market access. a. fast-cycle b. standard-cycle c. slow-cycle d. intermediate-cycle

c

97. Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance?

c. SBU form

107. Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy?

c. SBU form with related-linked strategy

Which of the following is NOT a preliminary task of the strategic center firm in a strategic network?

c. allocating internal capital

103. Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules

c. are not necessarily related to one another in terms of products or markets.

109. In the ___ multidivisional structure there is complete independence among the firm's divisions.

c. competitive

111. In the ___ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets.

c. competitive

108. A firm pursuing an unrelated diversification strategy will utilize a structure.

c. competitive form multidivisional

116. TheLG Company has units operating in significantly different industries and uses financial controls to manage its portfolio. LG is most likely using the ___ structure.

c. competitive form of the multidivisional

84. Firms seeking to differentiate particularly need support from the ___ and ___ functions.

c. product R&D; marketing

A ______ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both. a. corporate-level b. business-level c. national-level d. industry-level

a

A cooperative strategy is a means by which firms work together to achieve a shared objective. a. True b. False

a

A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable, and nonsubstitutable. a. True b. False

a

A powerful CEO would oppose the appointment of a lead director on the board of directors. a. True b. False

a

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n) a. equity strategic alliance. b. joint venture. c. nonequity strategic alliance. d. cooperative arrangement

a

A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure

a

Agency costs include incentives for executives, monitoring, enforcement costs, and any individual financial losses incurred by principals. a. True b. False

a

All of the following are business-level cooperative strategic alliances EXCEPT a. synergistic strategic alliances. b. uncertainty reduction strategic alliances. c. complementary strategic alliances. d. competition response strategic alliances

a

Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to 3 years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received a. a golden parachute. b. a poison pill. c. greenmail. d. a silver handshake

a

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

a

Awareness by top managers of the existence of external investors in the form of individuals (e.g., Carl Icahn) and groups (e.g., hedge funds) often positively influences them to align their interests with shareholders. a. True b. False

a

Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to a. align financial institutions' actions with society's interests. b. increase the number of foreign firms listing on U.S. stock exchanges. c. require CEOs to attest to the accuracy of their companies' financial reports. d. increase consumer protection in pharmaceutical products

a

Corporate governance mechanisms are designed to ensure that top managers make strategic decisions that best serve the interests of the entire group of stakeholders. a. True b. False

a

If a large Asian cosmetics firm was to engage in a 50-50 partnership with a large American chemical company to form a new company focused on creating advanced skin care products, this would be considered a joint venture. a. True b. False

a

In a cross-border alliance, the local partner is often a useful source of information about a. sources of capital. b. the strengths of the foreign firm's technology. c. market synergies. d. long-term planning

a

In recent years, the number of individuals who are large-block shareholders have declined and been replaced by institutional owners such as mutual funds and pension funds. a. True b. False

a

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's a. brand name. b. capital resources. c. access to a consolidated market. d. geographic locations

a

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 nonmanagement board member activities. a. True b. False

a

Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders. a. True b. False

a

Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance. a. True b. False

a

Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage. a. True b. False

a

Strategic alliances have become the cornerstone of many firms' competitive strategy, particularly large global competitors. a. True b. False

a

Synergistic strategic alliances such as the Renault-Nissan alliance discussed in the Opening Case focus on economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to Renault or Nissan cars. a. True b. False

a

The Renault Nissan approach to managing its collaboration involves less reliance on contracts and more reliance on trust, respect, and transparency (i.e., the opportunity-maximization approach to managing cooperative strategies). a. True b. False

a

The advantages of alliances designed to respond to competition and to reduce uncertainty are more temporary than those developed through complementary alliances, such as vertical and horizontal strategic alliances. a. True b. False

a

The alliance between BP Plc and OAO Rosneft to extract oil from Russia's Arctic Ocean was managed using contracts, i.e., the cost minimization approach. a. True b. False

a

The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is a. setting the option strike price substantially higher than the current stock price. b. insuring that the strike price value of the options can be lowered if the organizational environment becomes more risky. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope.

a

The cost minimization approach of managing alliances is more expensive to put into place and to use than is the opportunity maximization management approach. a. True b. False

a

The joint venture among BuzzFeed, CNN, and YouTube was formed to develop new sources of competitive advantages in the fast-cycle entertainment business. a. True b. False

a

The market for corporate control is composed of individuals and firms that buy ownership positions or take over potentially undervalued corporations and make changes to those corporations, including the replacement of the top managers. a. True b. False

a

The primary role of the board of directors is to monitor and control top-level executives to protect owners' interests. a. True b. False

a

The probability of alliance success is increased when partnering firms internalize successful alliance experiences. a. True b. False

a

The repurchase at a premium of the target firm's shares that were acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill

a

The separation of the positions of CEO and chairperson of the board of directors reduces the power of the CEO over firm governance practices. a. True b. False

a

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are a. engaging in tacit collusion. b. following uncertainty reducing strategies. c. monitoring business competitors for opportunistic behaviors. d. following a competitive response strategy

a

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 a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry

a

Which of the following is TRUE of trends in Japan's corporate governance structure? a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals. b. Increased regulation in the financial sector has increased the cost of mounting hostile takeovers. c. Banks' influence over corporations is increasing. d. The gap in compensation between CEOs in public and private companies is increasing

a

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ______ advantage. a. economic b. collusive c. alliance d. relational

d

A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill

d

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to _____, whereas owners wish to diversify the firm to ______. a. generate free cash flows; reduce the risk of total firm failure b. increase the price of the firm's stock; increase the dividends paid out from free cash flows c. reduce the risk of total firm failure; reduce their total portfolio risk d. reduce their employment risk; increase the company's value

d

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with a. low-cost labor production facilities in another country. b. similar products who could help the firm establish economies of scale. c. access to franchises in new markets. d. excess resources for investing

d

Japanese keiretsu are a. management structures related to total quality management systems. b. company unions, which are a type of governance system. c. the banks owing the largest shares of stock in the firm. d. a system of cross-shareholding among firms

d

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement? a. Meredith will own a majority equity stake in the new venture. b. JaZz will own a majority equity stake in the new venture. c. Meredith or JaZz will own an equal equity stake in the new venture. d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

d

Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors

d

Product diversification provides two benefits to managers that do not accrue to shareholders: ______m and ______. a. greater experience in a wider range of industries; lessening of managerial employment risk b. the manager frequently invests in the acquired firm, which allows him or her extensive profits; the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered; the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk

d

Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. b. the board includes employees as voting members. c. the board is homogenous in composition. d. outside directors own significant equity in the organization

d

The CEO and Chairman of the board of directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Establishing a formal process to evaluate the board's performance. c. Electing an lead director. d. All of these options are correct

d

The alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a ________ to speed up development of new products and services. a. slow-cycle market b. medium-cycle market c. standard-cycle market d. fast-cycle market

d

The global airline industry is one in which a. national political interests prevent airlines from making international alliances. b. the fast-cycle nature of the industry mandates heavy use of alliances. c. most alliances tend to be vertical complementary. d. alliance versus alliance competition dominates firm versus firm competition

d

The interests of multinational corporations' shareholders may be best served when there is a. a uniform compensation plan for all corporate executives, United States and foreign alike. b. executive compensation that is primarily based on long-term performance. c. elevation of foreign executive compensation to U.S. levels. d. a variety of compensation plans for executives of foreign subsidiaries

d

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT a. laws. b. culture. c. trade policies. d. technology

d

The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT a. making CEOs more accountable for their performance. b. challenges to the decisions of boards. c. focusing attention on ineffective boards of directors. d. a direct effect on firm performance

d

The risks of being accused of collusion are MOST likely under what type of alliance? a. equity-based vertical complementary alliance b. equity-based horizontal complementary alliance c. nonequity-based vertical complementary alliance d. nonequity-based horizontal complementary alliance

d

The use of strategic alliances a. is unlikely to yield success if partnering firms are headquartered in the same country. b. may be too restrictive to facilitate entry into new markets. c. usually increases the investment necessary to introduce new products. d. is more frequent than other types of cooperative strategies

d

When using cooperative strategies, firms most frequently develop strategic alliances that a. enhance the firm's reputation in the marketplace. b. are long-lived. c. will reduce the firm's political risk. d. create a competitive advantage

d

Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

d

Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top managers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management

d

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data

d

Which of the following statements is FALSE? a. Franchising is most appropriate in fragmented industries. b. Franchising provides corporate growth with less risk than do mergers and acquisitions. c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. d. Franchising agreements require more trust between firms than do other cooperative strategies

d

Why are alliances in the airline industry unstable? a. Unstable industries make for unstable alliances. b. The potential for firms to take opportunistic actions is too widespread. c. The industry is declining and profits are not sufficient to divide among alliance partners. d. The alliances require cooperation among firms that must also compete with one another

d

________ are LEAST likely to involve potential or current competitors. a. Mutual forbearance strategies b. Tacit collusion strategies c. Horizontal complementary strategic alliances d. Vertical complementary strategic alliances

d

98. Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures?

d. Firms pursuing a related constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.

70. One disadvantage of the functional structure is that

d. communication and coordination are difficult among organizational functions.

57. Structural stability affects the organization's ability to

d. consistently and predictably manage its daily work routines.

90. The___ structure is best for implementing the related-constrained diversification strategy.

d. cooperative form of the multidivisional

94. Cisco used the ___ structure to implement its __ strategy.

d. cooperative form of the multidivisional; related constrained

133. In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT

d. decreasing communications between network members to reduce communication costs.

60. Strategic controls allow corporate-level managers to

d. examine the fit between what the firm might do and what it can do.

96. The cooperative multidivisional firm

d. has a structure requiring heavy use of horizontal integrative devices.

Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms. Adams' company should

d. have a highly centralized, functional structure.

123. Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the ____ organizational structure.

d. hybrid combination

128. Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer-term contracts with suppliers and enables engineers in the supplier companies to have better communication with Toyota. This is an example of a(n)

d. strategic network.

67. The benefits of a simple structure include all of the following EXCEPT

d. the ability of specialists to develop deep expertise.

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT a. the acquisition of Taylor should be primarily for defensive rather than strategic reasons. b. research suggests that acquisition strategies are a common means of avoiding risky internal ventures. c. the outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product development process. d. acquisitions could become a substitute for innovation within your firm.

A

Christina is evaluating Maximum Brands as an investment opportunity. She is very concerned about future financial performance by Maximum Brands. Christina does not believe that the CEO can act as a steward. Christina will probably be most concerned if a. there is CEO duality. b. many of the members of the board of directors are outsiders. c. the positions of chairman of the board and CEO are held by different persons. d. there is an independent board leadership structure.

A

The CEO/chairman of PharmaPacifica was recently killed in an airplane crash. This tragedy has thrown PharmaPacifica into turmoil as there is no one in the organization qualified to step into the former CEO's shoes. This is an example of a. a failure of succession management. b. managerial hubris. c. the risk inherent in CEO duality. d. excessive reliance on the internal managerial labor market.

A

The idea that it is "vital to sell the ideas to others in the organization so that innovations will be commercialized" is the rationale behind the use of a. product champions. b. joint ventures. c. strategic leadership. d. cross-functional teams.

A

The more heterogeneous the top management team, the a. more difficult it will be for the team to implement strategies. b. more likely it is that the team will be cohesive. c. less innovative the team's decisions will tend to be. d. less diverse the team membership will be.

A

Thomas is an upper-middle level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to (BLANK) controls. a. bureaucratic b. strategic c. tactical d. organic

A

Value creation through internal innovation originates with a. an entrepreneurial mind-set. b. cross-product development teams. c. shared values and entrepreneurial leadership. d. innovation.

A

Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO? a. Internal hiring results in an increased level of innovation. b. Insiders are familiar with the firm's products, markets, technologies, and operating procedures. c. Use of the internal labor market reduces turnover among existing employees. d. Insiders are more familiar with a firm's operating procedures.

A

____ is(are) critical in order for a firm to gain access to complementary resources from partners in a cooperative alliance. a. Social capital b. Shared values c. An entrepreneurial mind-set d. Compatible organizational cultures

A

Normally, the more involved a board of directors is in shaping the firm's strategic direction, the a. more balanced the organization is. b. higher the corporation's performance is. c. more rapidly executive decisions can be make. d. more difficult it becomes to make effective executive decisions.

B

Omicron Artificial Intelligence has a core competency of being able to respond quickly to competitors' actions and to opportunities in the marketplace. This is an example of competitive a. agility. b. speed. c. flexibility. d. responsiveness.

B

QuadroVax is investing heavily in research and development on new methods of vaccine development that would speed up the creation of vaccines for newly emerging viruses and to get these vaccines to the market rapidly. QuadroVax's shareholders can expect a. immediate wealth creation. b. a long wait for an uncertain payoff. c. a long wait for a high probability payoff. d. a large payoff in the short-term with rapidly decreasing wealth generation in the longer run.

B

Research shows that internationally diversified firms tend to be ____ than domestic-only firms. a. less profitable b. more innovative c. less technologically advanced d. more likely to have an individualistic culture

B

When managers become overly focused on making acquisitions, it is a. because the skills of top executives are better used in making acquisitions than they are in daily organization operations. b. because of the thrill of selecting, chasing, and seizing a target. c. due to pressure from major stakeholders to diversify the firm. d. because acquisitions are a quick way to improve the financial standing of the firm.

B

Why have large pharmaceutical companies been forming alliances with biotechnology companies? a. to evade legislative restrictions on drug research in the U.S. b. to develop new products and bring them to market c. because both firms had declining profitability and needed cash infusions from other firms d. in order to gain absorptive capacity

B

According to Peter Drucker, the primary goal of innovation is to a. promote social well being. b. increase the number of jobs. c. create wealth. d. support national economies.

C

Products developed through ____ are often offered at lower prices without as many features than products developed through ____. a. innovation, imitation b. imitation, invention c. imitation, innovation d. innovation, invention

C

Shaping and reinforcing a new organizational culture requires all of the following EXCEPT a. effective communication. b. effective performance appraisals. c. adherence to the firm's traditional core values. d. an appropriate reward system.

C

Some research findings have shown that acquisitions typically (BLANK) for shareholders in the acquiring firm. a. result in above-average returns b. provide approximately average returns c. result in returns near zero d. take some time to achieve private synergy, but eventually result in above-average returns

C

Strategic control focuses on the ________ of strategic actions whereas financial controls focus on the _____ of strategic actions. a. revenues; costs b. long-term financial outcomes; short-term financial performance c. content; outcomes d. outcomes; content

C

The (BLANK) phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions. a. pre-acquisition negotiations b. pre-acquisition due diligence c. post-acquisition integration d. post-acquisition restructuring

C

____ exist(s) when there is a need in the market that can be satisfied by new goods or services. a. Potentiality b. Market readiness c. Entrepreneurial opportunities d. Critical core competencies

C

____ is one of the reasons for the differences in rates of entrepreneurship among different countries. a. Climate b. Competitiveness c. Culture d. Constitution

C

(BLANK) are unsecured obligations that are not tied to specific assets for collateral. a. Bearer bonds b. No-load stocks c. Penny stocks d. Junk bonds

D

(BLANK) is often used when the acquiring firm paid too high a premium to acquire the target firm. a. Management buyout b. Leveraged buyout c. Downscoping d. Downsizing

D

(BLANK) refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business. a. Downsizing b. Hostile takeovers c. Shakeouts d. Downscoping

D

Acquisitions can become a time sink for top level managers for all the following reasons EXCEPT a. the integration process after acquisition requires managerial attention. b. they must prepare for acquisition negotiations. c. managers are involved in the search for viable acquisition candidates. d. only top managers can perform the required due diligence.

D

Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will be most likely to be secure if a. Ambrose's research is in a non-core activity. b. the acquisition has been financed by junk bonds. c. Ambrose is in a position to take a poison pill. d. Ambrose is a key employee in the firm's primary business.

D

Autonomous strategic behavior is a(an) ____ process in which product champions pursue new ideas. a. top-down b. horizontal c. integrated d. bottom-up

D

Firms develop innovations in all the following ways EXCEPT a. Through autonomous or induced strategic behavior. b. By acquiring other companies. c. Through cooperative strategies. d. Via divestiture of low-performing units.

D

Managerial actions that support development of an ethical organizational culture include all of the following EXCEPT a. establishing a code of conduct. b. disseminating the code of conduct to all stakeholders to inform them of the firm's ethical standards and practices. c. creating a work environment in which people are treated with dignity. d. disciplining whistle-blowers.

D

New entrepreneurial firms are better than larger established firms at a. implementing innovations. b. gaining competitive advantage. c. making alliances. d. identification of entrepreneurial opportunities.

D

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT a. Pappelbon did not fully evaluate the target. b. Pappelbon overpaid. c. Pappelbon's due diligence was not fully effective. d. Pappelbon's management was overly focused on acquisitions.

D

Recently, Sony selected Sir Howard Stringer as CEO. Sir Howard is not Japanese and he was not a Sony employee before his selection. Which of the following statements is FALSE? a. Sony's top management team will be more heterogeneous with the addition of Sir Howard. b. Sir Howard will have a broader perspective of the firm and its competitive environment than would a Sony insider. c. If Sony's top management team is homogeneous, Sir Howard's future impact on Sony's strategy is ambiguous. d. The decision-making process on Sony's top management team will be smoother and faster with the addition of Sir Howard.

D

The failure of organizations to use the pool of managerial talents held by women can best be termed a. deliberate policy of discrimination. b. lack of assertiveness by women managers. c. managerial isolation from social trends. d. an opportunity cost for firms.

D

The top management team at Ingenuity, Inc., has assigned a team of scientists to a multi-year project to investigate the viability of growing large amounts of fur from cloned cells of minks and foxes to produce no-kill fur products for coats and other clothing items. This idea would satisfy all the dimensions of the entrepreneurial orientation EXCEPT a. innovativeness. b. risk taking. c. proactiveness. d. competitive autonomy.

D

The use or application of entrepreneurship within an established firm is called a. corporate emergence. b. transformational leadership. c. exceptional R&D. d. corporate entrepreneurship.

D

Transaction costs include all of the following EXCEPT a. charges from investment bankers who complete due diligence for the acquiring firm. b. the loss of key employees following the acquisition. c. managers' time spent evaluating target firms. d. managers' time spent planning the diversification strategy of the firm.

D

Which of the following will increase the probability that a lower-level manager will become a successful strategic leader? a. appointing many outside board members. b. increasing the firm's sales. c. increasing the homogeneity of the top management team. d. training and development programs.

D

An emphasis on strategic controls encourages managers to be risk averse.

F

Autonomous strategic behavior results in internal innovations that are highly consistent with the firm's current strategy.

F

For 15 years, Edward was a compensation specialist at a mid-sized firm. He was laid off when the firm experienced financial setbacks. Edward has decided to open his own business as a compensation consultant to small firms. He can expect that his main source of human capital will be a bank line of credit.

F

Organizational culture is a complex set of ideologies, symbols, and core values that are shared throughout the firm, but its development is so subtle and poorly understood that top managers cannot influence its content.

F

1. As shown in the Chapter 11 Opening Case, Borders was able to structure its operations in ways that allowed it to manage the different businesses in each country and market effectively.

False

33. Cisco implemented the related constrained strategy using the SBU form of the multidivisional structure.

False

A related acquisition involves two firms in the same industry. a. True b. False

False

Top managers typically become overly focused on acquisitions because only they can perform most of the tasks involved, such as performing due diligence on the target firm. a. True b. False

False

Unrelated diversified firms become overdiversified with a smaller number of business units than do firms using an related diversification strategy. a. True b. False

False

Top management team members and CEOs who have long tenure on the team and in the organization have greater influence in board decisions.

T

Firms often use the downscoping and downsizing strategies simultaneously as did Citigroup in its restructuring (Chapter 7 Strategic Focus). a. True b. False

True

Typical returns on acquisitions for acquiring firms are close to zero. a. True b. False

True

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) ______ strategy. a. vertical complementary b. horizontal complementary c. uncertainty reduction d. network

a

Although governments in free-market economies allow rivals to collaborate to improve competitiveness, the challenge is to make sure the alliance does not lead to price fixing. a. True b. False

a

Collusion is a form of cooperative strategy. a. True b. False

a

Large-block shareholders typically own at least 5 percent of a corporation's issued shares. a. True b. False

a

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT a. to enhance the compensation packages of top managers. b. to leverage core competencies in new markets. c. to operate within government restrictions in the local country. d. to escape limited domestic growth opportunities

a

Network cooperative strategies among Silicon Valley firms have been successful, in part, because they are geographically close together. a. True b. False

a

Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage. a. True b. False

a

One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the Chevron/China National Petroleum joint venture. a. True b. False

a

Research suggests that institutional activism may not have a strong direct effect on firm performance but may indirectly influence the targeted firm's strategic decisions, including those concerned with international diversification and innovation. a. True b. False

a

Scandals at Enron, WorldCom, and HealthSouth illustrate the negative effects of poor ethical behavior on a firm's efforts to satisfy stakeholders. a. True b. False

a

Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership. a. True b. False

a

Stock option repricing where the strike price value of the option has been lowered from its original position sometimes happens when firm performance is poor. a. True b. False

a

Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers. a. True b. False

a

The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the ______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Opening Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures. a. cost minimization; opportunity maximization b. opportunity maximization; cost minimization c. cost maximization; opportunity minimization d. bureaucratic; organic

a

The performance of individual board members and entire boards are being evaluated more formally and with greater intensity than in years past. a. True b. False

a

The top management of RavenCrest, Inc. have significant stock options in RavenCrest. They are therefore more likely to gain in making an agreement to be acquired, especially if they have golden parachutes. a. True b. False

a

The two basic approaches to successfully manage cooperative strategic alliances involve ______ and ______. a. cost minimization; opportunity maximization b. monitoring systems; multiple management approaches c. contractual systems; financial systems d. equity approaches; nonequity approaches

a

72. The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits?

a. aligning the corporate structure with the demands of global expansion

82. Walmart's effective strategy/structure configuration is

a. cost leadership/functional.

Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is most likely to be TRUE? a. Agency costs at Amos Ball are high. b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO. c. At Amos Ball, the opportunity for managerial opportunism is high. d. The functions of risk-bearing and decision making are separate at Amos Ball

b

As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions a. increases. b. decreases. c. remains constant. d. is eliminated

b

Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms. a. True b. False

b

Because top management decisions are usually complex and nonroutine, determining the quality of executive performance is beyond the power of boards of directors. a. True b. False

b

Both top executives and owners of the firm wish to diversify the firm to reduce risk. a. True b. False

b

Close monitoring, formal contracts, and constant vigilance against opportunism increase the probability of alliance success. a. True b. False

b

Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm

b

Cooperation in slow-cycle markets is extremely rare because these industries are declining. a. True b. False

b

Corporate governance is important to nations because a. shareholders want large stock returns. b. firms seek to invest in nations with national governance standards that are acceptable to them. c. company boards have lobbied for strong governance. d. the United States requires that other nations adopt its governance practices

b

DDD MetalWorks plans to go public in the next 2 years. In order to be listed on the New York Stock Exchange, the firm will need to restructure its present board of directors, which is made up of a majority outside independent directors to a board of directors that is dominated by insiders and related outsiders. a. True b. False

b

Firms entering into synergistic strategic alliances expect to attain a. technological complexity. b. economies of scope. c. monopolistic market power. d. learning curve efficiencies

b

Institutional owners, despite their size, are usually unable to discipline ineffective top managers and cannot influence a firm's choice of strategies and overall strategic direction. a. True b. False

b

International strategic alliances are less risky than domestic strategic alliances because of diversification across countries. a. True b. False

b

James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision making is based on authority and few conflicts emerge. d. Mr. Abercrombie should find significant need for his services in companies in transitional economies

b

Managers in firms that have been subjects of hostile takeovers usually find that their value to the new firm has been enhanced because of their in-depth insider knowledge. a. True b. False

b

Managers may decide to invest ______ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets

b

Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross-border alliance, this partnership can be called a(n) a. nonequity strategic alliance. b. joint venture. c. horizontal complementary alliance. d. equity strategic alliance

b

More intense application of governance mechanisms such as mandated by Sarbanes Oxley and Dodd-Frank may cause firms to take on fewer risky projects and thus increase potential shareholder wealth. a. True b. False

b

Nonequity strategic alliances exist when two or more firms join together to create an independent firm. a. True b. False

b

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders. a. True b. False

b

Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms

b

Tacit collusion tends to be least used as a business-level, competition-reducing strategy in highly concentrated industries such as airlines and breakfast cereals even though it results in higher prices for consumers. a. True b. False

b

The increased use of the market for corporate control has decreased the sophistication and variety of managerial defense tactics that are used in takeovers. a. True b. False

b

The primary responsibility of the franchiser is to transfer capital to the franchisee. a. True b. False

b

69. Leslie is a newly graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a structure.

b. functional

The ____ structure is the most appropriate structure for implementing the integrated cost leadership/differentiation strategy.

b. functional

91. Which of the following is NOT a variation of the multidivisional structure?

b. regional form

124. The need for the organization to combine local responsiveness and efficiency is most critical in a strategy.

b. transnational

127. It is easiest to identify the company that functions as the strategic center firm in

b. vertical complementary strategic alliances.

Agency costs reflect all of the following EXCEPT ______ costs. a. monitoring b. enforcement c. opportunity d. incentive

c

All of the following are consequences of the Sarbanes-Oxley Act EXCEPT a. a decrease in foreign firms listing on U.S. stock exchanges. b. internal auditing scrutiny has improved and there is greater trust in financial reporting. c. an increased number of IPOs (initial public offerings) are expected. d. Section 404 creates excessive costs for firms

c

In a(n) _______, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. a. equality-based strategic alliance b. non-equity strategic alliance c. joint venture d. equity strategic alliance

c

In managing cooperative strategies, research indicates that ______ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage. a. extensive capitalization b. stability c. trustworthiness d. Internet competency

c

Which of the following is FALSE about corporate governance in China? a. The Chinese governance system may be tilting toward the Western model. b. With increasing frequency, the compensation of top executives of Chinese companies is closely related to prior and current financial performance of the firm. c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more volatility in those values over time

c

Which of the following is NOT a risk for firms engaged in cooperative strategies? a. misrepresentation of a partner's competencies b. partner acts opportunistically c. insufficient variation in firms' core competencies d. failure of partners to make complementary resources available to the partnership

c

62. ______ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual

c. Financial

102. A firm pursuing a related constrained diversification strategy would typically need all of the following EXCEPT

c. division managers' rewards based on division financial performance.

122. One of the primary disadvantages of the global strategy and worldwide product divisional structure is that

c. it is difficult to respond effectively to local market needs and preferences.

A strategy in which firms work together to achieve a shared objective is a a. functional-level strategy. b. business-level strategy. c. corporate-level strategy. d. cooperative strategy

d

All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT a. consumer protection. b. CEO compensation. c. regulation of derivatives. d. retirement accounts

d

McDonald's, Hilton International, and Subway all heavily rely on the ______ strategy. a. transnational b. network cooperative c. cross-border alliances d. franchising cooperative

d

53. Which of the following is TRUE?

d. Strategy has a more important influence on structure than structure has on strategy.

93. Cisco's __ corporate-level structure was useful in implementing its ___ business-level strategy.

d. cooperative form; integrated cost leadership-differentiation

The most centralized and most costly form of the multidivisional structure is the

d. cooperative.

92. The BEST multidivisional structure to use

d. depends on the degree of diversification.

76. The three structural characteristics that differ among organizational structures include all of the following EXCEPT

d. intermediation.

99. The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization.

d. matrix

63. Alfred Chandler found that firms grow in a predictable pattern and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory?

d. multidivisional

121. The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited

d. potential for global efficiency.

Which of the following is NOT a result of over-diversification? a. Executives do not have a rich understanding of all of the firm's business units. b. Managers emphasize strategic controls rather than financial controls. c. Firms use acquisition as a substitute for innovation. d. Managers become short-term in their orientation.

B

Which of the following is NOT one of the five dimensions thought to characterize an employee's entrepreneurial mind-set? a. autonomy b. reactivity c. risk taking d. innovativeness

B

An advantage of severance packages is that they may encourage top-level managers to accept takeover bids that are attractive to shareholders. a. True b. False

a

An example of the external labor market is the situation where a. an assessment center operated by an external consulting firm evaluates company managers for promotion potential. b. a new vice president of marketing is hired from a competitor. c. the senior vice president of finance is promoted to CEO. d. a vice president of human resources is sent to a university executive MBA program for professional development.

B

149. (Refer to Case Scenario 2). Which structural form would be best for Pal given that it competes on the basis of low cost?

B. functional

Criteria for reevaluating internal business processes using the balanced scorecard include all of the following EXCEPT a. asset utilization improvements. b. improvements in employee morale. c. increases in employee skills. d. changes in turnover rates.

C

Critics advocate reforms to ensure that independent outside directors represent a significant majority of the total membership of the board. But outsider-dominated boards may emphasize the use of financial as opposed to strategic controls. The risk of reliance on financial controls is that they may encourage managers to make decisions to maximize their interests and reduce their employment risk. a. True b. False

a

Four perspectives are integrated to form the balanced scorecard framework. The financial perspective focuses on the view of the firm by the a. customer. b. employee. c. shareholder. d. general society.

C

Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentive compensation such as stock awards and options. a. True b. False

a

Failure of a partner to contribute needed resources and capabilities to a cooperative venture is a particular risk in international ventures especially in emerging economies. a. True b. False

a

The CEO of Icon Image Associates wishes to radically change the corporate culture of the firm. She knows that she must convince others at Icon Image of the necessity for the culture change and gain their active support. The CEO knows that the key players in energizing the culture change and fostering alignment with the new strategic vision are a. the members of the board of directors. b. top management team members. c. the CEO, top managers, and middle managers. d. rank-and-file employees.

C

The ____ is a framework firms can use to verify that they have established both strategic and financial controls to assess their performance. a. managerial model b. holistic control system c. balanced scorecard d. internal auditing system

C

The competition for resources among those representing different organizational functions within a firm often leads to a. erosion of social capital. b. heightened communication. c. organizational politics. d. empowerment of organizational members.

C

The dimensions on which functional departments can vary include all the following EXCEPT ____ orientation. a. time b. customer c. technological d. interpersonal

C

The expenses incurred by firms trying to create synergy through acquisition are called (BLANK) costs. a. differentiation b. diversification c. transaction d. interaction

C

The firm's culture promotes unity of purpose for cross-functional work teams through a. a collectivist structure. b. an entrepreneurial mind-set. c. shared values. d. resource allocation.

C

Firms consider entering international alliances because multinational firms outperform firms operating only in their home markets. a. True b. False

a

Firms in slow-cycle markets can use alliances to enter restricted markets or to establish franchises in new markets. a. True b. False

a

Firms in standard-cycle markets seek to gain economies of scale through cooperative alliances. a. True b. False

a

Franchising is an alternative to pursuing growth through mergers and acquisitions. a. True b. False

a

The level of entrepreneurial activity in a nation is ____ the nation's level of economic development. a. negatively related to b. independent of c. positively related to d. weakly related to

C

The main risk in a strategic alliance is that a. the alliance will not result in a successful innovation. b. critical employees will be hired away by the strategic partner. c. one partner will use the other partner's knowledge and use it to enhance its own competitive abilities. d. the partners will lose control over their internal processes.

C

The primary responsibility for effective strategic leadership of the organization rests with the a. board of directors. b. top management team. c. CEO. d. stakeholders.

C

The three types of innovative activity include all of the following EXCEPT a. invention. b. imitation. c. implementation. d. innovation.

C

High levels of trust allow less formal contracts to govern the relationship between alliance partners and increases the likelihood of alliance success. a. True b. False

a

Historically, ________ have been at the center of German corporate governance structure. a. banks b. institutional shareholders c. public pension funds d. government agencies

a

If a stakeholder is dissatisfied with a firm, it will withdraw its support and give it to another firm. a. True b. False

a

Cross-border acquisitions are primarily made to a. reshape the firm's competitive scope. b. reduce the cost of new product development. c. take advantage of higher education levels of labor in developed countries. d. overcome barriers to entry in another country.

D

When a firm acquires its supplier, it is engaging in a(n) a. merger. b. unrelated acquisition. c. hostile takeover. d. vertical acquisition.

D

The outcome of downsizing, downscoping, and leveraged buyouts is higher performance. a. True b. False

False

An organization engaging in strategic entrepreneurship focuses on identifying opportunities that it can exploit through innovations.

T

Because of the challenges top executives face, they often are more effective when they operate as top management teams.

T

Charles is a customer service representative for a home improvement store. He has creative ideas about how to increase customer satisfaction. Charles's talents will be most likely to be used in a firm that a. uses the induced strategic behavior form of internal corporate venturing. b. uses the autonomous strategic behavior form of internal corporate venturing. c. makes significant investment in research and development. d. focuses on an acquisition strategy for gaining innovative ideas.

B

Compared to internal product development, acquisitions allow a. immediate access to innovations in mature product markets. b. more accurate prediction of return on investment. c. slower market entry. d. more effective use of company core competencies.

B

Since it replaces existing products and methods of production, entrepreneurship is a process of a. harnessing the human potential. b. creative destruction. c. creation of opportunity. d. exploitation of innovation.

B

The balanced scorecard's perspective on learning and growth is intended to improve the firm's ability to innovate.

T

The fastest-growing group of entrepreneurs in the U.S. is women.

T

Transformational leadership is the most effective strategic leadership style.

T

When the new CEO is from inside the firm and a heterogeneous top management team is in place, the strategy may not change, but innovation is likely to continue.

T

37. The divisions within each SBU are related in terms of shared products or markets, but the divisions of one SBU have little in common with the divisions of the other SBUs. a

True

An overriding lesson from the Chapter 11 Opening Case about Borders is that failure to properly structure an organization can contribute to poor strategic decisions and eventually bankruptcy.

True

Research evidence suggests that horizontal acquisitions result in higher performance when the firms have similar strategies, assets, and capabilities. a. True b. False

True

The two types of complementary strategic alliances are a. vertical and horizontal. b. macro and micro. c. outsourcing and insourcing. d. network and complementary

a

The use of executive compensation as a governance mechanism is more challenging to firms implementing international strategies than those strictly operating domestically. a. True b. False

a

Usually, large-block shareholders are considered to be those shareholders with at least _______ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

a

78. ____ is the degree to which rules and procedures govern work.

a. Formalization

130. Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to

a. make the partners' true loyalties and intentions unclear.

66. In most cases, the focus strategy is best managed using a structure.

a. simple

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. a. explicit collusion b. economies of scale c. opportunistic behavior d. distribution opportunities

b

According to the Chapter 9 Opening Case, in addition to their corporate-level alliance, Renault and Nissan have each formed vertical complementary strategic alliances with other companies. a. True b. False

b

Acquisitions are the most common cooperative strategy used in standard-cycle markets. a. True b. False

b

Although growing in popularity with small and medium-sized firms because they can gain economies of scale, large companies tend to avoid strategic alliances. a. True b. False

b

Firms in _______ markets cooperate to pool resources and gain market power. a. slow-cycle b. standard-cycle c. fast-cycle d. hyper-cycle

b

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a ______, which is effective at transferring ______. a. nonequity strategic alliance; explicit knowledge. b. joint venture; tacit knowledge. c. joint venture; explicit knowledge. d. equity strategic alliance; tacit knowledge

b

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(n) ________ director. a. lead independent b. inside c. related d. encumbered

b

Generally, the board of directors can be classified as insiders, unrelated insiders, outsiders, and unrelated outsiders. a. True b. False

b

Horizontal business-level strategic alliances have greater probability of creating sustainable competitive advantage than do vertical business-level strategic alliances. a. True b. False

b

Horizontal complementary strategic alliances are designed so that each partner realizes equal benefits from equal investments in the alliance. a. True b. False

b

In the United States, cooperative strategies to reduce competition may result in ______ if they are explicit. a. increased tax liabilities b. litigation c. government takeover of the firms d. dissolution of the firm

b

In the United States, the fundamental goal of business is to a. ensure customer satisfaction. b. maximize shareholder wealth. c. provide job security. d. generate profits.

b

In the cost minimization approach to managing competitive strategies, the relationship between the firms is based on trust of the other partner. a. True b. False

b

Individual shareholders with small ownership percentages are less dependent on the board of directors to represent their interests than are large block shareholders. a. True b. False

b

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a. the director of food service for IFS b. the board of directors of IFS c. the employees directly involved in the wrongdoing d. the head of contract services for the Marines

b

87. Successful implementation of the differentiation strategy requires a structure that

b. decentralizes decision making.

105. In an SBU structure, ___ is/are evaluated using strategic controls, whereas ______ is/are evaluated using financial controls.

b. divisions within the SBUs; each SBU

95. Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible?

c. cooperative structure; a bonus for increasing organizational performance

74. The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to

c. coordination and control problems.

75. Some experts consider the _____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms.

c. multidivisional

118. A worldwide geographic area structure is an organizational form in which

c. national interests dominate and management adapts to local or cultural differences.

71. Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure?

c. need for knowledge-sharing among specialists

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

F

The entrepreneurial mind-set is found primarily among managerial and scientific employees.

F

20. As a firm grows, it typically shifts from a simple structure to a functional structure.

True

23. There are three variations of the multidivisional structure.

True

26. The marketing and R&D functions are emphasized in the differentiation strategy's functional structure.

True

Research shows that about (BLANK) percent of mergers and acquisitions are successful. a. 20 b. 40 c. 60 d. 80

A

The goal of investing in human capital is to a. increase the number of employees in the firm. b. reduce organizational slack. c. maximize current productivity per employee. d. develop a workforce capable of continuous learning.

D

The most effective leadership style is ____ leadership. a. pragmatic b. charismatic c. inspirational d. transformational

D

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms a. with insufficient diversification. b. having too much debt. c. being unable to achieve synergy. d. growing too large.

A

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to (BLANK) than other firms and that government ownership of those firms leads to (BLANK) for the acquisition a. pay a higher premium; overpayment b. pay a lower premium; overpayment c. pay a lower premium; underpayment d. pay a higher premium; underpayment

A

Actions that effective strategic leaders can take to develop an ethical organizational culture include all of the following EXCEPT a. relying on the fundamental goodness of individuals. b. using reward systems that recognize acts of courage. c. communicating goals that describe the firm's ethical standards. d. creating a work environment where individuals are treated with dignity.

A

After a leveraged buyout, (BLANK) typically occur(s). a. selling of assets b. further rounds of acquisitions c. due diligence d. private synergy

A

An organization's ____ is composed of the key individuals who are responsible for selecting and implementing the firm's strategies. a. top management team b. board of directors c. keiretsu d. governance circle

A

Billy Kroghmen is the son of a very prominent Fortune 500 CEO. Billy has had troubles. He failed out of multiple colleges, universities, and correspondence schools. He finally received his undergraduate degree from a university with only a post office box for an address. He then enrolled in the school's combined graduate accounting and law school programs, graduating with honor with degrees in both areas. After graduation, he twice failed both the CPA and bar exams, managing to set record low scores on the ethics portions of both. Despite these academic setbacks, Billy's career now seems to be thriving. He has been appointed to a number of "blue ribbon" government committees, is on the board of directors of two corporations and one prestigious not-for-profit organization. In at least one instance, a donor credited Billy with the idea for making a large contribution to the not-for-profit. Widespread speculation is that his career advancement is based largely on social relationships through friends and family. We would classify Billy as ____ on ____ capital, and ____ on ____ capital. a. high; social; low; human b. high; human; high; social c. high; human; low; social d. none of these are correct.

A

Blixin Concrete Products, an established firm, is seeking a technologically-advanced partner for a strategic alliance. If the potential partner is a new entrepreneurial venture, the main benefit the Blixin Concrete can offer is probably a. investment capital. b. management expertise. c. research and development competencies. d. social networks.

A

Cross-functional teams are useful in developing and commercializing new products because each team member brings his or her special competencies to the project. Each team member brings his/her point of view from his/his experience and background. On the other hand, these ____ may cause barriers to effective communication among team members. a. independent frames of reference b. entrepreneurial mind-sets c. professional rivalries d. politicized points of view

A

During the recent financial crisis, M&A activity (BLANK) , whereas in 2011, M&A activity (BLANK) a. declined; increased. b. declined; declined. c. increased; increased. d. increased; declined.

A

Entrepreneurship is the process by which individuals or groups identify and pursue ____ without being immediately constrained by the ____ they currently control. a. opportunities; resources b. opportunities; core competencies c. threats; resources d. threats; core competencies

A

Failing to (BLANK) appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated. a. downsize b. spin-off c. downscope d. buyout

A

Firms needing to change their strategies should a. create more heterogeneous top management teams. b. focus on their core customer base. c. implement transformational leadership. d. emphasize the training and development of internal managerial talent.

A

Horizontal, vertical, and related acquisitions to build market power a. are likely to undergo regulatory review and analysis by financial markets. b. are rarely permitted to occur across international borders. c. typically involve a firm purchasing one of its suppliers or distributors. d. concentrate on capturing value at more than one stage in the value chain.

A

In the balanced scorecard framework, ____ controls are used to assess the organization's success in creating a climate that supports change and innovation. a. learning and growth b. financial c. operational d. innovational

A

Innovation by imitation usually leads to _________ and products based on imitation are usually offered at ________. a. product or process standardization; lower prices b. product or process dedifferentiation; higher prices c. product or process standardization; higher prices d. product or process dedifferentiation; lower prices

A

Internal product development is often viewed as a. carrying a high risk of failure. b. the only reliable method of generating new products for the firm. c. a quicker method of product launch than acquisition of another firm. d. critical to the success of biotech and pharmaceutical firms.

A

The firm of Bergeron has existed for hundreds of years, having made exquisite clocks and watches. In its advertising it refers to clocks the firm made for such past royalty as Marie Antoinette and the Czars of Russia. Employees are constantly reminded of the firm's rich history and its long tradition of excellence of design and execution. Bergeron is motivating its employees through its a. core ideology. b. envisioned future. c. organizational culture. d. business strategy.

A

The number of patents held by an organization is a rough guide to the a. effective use of organizational politics. b. future success of an initial public offering. c. amount of venture capital a firm will be able to attract. d. level of innovation in a firm.

D

Isidore Security Services is a national provider of guard and security services for businesses. It has been in business for over 90 years, having been founded by one of Teddy Roosevelt's Rough Riders (Isidore O'Malley). Lately it has been losing clients to more aggressive and innovative firms offering remote security monitoring systems instead of a guard-based approach. The board of directors of Isidore Security Services is concerned that this downward trend may threaten the existence of this venerable firm and the jobs of its employees. a. This is an example of an established firm neglecting the opportunity-seeking aspect of strategic entrepreneurship. b. This example shows the dysfunctional aspects of unrestricted entrepreneurialism. c. This is an example of the lack of human capital hampering internal innovation. d. Isidore Security Services is suffering from the "novelty effect" wherein new firms are more attractive to clients/customers merely because they are new and not because they add value.

A

Knowledge must be transferred to others in the firm to enhance the entrepreneurial competence of the firm. This requires that a. the receiving party have adequate absorptive capacity to learn. b. the communication process be highly intensive. c. the knowledge be broken into the smallest comprehensible units. d. training consultants be involved in every step of transference.

A

One of the distinguishing differences between the two sources of internal corporate venturing (autonomous strategic behavior and induced strategic behavior) is whether the innovation process a. is encouraged through a bottom-up or top-down process. b. is encouraged by a product champion or an entrepreneur external to the organization. c. relies on internal structure or existing strategy to encourage innovation. d. is in a large or small organization.

A

Organizational controls provide a. the parameters within which strategies are to be implemented. b. goals and objectives that must be achieved. c. information on action steps to be taken to implement the corporate strategy. d. managers with guidelines on how to treat employees.

A

Panera Bread has innovated to improve the quality of its distribution system, to improve the quality of its bread dough, and to introduce new menu items. These are examples of a. incremental innovation. b. invention. c. imitation. d. the use of social capital.

A

Pet Care Companion Connection (PCCC) is an organization that trains persons with mild to moderate mental disabilities to care for pets in a pet boarding facility. This organization has been successful in providing a quality service for pet owners and a supportive training environment for their trainees. The tuition charged to trainees is only somewhat higher than the fee which day-care providers would charge for these individuals. Graduates of the program are qualified for employment by commercial kennels. PCCC is an example of a. taking advantage of a need in the marketplace. b. creative destruction of existing services for pet boarding. c. institutionalized entrepreneurship. d. internal corporate venturing.

A

Research has shown that the more (BLANK), the greater is the probability that an acquisition will be successful. a. related the acquired and acquiring firms are b. diverse the resulting portfolio of competencies c. disparate the corporate cultures d. involved investment banking firms are in the due diligence process

A

Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.

A

Sales of watches among teenagers and twenty-somethings are declining rapidly as this age group uses cellphones, iPods, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider (BLANK) in order to develop new products other than watches. a. unrelated diversification b. backward integration c. forward integration d. horizontal acquisitions

A

The ability to attract and manage ____ may be the most important skill a strategic leader must have. a. human capital b. financial resources c. responses to competitors' actions d. investment strategies

A

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) a. vertical acquisition. b. unrelated acquisition. c. horizontal acquisition. d. merger of equals.

A

153. (Refer to Case Scenario 3). Jewell's divisional incentive compensation can be described as

A. linked to divisional performance.

56. A firm's ___ specifies the work to be done and how to do it given the firm's strategy or strategies.

A. structure

An investor is analyzing two firms in the same industry. She is looking for long-term performance from her investment. Both firms are basically identical except one firm is involved in substantial downsizing and the other firm is undertaking aggressive downscoping. The investor should invest in the a. downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. b. downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses. c. downsizing firm because it will be making decisions based on tactical strategies. d. downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.

B

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners a. resisted selling at any price. b. sold the company to the larger brewer. c. designed a poison pill to discourage a takeover. d. looked for smaller brewers to acquire instead of selling to the larger brewer.

B

Compared with downsizing, (BLANK) has (have) a more positive effect on firm performance. a. reconfiguring b. downscoping c. leveraged buyouts d. acquisitions

B

Currently, the rationale for making an acquisition includes each of the following EXCEPT a. to increase market power. b. to decrease taxes paid by shareholders. c. to overcome entry barriers. d. to increase diversification.

B

Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for a. market discipline. b. innovation. c. risk analysis. d. international diversification.

B

GreenBox, a company that recycles paper products to make cardboard cartons, has introduced a new product that resists damage by moisture. GreenBox can expect that a. this innovation will resist competitors' attempts to imitate it. b. its investors will react positively to the introduction of the new product because of the potential for higher returns. c. its investors will react negatively because of the risk and cost entailed in introducing a new product. d. this will be recognized in the industry as a radical innovation.

B

Market power is derived primarily from the a. core competencies of the firm. b. size of a firm and its resources and capabilities. c. quality of a firm's top management team. d. depth of a firm's strategy.

B

Monahegan Plasma Company is facing a performance downturn and realizes that a major rethinking of its strategy is in order. Under these circumstances, Monahegan Plasma would benefit from a a. internal CEO with short tenure. b. external CEO with a heterogeneous top management team. c. dual CEO/chairperson with a homogenous top management team. d. CEO with long tenure who has a strong sense of hubris.

B

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(an) a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this market.

B

The board of directors for TundraPro, Inc., is searching for a new CEO. The firm is in need of new direction after suffering several years of declining performance and increasingly demoralized management and employees. The board has decided it needs a CEO who can be a transformational leader. To this specific end, the board needs to identify applicants who have a. high levels of honesty, trustworthiness, and integrity. b. high emotional intelligence. c. excellent analytical skills. d. low tolerance for ambiguity.

B

____ capital increases cooperation among individuals inside and outside the firm. a. Human b. Social c. Visionary d. Cultural

B

145. (Refer to Case Scenario 1). Given its change from a multidomestic strategy to a transnational strategy, Compliance Inc. should change its structure from ____ to

B. worldwide geographic area; combination

(BLANK) may be necessary because acquisitions create a situation in which the newly formed form has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management. a. Management buyout b. Leveraged buyout c. Downsizing d. Downscoping

C

(BLANK) typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving. a. Financial slack b. Private synergy c. Friendly acquisitions d. High compensation

C

A CEO's breadth of knowledge base is constrained by a. his or her relationship with the board of directors. b. whether he or she is also the chairperson of the board of directors. c. his or her long tenure with the firm. d. the level of social capital in the firm.

C

A friendly acquisition a. raises the price that has to be paid for a firm. b. enhances the complementarity of the two firms' assets. c. facilitates the integration of the acquired and acquiring firms. d. allows joint ventures to be developed.

C

A leveraged buyout refers to a. a firm restructuring itself by selling off unrelated units of the company's portfolio. b. a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background. c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. d. an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity.

C

A major barrier to the use of cross-functional teams is a. excessive individualism of creative people. b. lack of communication skills of technical people. c. independent frames of reference of team members. d. lack of social capital by team members.

C

GE performed exceptionally well under Jack Welch, the former CEO of GE. Jeffery Immelt, the current CEO, has made changes to the firm's corporate-level strategy and structure. These changes were necessary because the competitive landscape had shifted significantly. Immelt's actions resulted in a. a smooth transition to the new organizational strategy because of the organizational slack generated by Jack Welch. b. replacement of the entire top management team because once individuals commit to a core ideology and an envisioned future, they are unlikely to change. c. some resistance by organizational stakeholders who are accustomed to Jack Welch and the high performance which he brought to GE. d. acceptance by GE's stakeholders as Immelt inherited the "iconic aura" surrounding Jack Welch.

C

If the firm's current employees are well-trained in their jobs, but also have other knowledge, skills, and abilities, these employees have a. social capital. b. entrepreneurial capabilities. c. high absorptive capacity to learn. d. intellectual slack.

C

Induced strategic behavior is a process that fosters product innovations that a. are likely to change a firm's strategic intent and mission. b. will lead to greater financial returns. c. are aligned closely with current strategy and structure. d. will come to market in a short period of time.

C

Innovation creates a(an) a. opportunity for a new product or process. b. new product or process. c. commercial product. d. idea for potential exploitation.

C

Innovations that involve significant technological breakthroughs and create new knowledge a. build incrementally on the firm's existing technologies and knowledge. b. are the most common type of innovation. c. involve substantial uncertainty and risk. d. typically have clear market opportunities.

C

Internal corporate venturing does NOT involve a. autonomous strategic behavior. b. induced strategic behavior. c. strategic alliances. d. product champions.

C

Magma, Inc., acquired Vulcan, Inc., 3 years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will a. go public through an IPO. b. review the due diligence information collected before the acquisition. c. restructure. d. review its tactical-level strategies.

C

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately (BLANK) percent of innovations are imitated within 4 years after patents are obtained. a. 5 b. 10 c. 60 d. 20

C

Panera Bread develops and produces its own dough-based products, but it works with manufacturing partners to create new soups. Panera Bread is therefore a. increasing its costs and reducing its potential to succeed. b. engaged in internal corporate venturing. c. pursuing innovation through both internal and cooperative strategies. d. not an innovative company.

C

PracticalSolutions is a small firm providing employee assistance programs for companies with troubled employees. PracticalSolutions frequently partners with other consulting firms to provide creative solutions for companies with personnel problems. This history of partnering has developed ____ capital for PracticalSolutions. a. intellectual b. institutional c. social d. technological

C

Private synergy a. occurs in most related acquisitions and allows firms to see increased returns. b. is frequently achieved in conglomerates. c. is not easy for competitors to understand and imitate. d. is assessed by managers during the due diligence process.

C

A cross-functional work team is having difficulties in operating smoothly and friction has developed among some of the members. Many of the strongest complaints are from the representatives of management who complain that the research scientists are disorganized, haphazard, and undisciplined. Managers complain the scientists do not adhere to any fixed rules or procedures. On the other hand, the research scientists complain that the managerial representatives are excessively rule-oriented bureaucrats, and have no flexibility or spontaneity. The main problem with this team seems to be centered around differences in a. interpersonal orientation. b. time orientation. c. goal orientation. d. formality of structure.

D

According to the Chapter 7 Strategic Focus, China's recent approach to acquisitions has been to focus on hard assets (e.g., mineral deposits or R&D facilities) instead of established branded products because a. China's initial acquisition activities in branded products was highly successful and it wanted to apply those successful techniques to hard assets that would create more value for Chinese firms. b. hard assets around the world had appreciated rapidly and China wanted to take advantage of that appreciation. c. China's currency had depreciated relative to currencies in developed countries making acquisition of hard assets in those countries cheaper. d. it did not always have the managerial capability to realize successful performance of branded products

D

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

D

CEO duality refers to a. firms where there is both a president and a CEO. b. CEOs who sit on the board of directors of other firms. c. CEOs who hold office in more than one company. d. the situation where the CEO is also chairperson of the board of directors.

D

Clarita Cosmetics is confronting a decline in sales due largely to a general economic downturn. The top management team is debating whether to lay off employees. In the debate, the following statements are made. Which of the statements is FALSE? a. If Clarita Cosmetics lays off a large number of employees, there will be a significant loss of human capital that will cause further downturns in the firm's performance. b. A moderate-sized layoff at Clarita Cosmetics will probably improve firm performance. c. If Clarita Cosmetics restructures, it ought to increase investments in training and development. d. A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the increased number of errors employees may make until they learn their new tasks.

D

Competitive aggressiveness describes a firm's a. tendency to engage in new ideas and creative processes. b. willingness to allow employees to take actions free of organizational constraints. c. ability to be a leader in the marketplace. d. propensity to take actions that allow it to outperform rivals consistently and substantially.

D

Cross-border acquisitions are critical to U.S. firms competing internationally a. if they are to develop differentiated products for markets served. b. when market share growth is the focus. c. where consolidated operations are beneficial. d. if they wish to overcome entry barriers to international markets.

D

Each of the following is a rationale for acquisitions EXCEPT a. achieving greater market power. b. overcoming significant barriers to entry. c. increasing speed of market entry. d. positioning the firm for a tactical competitive move.

D

Entrepreneurial opportunities a. present the potential for a firm to leverage existing products or services into new markets. b. present risk to the firm and should be avoided. c. are conditions contrary to a firm's established strategy and segments served. d. are conditions in which new goods or services can satisfy a need in the market.

D

The Enron employee who reported the financial manipulations at the company to her superiors can be considered to have engaged in a. managerial opportunism. b. white-collar crime. c. vindictive disloyalty. d. an act of courage.

D

Executive headhunters have approached Charles about taking the position of senior vice president of marketing for a well-known company. Although this company has been highly successful since 1995, Charles has heard persistent rumors of overly aggressive marketing tactics, questionable reporting of sales data, and an atmosphere of intolerance of criticism. The CEO is a powerful and charismatic individual, who built the company from a small regional firm to an international powerhouse in only a decade. The other top managers have been hand-picked by the CEO, as have a number of the members of the board of directors. The salary for this position is very high and includes generous stock options. It would be a major step up in Charles's career and would position him to move to CEO of another company in the future. Charles has prided himself on his high moral values and is viewed as an exceptionally ethical person by his peers. What should Charles do? a. Charles should take the job because he can effect real change in the culture of the organization, and take advantage of the personal financial and career opportunities. b. Charles should realize that personal moral values and the realities of the corporate world differ in both quality and degree. Consequently, he can take a job in an ethically borderline company without tainting his personal moral standing. c. Charles should not rely on rumors to dissuade him from making an advantageous career decision. d. Charles should not take the job because the culture of the organization is set by the CEO and other top managers. He would have little influence on the organizational culture as one of many top managers.

D

Human capital refers to a. the net present value of the future competencies of the workforce. b. the amount of money purchasers of the firm would pay for the continuing employment of the present workforce. c. the value-added that the firm's workforce contributes to each product produced or service rendered. d. knowledge and skills of the firm's work force.

D

Independent frames of reference and organizational politics are the two primary barriers to cross-functional team integration. Two methods to facilitate cross-functional integration are _________ and ___________. a. autonomous strategic behavior; induced strategic behavior b. incremental innovations; radical innovations c. bottom-up integration; top-down integration d. shared values; effective leadership

D

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(n) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

D

One problem with becoming too large is that large firms a. tend to have less market power. b. have less potential for economies of scale. c. become attractive takeover targets. d. usually increase bureaucratic controls.

D

Regarding partnering in cooperative alliances, entrepreneurial new companies may seek ____ while more established companies may need ____. a. distribution channels, tacit knowledge b. deep technological expertise, distribution channels c. social capital, technical capital d. investment capital, new technological knowledge

D

Research shows that ____________ is the most effective means of ensuring that employees comply with the firm's ethical requirements. a. a written code of ethics b. a statement in the firm's mission statement c. a speech on ethics by the CEO of the company d. a value-based culture

D

24. High levels of formalization of rules and procedures which often emanate from the centralized staff are a characteristic of the structure used to implement the cost leadership strategy.

True

A company with a need for immediate, large returns should invest in research and development.

F

A firm that innovates through imitation can expect to produce a product for a niche market, since the general market for the standardized product will be dominated by early adopters.

F

A product champion should come from outside the organization in order to ensure that the entrepreneurial vision has the objective support it needs.

F

Acquisitions are a low risk approach to producing and managing innovation.

F

17. The centralized structure used by Borders (Chapter 11 Opening Case) did not provide information from local stores that might have been useful in changing its technology strategy more quickly than it did. This example illustrates the effect of structure on strategy.

True

10. Organizational controls guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable.

True

11. To properly execute strategic controls in firms using related diversification, the executives must have a deep understanding of each unit's business-level strategy.

True

12. RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize strategic controls over financial controls.

True

15. According to Michael Dell, an overemphasis on financial controls to produce attractive short-term results contributed to performance difficulties at Dell, Inc. This point emphasizes the importance of properly balancing the use of strategic and financial controls.

True

2. The Chapter 11 Opening Case about Borders shows that although strategy has an important influence on structure, once a particular structure is in place, that structure influences strategy.

True

113. The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive-placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all- important at Transector. Transector probably uses the _____ structure.

a. competitive form of the multidivisional

100. The heavy use of integrative mechanisms in the _____ multidivisional organizational structure is intended to achieve

a. cooperative; economies of scope.

73. Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience

a. coordination and control problems.

88. The integrated cost leadership/differentiation strategy is difficult to implement mostly because

a. different primary and support activities are emphasized when using cost leadership and differentiation strategies.

Implementing the multidomestic strategy requires decentralization to

a. facilitate the tailoring of products to the demand in local markets.

58. Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because

a. firms must be flexible while retaining a degree of stability.

115. In the competitive form of the multidivisional structure, the focus of headquarters is on all of the following EXCEPT

a. integration.

131. Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with which Toyota has contracts for services. This results in the suppliers and Toyota (the strategic center firm) being more

a. interdependent.

Managers in the United States receive ______ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

b

Mutual forbearance is a. illegal in the United States. b. a type of competition-reducing strategy. c. a variety of risk-sharing by firms in highly fragmented industries. d. exercised when alliance partners refrain from opportunistic behaviors

b

Mutual forbearance is a form of explicit collusion between firms in which competitors avoid attacking rivals they meet in multiple markets. a. True b. False

b

Nonequity strategic alliances are formed when one partner owns a much larger (or inequitable) share of the joint venture than do the remaining partner(s). a. True b. False

b

Of the various business-level strategic alliances, ______ alliances have the most probability of creating sustainable competitive advantage, and ______ have the lowest. a. horizontal complementary; vertical complementary b. vertical complementary; competition reducing c. competition reducing; horizontal complementary d. uncertainty reducing; competition reducing

b

Ownership concentration is determined by both a. the number of stockholders and the parties they represent. b. the number of stockholders and total percentage of shares they own. c. the number of outside directors and the parties they represent. d. the number of outside directors and total percentage of shares they own

b

Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet

b

Stable alliance networks will most often a. be used to enhance a firm's internal operations. b. appear in mature industries where demand is relatively constant and predictable. c. emerge in industries with short product life cycles. d. emerge in declining industries as a way to increase process innovations

b

The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers

b

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions related to consumer protection, systemic risk oversight, capital requirements for banks, but not for executive compensation. a. True b. False

b

The New York Stock Exchange requires that the audit committee be a. available to comment to external analysts. b. headed by outside directors. c. liable for any illegal actions by the top management team. d. made up of CPAs with auditing experience

b

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability

b

The longer the focus of managerial incentive compensation, the greater the ______ top-level managers. a. earnings potential for b. risks borne by c. incentives for d. potential tax burden for

b

The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned

b

The way that U.S. corporate boards of directors are presently structured, they have little influence on the unethical behavior of top management. a. True b. False

b

To increase the likelihood of success between partners assuming that trust exists, ______ approach(es) should be used to manage cooperative strategies. a. the cost minimization b. the opportunity maximization c. both the cost minimization and opportunity maximization d. None of the these options are correct.

b

Using business-level strategic alliances to hedge against risk and uncertainty is most common in the slow-cycle markets. a. True b. False

b

Well-designed stock option-based compensation plans should have the option strike prices substantially lower than the current stock prices. a. True b. False

b

When the option strike prices in an executive stock option-based compensation plan have been lowered it is usually a defense to a hostile takeover. a. True b. False

b

Which of the following statements is TRUE? a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies. b. As many as 50 percent of cooperative strategies fail. c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources. d. Problems with international cooperative strategies usually concern financial-system differences between the partners

b

Which of the following statements is about corporate governance in Germany is FALSE? a. The Vorstand (management board) of a German corporation makes decisions about strategy and management. b. The Vorstand is elected by the firm's employees. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock

b

Which type of strategic alliance is best at passing tacit knowledge between firms? a. primary cooperative strategic alliances b. joint ventures c. equity strategic alliances d. nonequity strategic alliances

b

Within the Renault Nissan alliance (Chapter 9 Opening Case), both Renault and Nissan have each formed ______ strategic alliances at the business-unit level with other companies. a. vertical complementary b. horizontal complementary c. synergistic d. diversifying

b

______ strategic alliances have stronger focus on value creation than do ______ alliances. a. competition reducing; complementary b. complementary; competition reducing c. uncertainty reducing; complementary d. collusive; uncertainty reducing

b

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture? a. BPM will own more than 50 percent of the venture and a new company will be formed. b. J3 will own more than 50 percent of the venture and a new company will be formed. c. BPM and J3 will both own 50 percent of the venture and a new company will be formed. d. BPM and J3 will both own 50 percent of the venture but no new company will be formed

c

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this? a. joint venture b. equity strategic alliance c. nonequity strategic alliance d. competition reduction alliance

c

Complete the following: In small firms, managers often own a________ percentage of the firm, which means there is ________ separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large

c

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will a. insist on excessively close monitoring of DDD's actions. b. gain access to DDD's core competencies and use them to become a future competitor. c. not fully share its intangible resources. d. not make equivalent investments to the alliance as does DDD

c

Firms in a standard-cycle market may form alliances in order to a. take advantage of opportunities in emerging market countries. b. more quickly distribute new products. c. capture economies of scale. d. share risky R&D investments

c

German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the UK and United States largely because a. the roles of CEO and chairperson of the board of directors are usually combined. b. large institutional investors control large blocks of stock. c. private shareholders and large institutional investors rarely have large ownership positions in firms. d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms

c

Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance

c

If the market for corporate control were efficient as a governance device, then only ______ would be targets for takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly performing firms d. over-valued firms

c

Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50 percent of the stock of any one firm

c

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n) a. joint venture. b. network strategy. c. equity strategic alliance. d. nonequity strategic alliance

c

Agricultural Chemicals, Inc., was the target of a hostile takeover 6 months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE? a. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. They are more a function of general market conditions. b. The fact that a hostile takeover has occurred is proof that the firm was under-performing. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. d. The CEO and top executives should not consider their jobs secure

d

All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. defense tactics are usually beneficial for the executives of the target firm. b. defense tactics are opposed by institutional investors. c. defense tactics vary in their effectiveness as a defense to takeovers. d. defense tactics make the costs of a takeover lower

d

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breech of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here? a. having a true perception of the partner's trustworthiness b. failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy c. the partner misrepresenting competencies it can bring to the partnership d. opportunistic behavior

d

Corporate governance is all of the following EXCEPT a. mechanisms used to determine and control the strategic direction and performance of organizations. b. a means to establish and maintain harmony between owners and top managers whose interests may conflict. c. ensuring that top managers' interests are aligned with the interests of stockholders. d. resolve conflicts among corporate employees

d

Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance

d

Firms participate in strategic alliances for all the following reasons EXCEPT to a. create value that they could not develop by acting independently. b. enter competitive markets more quickly. c. gain access to resources. d. retain tight control over intangible core competencies

d

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should a. avoid future cooperative alliances because they lack the skills needed to manage them successfully. b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent opportunistic behavior by the alliance partner. c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance partner in the future. d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

d

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT: a. Has AsiaFoods accurately represented its competencies? b. Will AsiaFoods make alliance-specific investments? c. Can Greentech expect opportunistic behavior from AsiaFoods? d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

d

Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is correct about this relationship? a. This is a joint venture because in licensing arrangements, a new company is created. b. This is an equity strategic alliance because licensing does not involve the creation of a new company, but does involve an equity commitment. c. The firms risk charges of collusion because most licensing relationships between competitors involve explicit collusion. d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities

d

In Japan, the principal source of the active monitoring of large companies comes from a. boards of directors. b. stock brokerage companies. c. the government. d. banks

d

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy? a. the loss of unexpected opportunities b. the cost of extensive monitoring mechanisms c. the costs of writing detailed contracts d. the prevention of opportunistic behavior by the partner(s)

d

In some countries, the only legal way for foreign firms to invest in the country is through a. acquisitions. b. mergers. c. greenfield ventures. d. strategic alliance with a local firm

d