MGMT 498 Exam 2

Why is following an unrelated diversification strategy especially advantageous in an emerging economy? a) It allows the conglomerate to overcome institutional weaknesses in emerging economies. b) It allows the conglomerate to form a monopoly in emerging economies. c) It allows the conglomerate to use well-defined legal systems in emerging economies. d) It allows the conglomerate to take advantage of strong capital markets in emerging economies.

a) It allows the conglomerate to overcome institutional weaknesses in emerging economies.

A primary advantage of organizing economic activity within firms is the a) ability to coordinate highly complex tasks to allow for specialized division of labor. b) low administrative costs because of reduced bureaucracy. c) eradication of the principal-agent problem. d) high-powered incentive to work as salaried employees for an existing firm

a) ability to coordinate highly complex tasks to allow for specialized division of labor.

Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? a) cost-leadership b) differentiation c) niche marketing d) product diversification

a) cost-leadership

Which of the following lists the stages of the industry life cycle in the correct order? a) introduction, growth, shakeout, maturity, and decline b) introduction, shakeout, growth, maturity, and decline c) introduction, growth, maturity, shakeout, and decline d) introduction, shakeout, maturity, growth, and decline

a) introduction, growth, shakeout, maturity, and decline

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are a) similar to those that need to be developed and superior to those of competitors in the targeted area. b) similar to those that need to be developed and inferior to those of competitors in the targeted area. c) different from those that need to be developed and superior to those of competitors in the targeted area. d) different from those that need to be developed and inferior to those of competitors in the targeted area.

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

When a firm manufactures 2000-3000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3000-4000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? a ) 2000-3000 units b) 3000-4000 units c) below 2000 units d) above 4000 units

b) 3000-4000 units

Which of the following statements is true of an equity alliance? a) An equity alliance is based on contractual agreements rather than partial ownership. b) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. c) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. d) An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance.

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

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend aconsiderable amount to protect its intellectual property. Which of these business ventures makes themost sense for Sky Pioneers? a) licensing some of its newest designs to overseas competitors b) acquiring an airplane-parts manufacturer in another country c) beginning a brownfield project in its home country d) exporting airplane parts to many other countries

b) acquiring an airplane-parts manufacturer in another country

Which of the following modes of entering a foreign market allows for the lowest level of control? a) greenfield ventures b) exporting c) joint ventures d) acquisitions

b) exporting

In the decline stage, which of the following strategies involves a reduction of investment? a) exit strategy b) harvest strategy c) maintain strategy d) consolidate strategy

b) harvest strategy

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller andAssociates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will a) decrease. b) increase. c) become external transaction costs. d) be eliminated.

b) increase.

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices.According to the CAGE distance model, which of these countries is statistically most attractive toBadlands? a) one that is much poorer than the country where Badlands has its headquarters b) one that is in the same trading bloc as Badlands' home country c) a country that does not share the same currency as Badlands' home country d) the country that is the greatest physical distance from existing Badlands facilities

b) one that is in the same trading bloc as Badlands' home country

What causes the winner's curse? a) buying a firm with principal-agent problems b) overpaying for an acquisition c) buying a firm with a competitive disadvantage d) underpaying for an acquisition

b) overpaying for an acquisition

WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? a) process diversification b) product diversification c) geographic diversification d) market diversification

b) product diversification

Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue? a) dominant business b) related-constrained c) related-linked d) unrelated

b) related-constrained

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that a) the foreign firm will need to make larger investments when compared to entering the newmarket on its own. b) some of the firm's proprietary know-how may be appropriated by the foreign partner. c) all potential business risks in the new market will have to be faced alone by the foreign firm. d) the shareholder value of the foreign partner will decline drastically

b) some of the firm's proprietary know-how may be appropriated by the foreign partner.

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with a) differences in climates and time zones. b) the absence of a trading bloc. c) physical remoteness. d) the lack of connective ethnic and social networks.

b) the absence of a trading bloc.

Which of the following is an example of an external transaction cost? a) the cost of setting up a production unit b) the cost of searching for a contract manufacturer c) the cost of recruiting and retaining employees d) the cost of maintaining plant and machinery

b) the cost of searching for a contract manufacturer

What is horizontal integration? a) the process of merging with a competitor at a different stage of the value chain b) the process of merging with a competitor at the same stage of the value chain c) the process of acquiring a competitor at a higher stage of the value chain d) the process of acquiring a competitor at a lower stage of the value chain

b) the process of merging with a competitor at the same stage of the value chain

A drawback of short-term contracting as an alternative to making a component in-house is that a) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. b) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. c) it fails to allow a long planning period that individual market transactions provide. d) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

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

Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? a) The firm will be protected against the principal-agent problem. b) The firm's administrative costs will be low because of necessary bureaucracy. c) The firm will have more flexibility in purchasing and comparing prices of goods and services. d) The firm will have high-powered incentives, such as hourly wages and salaries.

c) The firm will have more flexibility in purchasing and comparing prices of goods and services.

Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.? a) a conglomerate b) a subsidiary c) a dominant-business firm d) a single-business firm

c) a dominant-business firm

The concept of a(n) ____________ attempts to capture both learning effects and process improvements at firms. a) managerial grid b) growth matrix c) experience curve d) diminishing utility curve

c) experience curve

Revolution Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing? a) product diversification strategy b) process diversification strategy c) geographic diversification strategy d) product-market diversification strategy

c) geographic diversification strategy

In a radical innovation, a firm targets a) existing markets by using new technologies b) new markets by using existing technologies c) new markets by using new technologies d) existing markets by using existing technologies

c) new markets by using new technologies

Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms? a) unlike incumbent firms, new entrants do not have to face the high entry barriers, initially b) new entrants are embedded in an innovation ecosystem, while incumbent firms are not c) unlike incumbent firms, new entrants do not have formal organizational structures and processes d) incumbent firms do not have the advantages of network effects that new entrants have

c) unlike incumbent firms, new entrants do not have formal organizational structures and processes

Which of the following example uses a focused differentiation strategy? a) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet b) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte c) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night d) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

d) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

To keep track of the latest developments in computing, Lenovo's research centers are located inChina, the United States, and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Lenovo's products are the same for its domestic and foreign markets. Which strategy does Lenovo follow? a) a transnational strategy b) a multi domestic strategy c) a localization strategy d) a global-standardization strategy

d) a global-standardization strategy

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of a) factor conditions. b) competitive intensity in a focal industry. c) demand conditions. d) related and supporting industries/complementors

d) related and supporting industries/complementors

Which of the following is a competitive benefit experience by the first mover firm in an industry? a) the first mover will be able to achieve a less steep learning curve b) the first mover will be able to reduce the switching costs c) the first mover will not have to patent its products or technology d) the first mover will be able to reduce costs through economies of scale

d) the first mover will be able to reduce costs through economies of scope

Product features, customer service, and complements are all examples of important a) cost curves b) cost drivers c) value curves d) value drivers

d) value drivers