MGT 400 Final Exam

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

related-linked diversification

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

the absence of a trading bloc

real-options perspective

-Breaks down a larger investment decision into a set of smaller decisions -Staged sequentially over time

Which of the following descriptions best exemplifies adverse selection?

A manager cannot ascertain the contributions of individual team members in team production.

Transaction costs (definition, internal vs. external)

All internal and external costs *associated with an economic exchange*, whether it takes place within the boundaries of a firm or in markets External: searching for contractors, monitoring/enforcing contracts Internal: recruiting employees, setting up shop floor

Inside directors versus outside directors

Inside directors: -usually consist of CEO, CFO, COO Outside directors: senior execs from other firms

strategic trade-offs

Choices between a cost or value position. Higher value = higher cost

multinational enterprise

Deploys resources and capabilities in two countries or more

Influence of economies of scale on firm growth

Diversification enhances firm performance by providing economies of scale to reduce costs

A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n)

Equity alliance

Which of the following statements is true of explicit knowledge?

Explicit knowledge is shared in non-equity alliance firms.

Explicit knowledge v. Tacit knowledge

Explicit: objective, in books/reports Tacit: subjective, what you've learned over time, personal

Businesses located in countries that have relatively weak domestic demand rarely make the leap to multinational enterprises because they must focus their attention on shoring up their economic positions in their home countries. (T/F)

False

characteristics of a public stock company/publicly traded company

Four benefits: -limited liability for investors -transferability of investor ownership -legal personality -separation of legal ownership and management control Level of hierarchy: state charter shareholders board of directors management employees

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

Globalization (definition, benefits, and disadvantages)

Process of closer integration and exchange b/w countries and peoples worldwide Advantages: Gain access to a larger market Gain access to low-cost input factors Develop new competencies Disadvantages: Liability of foreignness Loss of reputation Loss of intellectual property

Which of the following statements is true of shareholders in a public stock company?

They are granted a charter of incorporation by the state and legally own company stock.

Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Airbase should ideally compare its strategic position with

a consumer electronics company popular among price-conscious customers.

principal-agent problem

a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him

Business Strategy versus corporate strategy

business level strategy: -cost leadership -value innovation corporate level strategy: -diversification -vertical integration -geographic slope

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

Which of the following is primarily a value driver?

complements

Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a

focused differentiation strategy

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms

Decisions relating to the range of products and services a firm will offer determine the firm's

level of diversification

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

lowering costs

Which of the following motivations for business growth involves principal-agent problems?

motivating managers

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification

shared value creation framework

provides guidance to managers about how to reconcile the economic imperative of gaining and sustaining competitive advantage with corporate social responsibility

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

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

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic trade-offs

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

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

the cost of searching for a contract manufacturer

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?

to take advantage of the lower taxes in southern united states

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

vertically integrate

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?

what range of products the firm should offer

Advantages of organizing economic activity within a firm

-The ability to make command-and-control decisions by fiat along clear hierarchical lines of authority. -Coordination of highly complex tasks to allow for specialized division of labor. -Transaction specific investments -Creation of a community of knowledge

Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario?

Differentiation

Which of the following perspectives best supports the shared value creation framework?

Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage?

Narrow the scope of competition and focus on unique features such as the use of organic materials.

Showstopper Inc. dominates the ladies' wig market and wants to expand into men's toupees. How can Showstopper's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm?

The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do.

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)?

Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.

strategic alliances (definition, types, benefits of types)

Voluntary arrangement between firms involving the sharing of knowledge, resources, & capabilities in order to develop processes, products, & services Types & Benefits: -*Non-Equity*- flexible, fast, easy to imitate/terminate -*Equity*- stronger tie, trust/commitment can emerge, window to new technology -*Joint Venture*- strongest tie, trust & commitment likely to emerge, may be required by institutional setting

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

a real-options perspective

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?

by having higher performance in another sector

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

The process of closer integration and exchange between different countries and peoples worldwide is

globalization

Starling Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that public companies

have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.

Esther is the CEO of a line of accessories and cosmetics, Starring Me! Inc., which has retail stores and production units in five countries. In this scenario, Starring Me! Inc. is most likely a

multinational enterprise (MNE)

In a non-equity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

the expectation that the agent will act in the principal's best interest