MGT4476 Exam 2

In the context of competitive rivalry, what is an actor's reputation?

A positive or negative quality attributed to one's rival based on previous competitive behavior

Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is MOST likely to be true?

Ahrens will respond aggressively because of the high multipoint contact between Hilliard and Ahrens.

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?

Amos Ball, Inc. will perform better if a family member is CEO than if an outsider is CEO.

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?

Amos should consider adopting the multidivisional structure.

A retail company called Bullseye has multiple stores. An appropriate organizational structure would have store managers responsible for their respective stores, with clear reporting lines to regional managers overseeing multiple stores. This hierarchical structure ensures that each store manager is accountable for the performance of their store, and the regional managers have a clear overview and control over the operations of the stores in their region. How does an appropriately designed organizational structure contribute to a firm's success?

By providing stability and flexibility to support the firm's current and future strategies

How does the market for corporate control function as a governance mechanism?

By replacing ineffective top-level management teams

Apple is known for its continuous innovation and introduction of new products and technologies in the consumer electronics industry. What is a strategic or tactical action that a firm takes to counter the effects of a competitor's competitive action called?

Competitive response

Coca-Cola and PepsiCo both operate in the soft drink space. They have a variety of offerings in the soda, uncarbonated, and sparkling water space. Which term describes firms operating in the same market, offering similar products, and targeting similar customers?

Competitors

LeederTech is facing a hostile takeover. Its focus as a defense strategy has been to ensure some continuity. It has decided to pursue a strategy that will prevent an acquirer from replacing the entire board of directors immediately, even though this tends to have very low success and a negative or negligible effect on shareholder wealth. What strategy did LeederTech select?

Corporate charter amendment

Leeway Corp. wants to pursue a business-level international strategy to export to developed countries. Which of the following strategies would Leeway most likely select?

Cost leadership

GM China and SAIC Motor Corp. are managing their joint venture through formal contractual relationships. Which approach to managing cooperative strategies does this exemplify?

Cost minimization approach

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 which management approach?

Cost-minimization

What can significantly affect a firm's competitiveness in global markets due to its effect on product prices in different countries?

Currency risk

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if

Disney's cartoon characters became widely perceived as old-fashioned and unappealing

Compared with downsizing, which strategy has (have) a more positive effect on firm performance?

Downscoping

What is one benefit of using the opportunity-maximization approach to managing cooperative strategies?

Enhanced exploration of new opportunities

Which of the following steps, if taken by Walmart, would be characterized as a strategic rather than tactical action?

Entering a new foreign market

Which type of risk is more common when a firm misrepresents its resources in a cooperative partnership?

Failure due to misrepresentation of available resources

What is one risk associated with a cooperative strategy when the contract governing the alliance is insufficient?

Failure to address important issues as they arise

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 customers.

False

A firm is considering the pursuit of international opportunities. In considering the pros and cons, the analyst likely pointed out that the firm would gain access to labor, resources, and customers, all of which are benefits related to economies of scale, through international strategies.

False

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

False

Ray and Gina own shares of stock in a number of different companies. None of their holdings are very large. Because they make their own investment decisions, they are not as dependent on the board of directors to represent their interests as the large-block shareholders are.

False

Renault and Nissan Motor Company have formed a vertical complementary strategic alliance to create synergy.

False

Walmart's aggressive pricing strategy is a strategic action that plays a major role in how it competes.

False

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. Because both of these companies have a long, stable history in highly related industries, this acquisition has a high probability of success.

False

What type of firms tend to make the best strategic decisions?

Family-owned firms with significant family equity

Which of the following statements is false?

First movers have lower survival rates than second and late movers.

Evaluate the significance of flexibility and adaptability in the context of successful acquisitions.

Flexibility and adaptability contribute to the ability to adapt capabilities to new environments.

McDonald's, Hilton International, and Subway all license their trademarks and methods to other businesses. In doing so, they rely on which type of strategy?

Franchising

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?

Highway systems and the supply of debt capital

FruitFusion specializes in producing healthy and flavorful fruit juices. Recognizing the growing demand for fruit-infused water, FruitFusion decides to license its brand and recipes to a beverage manufacturer called HydroHydrate for the production and distribution of FruitFusion-branded flavored water. Which of the following is NOT a typical disadvantage of licensing in this way?

Incompatibility of the licensing partners

Which of the following is NOT a risk for firms engaged in cooperative strategies?

Insufficient variation in firms' core competencies

How does financial slack contribute to the success of acquisitions?

It enables companies to maintain a low level of debt after the acquisition.

Why is trust considered important in managing cooperative strategies, even when formal contracts cannot specify all operational details?

It enhances alliance stability

Why does pursuing an international diversification strategy make managing a firm more difficult?

It increases coordination costs.

Which of the following is true of a firm that has high market dependence?

It is likely to respond strongly to attacks threatening its market position.

How does resource dissimilarity influence the competitive actions and responses firms choose to take?

It leads to longer delays by firms with a resource disadvantage.

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This is which type of collaboration and knowledge transfer?

Joint venture; tacit knowledge

What historical trend led to the separation of ownership and control in most large corporations?

Managerial revolution and the rise of professional managers

Apple recognized the potential of the mobile phone market and responded with the launch of the iPhone in 2007. This move disrupted the industry, challenging established players like Nokia and BlackBerry. Apple's innovative approach and focus on user experience resonated with consumers, leading to the iPhone's immense success and market dominance. What term describes their incentive to take action or respond to competitors based on perceived gains and losses?

Motivation

Both Coca-Cola and P&G engage in multimarket competition by competing across different product categories and geographic markets, aiming to capture market share and maintain a competitive edge in each market they operate in. Which term describes the phenomenon where firms compete against each other in multiple product or geographic markets?

Multipoint competition

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. All of the following statements accurately reflect this EXCEPT:

Pappelbon's management was overly focused on acquisitions.

Which risk factor is associated with concerns about government stability and the effects of unrest on foreign investments?

Political risk

Which of the following is an example of an external governance mechanism?

Regulators

How has corporate governance in Japan been changing in recent years?

Rise in the number of independent board members

In 2011, HP acquired Autonomy, a British software company, for $11.1 billion. However, just a year after the acquisition, HP announced an $8.8 billion write-down of Autonomy's value, citing accounting improprieties and misrepresentations by Autonomy's management. In order to avoid a situation like this, what is an important component of effective due-diligence processes in acquisitions?

Selection and evaluation of target firms

A small family-owned restaurant is called Tasty Bites. Its owner, Mrs. Smith, plays the role of the owner-manager and is responsible for making all major decisions in the restaurant. Which organizational structure is characterized by the owner-manager making all major decisions and having informal relationships with employees?

Simple structure

Which pair of firms has the LEAST resource similarity?

Small, family-owned Italian restaurant; Olive Garden

Which competitive actions and responses in markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide the same positive experience for customers?

Standard-cycle

Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets that differ greatly from its home market, instead expanding within the twelve-nation region that includes its home country. Which of the following statements is true?

The firm is using a regional approach to international expansion.

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 of the following scenarios is the MOST likely?

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.

In 2001, Sony and Ericsson formed a 50-50 joint venture known as Sony Ericsson to compete in the rapidly growing mobile phone market. The alliance aimed to leverage Sony's brand strength and Ericsson's expertise in telecommunications technology to develop innovative mobile devices. However, the partnership faced significant challenges, leading to its eventual dissolution. More broadly, which of the following is a primary reason for failure of cross-border strategic alliances?

The incompatibility of the partners

Evaluate the risks associated with using cooperative strategies and their management.

The risks associated with cooperative strategies can be mitigated through effective management.

In a manufacturing company, TechnoTech, financial controls are implemented to ensure the efficient and effective management of financial resources. These controls serve several purposes. What role do organizational controls play within a firm?

They guide the use of strategy, monitor performance, and suggest corrective actions.

Why do formal contracts and extensive monitoring systems tend to stifle partners' efforts to gain maximum value from their participation in a cooperative strategy?

They limit the exploration of new opportunities

In a large manufacturing company, the top-level managers have been operating with a traditional hierarchical organizational structure for many years. However, the market dynamics and business landscape have evolved significantly, and there is a need for a more flexible and agile structure to respond to the changing customer demands and industry trends. Despite the pressing need for change, why might top-level managers hesitate to change the firm's structure?

They prefer the status quo and familiar working relationships.

What is the primary reason why firms use cooperative strategies?

To achieve a shared objective that benefits all partners

A leveraged buyout (LBO) is the acquisition of Dell Inc. by its founder Michael Dell in collaboration with private equity firm Silver Lake Partners in 2013. The LBO allowed Michael Dell and Silver Lake Partners to take control of Dell Inc. and operate it as a private company away from the scrutiny of public markets. By using a significant amount of debt financing, they were able to finance the acquisition and take advantage of Dell's cash flow and assets to service the debt obligations. What is the purpose of a leveraged buyout as a restructuring strategy?

To correct managerial mistakes and restructure distressed assets

Increasingly, customers worldwide are demanding emphasis on local requirements and companies require efficiency as global competition increases. This has triggered an increase in the number of firms to use which of the following strategies?

Transnational

MirGold uses a related constrained strategy in order to share resources and activities across its many businesses. The multidivisional structure form that is best suited for MirGold is the cooperative form.

True

Rivals Airbus SAS and Boeing have multiple manufacturing facilities and outsource some activities to firms located throughout the world, partly for the purpose of developing economies of scale as a source of being able to create value for customers.

True

Royalware, based in New England, wanted to establish a foothold in the Midwest, so it made an unsolicited bid to purchase TrueBlue, a similar firm based in Indiana. This is an example of a takeover.

True

Sales of watches among teenagers and twenty-somethings are declining rapidly as this age group uses cellphones, iPads, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider which strategy in order to develop new products other than watches?

Unrelated diversification

The management team at Krandal Industries emphasizes financial controls over strategic ones. Accounting-based measures are used to evaluate the firm's performance based on its own history and on industry averages. It is most likely that Krandal uses what type of strategy?

Unrelated diversified

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 questions that Greentech should consider before entering this alliance include all of the following EXCEPT:

Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

What is one potential consequence of poor ethical behavior by a firm's top-level managers?

Withdrawal of support from dissatisfied stakeholders

Corporate governance is all of the following EXCEPT:

a method for resolving conflicts among corporate employees.

Apple leverages its core competencies in design, innovation, supply chain management, vertical integration, localization, and brand power. Firms with core competencies that can be exploited across international markets are able to

achieve synergies and produce high-quality goods at lower costs.

All of the following are consequences of the Sarbanes-Oxley Act EXCEPT:

an increased number of IPOs (initial public offerings).

In Japan, the principal source of the active monitoring of large companies comes from

banks.

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO

believes that he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share.

In the franchising strategy, the most important competitive advantage for the franchisee is usually the franchisor's

brand name.

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be

concerned if the value of the dollar strengthened.

Structural stability affects the organization's ability to

consistently and predictably manage its daily work routines.

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

coordination and control problems.

When using cooperative strategies, firms most frequently develop strategic alliances that

create a competitive advantage.

The center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT:

decreasing communications between network members to reduce communication costs.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n)

equity strategic alliance.

Problems associated with acquisitions include all of the following EXCEPT:

excessive time spent on the due diligence process.

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

firms must be flexible while retaining a degree of stability.

The repurchase of the target firm's shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover is called

greenmail.

A leveraged buyout will often result in a short-term outcome of __________, which, in turn, leads to a long-term outcome of __________.

high debt costs; higher risk

Cross-border acquisitions are critical to U.S. firms competing internationally

if they wish to overcome entry barriers to international markets

All of the following are roles that the board of directors play in deterring unethical behaviors by top-level managers EXCEPT:

incentivizing ethical behavior with bonuses.

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when the attack

is by a competitor known for risky or complex competitive behavior

In 2014, Apple made a substantial acquisition, purchasing Beats Music and Beats Electronics for $3 billion dollars. This is an example of the strategy of acquisition. The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

it is difficult and time intensive for companies to develop products that differ from their current product line

The transnational strategy is becoming increasingly necessary to compete in international markets for all of the following reasons EXCEPT:

it is easy to use because of its unifying goals.

South Korea faced resource constraints due to its limited availability of natural resources such as oil, minerals, and arable land. However, the country focused on building a knowledge-based economy and investing heavily in education, research and development, and technological innovation. A fundamental reason for a country's development of advanced and specialized factors of production is often its

lack of basic resources

A firm that is LEAST likely to launch competitive actions is one that has

large size

Ownership concentration is determined by both the number of

large-block shareholders and the total percentage of shares they own.

Firms able to continually improve the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to

learn how to continuously reduce costs while increasing the value of their products.

All of the following statements are true about the use of defense tactics by the target firm during a hostile takeover EXCEPT defense tactics

make the costs of a takeover lower.

Synthronix Industries is a firm that is looking to make an acquisition of a competing firm. They are in the stages of examining the internal business model and financials of the company. Acquisitions can take a lot of time for top level managers for all the following reasons EXCEPT:

only top managers can perform the required due diligence.

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

potential for global efficiency.

In a cross-border alliance, the local partner is often a useful source of information about

sources of capital.

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that

spontaneous opportunities are minimized.

Because Coca-Cola, Nestlé, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is MOST likely that the bottled water market is a(n)

standard-cycle market

When evaluating national competitive advantage, managers should take into account technological expertise, skills of workforce, collaborative culture, etc. All of the following are correct about what managers should know about firms based in a country with a national competitive advantage EXCEPT:

success is guaranteed as the firm implements its chosen international business-level strategy

On the whole, there are more competitive responses to

tactical actions than to strategic actions.

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product, instead of adopting a strategy of developing new products in-house. All of the following arguments are correct EXCEPT:

the acquisition of Taylor should be primarily for defensive rather than strategic reasons.

The governance mechanism MOST closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is

the board of directors.

In the process of a merger

two firms agree to integrate their operations on a relatively coequal basis

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)

vertical acquisition

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

vertical complementary strategic alliances.