Practice Exam - Integrated Business Policy and Strategy

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results? A) Increase investment in the personal health monitoring unit to encourage future growth. B) Seek to lower costs in the personal health monitoring unit to increase market share. C) Harvest as much cash flow as possible before shutting the business down. D) Immediately divest from the personal health monitoring industry.

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

One of Black Mesa's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "Always You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Black Mesa's competitors. Although the campaign has resulted in a 10 percent decline in profits, Black Mesa has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Black Mesa's culture, exemplified by the "Always You" campaign, fail to support a competitive advantage? A) It does not increase economic value creation for the firm. B) It is not a rare resource. C) Always lacks founder imprinting. D) The culture is not difficult to imitate.

A) It does not increase economic value creation for the firm.

Konmatfix Inc. recently acquired Finhigh Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Finhigh Pharmaceuticals. As a result, Konmatfix's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Konmatfix? A) It will lower its costs through economies of scale. B) It will diminish its economic value creation. C) Konmatfix will increase its cost of distribution. D) Konmatfix will reduce the size of its product line.

A) It will lower its costs through economies of scale.

________, which captures the cultural fit between different firms, is one key element needed when selecting an alliance partner. A) Partner compatibility B) Partner commitment C) Joint ventures D) Partner competency

A) Partner compatibility

Which of the following is true of acquisitions? A) They can be friendly or hostile. B) They can occur only when the involved entities are of comparable size. C) In acquisitions, two independent companies join to form a separate third entity. D) Acquisitions increase the competitive intensity in an industry.

A) They can be friendly or hostile.

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A) location economies. B) economies of scope. C) learning races. D) network effects.

A) location economies.

While working a night job at a call center, John creates an app called iFood, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on iFood. He creates a start-up called JohnBuilt1 and hires three people to help him improve iFood and maintain the servers that run it. In this scenario, JohnBuilt1 most likely has a ________ structure. A) simple B) matrix C) mechanistic D) functional

A) simple

Since Coca-Cola focuses on selling only soft drinks, a low degree of product diversification, we would conclude that they compete in a(n) ________ market versus their main competitor PepsiCo, that sells a wide variety of products. A) single product B) multiple product C) related diversification D) unrelated diversification

A) single product

Which of the following statements about managing alliance-related tasks is true? A) Forming an alliance with another firm prohibits that firm from forming other alliances. B) Alliance-management capability is based on three alliance-related tasks. C) A merger is one of the three options for alliance design and governance. D) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

B) Alliance-management capability is based on three alliance-related tasks.

Weyland Yutani Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as A) competition. B) co-opetition. C) exploitation. D) exploration.

B) co-opetition.

Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created? A) capital liquidity B) diversification premium C) diversification discount D) demand-pull inflation

B) diversification premium

The Umbrella Corporation (UC) recently acquired a smaller competitor, Packer and Associates, which specializes in issues not previously covered by UC, 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.

Which of the following is an unintended side effect of a high degree of specialization in an organization? A) decreased trade-off between breadth and depth of knowledge B) decreased opportunities for the division of labor C) reduced employee satisfaction due to repetition of tasks D) reduced productivity

C) reduced employee satisfaction due to repetition of tasks

Susan owns a firm that is considered fully integrated. Which of the following statements below would best describe a firm that is fully integrated? A) Susan's firm is a single-business organization. B) Susan's firm is more than likely a conglomerate. C) Susan's firm is still reliant on certain key suppliers in the industry value chain. D) All of Susan's business activities are conducted within the boundaries of the firm.

D) All of Susan's business activities are conducted within the boundaries of the firm.

Li runs a firm that has diversified into different product lines and geographies. She should probably use a(n) _______ organizational structure. A) functional B) simple C) network D) M-form

D) M-form

Dana wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission (FTC). Which of the following strategic options should Dana pursue? A) Dana should implement green field operations with the marketing firm to strengthen her interanion reach. B) Dana should consider forming a strategic alliance with the marketing firm. C) Dana should move forward with a hostile takeover of the marketing firm. D) Dana should purchase the marketing firm outright via an acquisition

B) Dana should consider forming a strategic alliance with the marketing firm.

Massive Dynamic 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. Massive Dynamic 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, Massive Dynamic should A) continue to outsource production. B) vertically integrate. C) exit the laptop industry. D) diversify its activities.

B) vertically integrate.

Weyland Yutani Inc., a supermarket chain, is implementing a multidomestic strategy. TelAmeriCorp , a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A) Weyland Yutani Inc. will focus more on cost-reduction than TelAmeriCorp. B) Weyland Yutani Inc. will have its business functions spread across the world; TelAmeriCorp's business functions will be highly centralized. C) Unlike TelAmeriCorp, Weyland Yutani Inc. will be able to pursue a differentiation strategy at the business level. D) Unlike TelAmeriCorp, Weyland Yutani Inc. will be able to reap significant economies of scale and location economies.

C) Unlike TelAmeriCorp, Weyland Yutani Inc. will be able to pursue a differentiation strategy at the business level.

Sonron Auto Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 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 Sonron Auto Corporation? A) a conglomerate B) a subsidiary C) a dominant-business firm D) a single-business firm

C) a dominant-business firm

When a firm diversifies into different product lines and geographies, a ________ structure is preferred. A) simple B) functional C) multidivisional D) network

C) multidivisional

Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ________ tool. A) value chain analysis B) VRIO C) diversification premium D) Boston Consulting Group (BCG) matrix

D) Boston Consulting Group (BCG) matrix

Which of the following accurately describes an organic organization? A) an inflexible organization that fosters slow decision making and high employee motivation B) an inflexible organization that fosters fast decision making and high employee motivation C) a flexible organization that fosters slow decision making and high employee motivation D) a flexible organization that fosters fast decision making and high employee motivation

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

Which of the following best illustrates physical-asset specificity? A) a unique training program developed in an organization B) a ship container designed to carry more than the average load of iron ore C) a generic machine that can be used to churn different mixtures D) a machine solely designed to give a candy its trademarked shape

D) a machine solely designed to give a candy its trademarked shape

23) Which of the following is an example of explicit knowledge? A) knowing how to create surveys B) a research skill C) knowing how to assemble semiconductors D) a research summary

D) a research summary

Hooper's Store, a luxury motorcycle company, sells the same motorcycles and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost-reductions. Which of the following strategies within the integration-responsiveness framework does Hooper's Store most likely pursue? A) a multidomestic strategy B) a transnational strategy C) a global-standardization strategy D) an international strategy

D) an international strategy

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A) leveraging existing core competencies to improve current market position. B) building new core competencies to achieve vertical integration. C) redeploying and recombining existing core competencies to compete in markets of the future. D) building new core competencies to create and compete in markets of the future.

D) building new core competencies to create and compete in markets of the future.

Amy is the CEO of a line of accessories and cosmetics, Hooli Inc., which has retail stores and production units in five countries. In this scenario, Hooli Inc. is most likely a A) nonprofit organization. B) nationalized firm. C) sole proprietorship. D) multinational enterprise.

D) multinational enterprise.

Why are controls like budgets and operating procedures that McDonald's implements known as input controls? A) They are independent of an organization's culture. B) They are implemented by corporate headquarters. C) They are considered before employees make any decisions. D) They are ad hoc and not codified.

C) They are considered before employees make any decisions.

Which of the following provides an example of a common drawback of a functional strategy? A) Jack had a difficult time communicating efficiently with the manager of another department. B) Leslie was surprised about the inflexibility of her firm when it rejected her marketing plan. C) Chris's manager dismissed his idea because it was too innovative. D) Denise did not accept the position with the firm because it has an ineffective cost-leadership strategy.

A) Jack had a difficult time communicating efficiently with the manager of another department.

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company. B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

Los Pollos Hermanos is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should Los Pollos Hermanos take as it strives to become multinational? A) Pursue a multidomestic strategy, customizing product offerings to suit local preferences. B) Attempt an international strategy, controlling costs and taking advantage of economies of scale by selling the same (or very similar) products around the globe. C) Try a global-standardization strategy, which creates standardized products and competes mainly on price. D) Consider a transnational strategy by creating a blue ocean market.

A) Pursue a multidomestic strategy, customizing product offerings to suit local preferences.

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like A) a nonequity alliance. B) an equity alliance. C) a joint venture. D) a merger.

A) a nonequity alliance.

Aperture Science Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will give it strong control over all its business activities. Which of these foreign-entry modes will Maddox most likely choose? A) greenfield operation B) export C) joint venture D) acquisition

A) greenfield operation

There are some industries that are more competitive in some countries than others. In order to fully understand why this occurs, we need to examine Porter's Diamond framework. Which of the following below is NOT one of the four factors in this framework? A) industry-specific forces B) factor conditions C) competitive intensity in the focal industry D) demand conditions

A) industry-specific forces

Sirius Cybernetics Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A) is a world leader in the pharmaceutical industry. B) has nationalized the pharmaceutical industry. C) has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. D) is a potential foreign market for multinational pharmaceutical companies to sell their products.

A) is a world leader in the pharmaceutical industry.

Can't Believe It's Not Hair Inc. (CBNH) dominates the ladies' wig market and wants to expand into men's toupees. How can CBNH 's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm? A) To protect themselves, CBNH's managers should choose the option that leads to the largest company with the most managerial positions. B) The managers need to determine whether the skills needed to create wigs and toupees are similar and whether CBNH creates better hairpieces than its competitors do. C) The managers must determine whether wig making and toupee making require substantially different skills. If so, the company should pursue internal development. D) Unless the market for toupees is booming, CBNH should stick to what it knows and focus on creating the best ladies' wigs in the industry

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

How will an increase in coordinated economic and political integration between countries affect the world economy? A) The world's market economies will become self-sufficient and independent. B) There will be gains in social welfare and living standards across the globe. C) The cost of labor will further decline in emerging economies. D) There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B) There will be gains in social welfare and living standards across the globe.

When Aviato Inc. wanted to sell its cars in the country of Yugoslakia, it lacked access to distribution channels and marketing expertise in the country. Thus, Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) increasing competitive intensity B) accessing critical complementary assets C) procuring additional capital investments D) reducing differentiation of product and service offerings

B) accessing critical complementary assets

Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Plexzap pursue? A) Leverage existing core competencies to improve current market position. B) Build new core competencies to protect and extend current market position. C) Redeploy and recombine existing core competencies to compete in markets of the future. D) Build new core competencies to create and compete in markets of the future.

C) Redeploy and recombine existing core competencies to compete in markets of the future.

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage? A) W. L. Gore & Associates organizes its employees into project-based teams. B) Apple develops high-tech products that are preferred by consumers across the world. C) Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D) GM offers compensation if its products do not meet a consumer's expectations.

C) Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.

Hooli 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.

Which of the following is an advantage of equity alliances when compared to nonequity alliances? A) They are more flexible and easy to initiate and terminate. B) They require smaller capital investments. C) They produce stronger ties between partners. D) They are based on contracts rather than ownership.

C) They produce stronger ties between partners.

Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the followingbest describes Nerissa's business? A) a firm that relies on high input controls to tap into intrinsic motivation B) a firm that relies on high input controls to tap into extrinsic motivation C) a firm that relies on high output controls to tap into intrinsic motivation D) a firm that relies on high output controls to tap into extrinsic motivation

C) a firm that relies on high output controls to tap into intrinsic motivation

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A) because of the political differences between India and the United States B) because NAFTA prohibits Walmart from investing in countries outside North America C) because of the large economic distance between the United States and India D) because Indian consumers have not accepted Walmart's low-cost strategy

C) because of the large economic distance between the United States and India

44) Sean is having hard time replicating his competitors' strong organizational culture because of ________ and ________, which stem from the VRIO framework. A) tangible; intangible budgets B) organizational socialization; input controls C) causal ambiguity; social complexity D) historical conditions; external opportunities

C) causal ambiguity; social complexity

The managers at Statholdings Mobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of A) time compression diseconomies. B) experience-curve effects. C) principal-agent problems. D) resource ambiguity.

C) principal-agent problems.

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 A) proprietorship. B) cooperative. C) strategic alliance. D) leveraged buyout

C) strategic alliance.

Rainholm Industries is a large snack-food conglomerate that operates in more than 50 countries and employs more than 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Rainholm Industries most likely use? A) an international strategy B) a focused-differentiation strategy C) a multidomestic strategy D) a transnational strategy

D) a transnational strategy

24) Piper Inc. is a large cosmetics company that made an initial small investment in a start-up company, Oscorp, which was developing an organic face lotion. This gave Piper controlling interests in the start-up company. However, Oscorp soon began to have financial difficulties because of principal-agent problems. As a result, Piper did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A) break-even analysis. B) partial joint venture. C) credible commitment. D) real-options perspective.

D) real-options perspective.

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