Strategic Management Chapter 6-11

1. From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy almost always involves

Conflict resolution

25. If there are no vertical, horizontal, product extension, or market extension links between firms, the FTC defines the merger or acquisition activity between firms as a ________ merger.

Conglomerate.

3. Which one of the following is not a structural option for firms pursuing international strategies?

Corporate federation

31. Firms that seek to maximize international integration in their operations will typically opt for ________ structures.

Corporate federation

1. Agrestal Cosmetics, Inc. is a leading U.S. manufacturer of natural, herb-based cosmetic products. It started out purely as a domestic company but in 1983 established operations in India primarily to gain access to that country's abundant supply of hibiscus, a plant that provided important raw materials to the company's products. In 2009, Agrestal did business in 29 countries around the world. It has factories in Malaysia and Taiwan to use the low labor cost in those countries in making its labor-intensive products. In the late 1990s, it had to close it operations in a foreign country when, due to a change in the country's leadership, all foreign companies had to cease doing business there. During the Brazilian financial crisis, Agrestal adopted the practice of using revenues generated in Brazil to buy orange concentrate locally and sell that concentrate in the United States. Agrestal's corporate finance department aggressively uses hedging in all the countries where it operates. In a few select countries, Agrestal licenses its brand names and know-how to local licensees. Currently, Agrestal is organized whereby all strategic and operational decisions are made at its Princeton, New Jersey headquarters. What Agrestal did in Brazil was an example of

Countertrade

7. Which of the following is a source of diversification economies?

Portfolio management

1. When diversified firms use the revenues from profitable businesses to subsidize the operations of another business and then set the prices of the subsidized firm's products at a level that is below the subsidized business's cost to produce these items, this is known as ________ pricing.

Predatory

2. ______ may enable partners to explore exchange opportunities that they could not explore if only legal and economic organizing mechanisms were in place.

Trust

4. Strategic alliances are particularly valuable in facilitating market entry and exit when the value of market entry or exit is

Uncertain

16. A firm has implemented a strategy of ________ when all or most of its activities fall within a single industry and geographic market.

limited corporate diversification

18. Shared activities are quite common between both ________ and ________ diversified firms.

related-constrained; related-linked

8. Variable levies are an example of

tariffs.

29. Improvements in the ________ infrastructure of business is one of the important contributors to the growth in the number of firms pursuing international strategies.

technological

3. ________ is an example of an ineffective and inconsequential response by a target firm.

A crown jewel sale

1. In an unrelated acquisition, if 5 firms are interested in acquiring a firm and each of the bidding firms had a current market value of $30,000 while the current market value of the target firm is $20,000, this acquisition is likely to generate economic profits of ________ for the acquiring firm.

0.00

21. In 2007, the total value of announced merger and acquisition activities in the United States was

1.7 trillion

18. Some observers predict that by ________ an additional 3.3 million jobs in the United States will be outsourced, many to operations overseas.

2015

11. In the computer technology-based industries, over ________ alliances were created between 2001 and 2005.

2200

18. In one study almost ________ percent of the managers in entrepreneurial firms felt unfairly exploited by their large-firm alliance partners.

80

13. Which of the following statements regarding direct duplication and substitutes for vertical integration is accurate?

A firm's valuable and rare vertical integration choices may be subject to direct duplication and substitutes.

38. Digipics is an assembler of digital cameras. As an assembler, Digipics' operations are limited to purchasing all of the components necessary to assemble the cameras and then selling these cameras to wholesalers who, in turn, sell them through online stores and in retail electronics stores. If Digipics were to agree to spend a significant amount of money to establish a new assembly line for a large client, PicPro, that has unique needs that would make this assembly line largely useless for any other customer, the funds Digipics spent in establishing this line would be an example of

A transaction-specific investment

10. A firm engages in a(n) ________ when it purchases a second firm.

Acquisition

42. If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store, this would be an example of

Backward vertical integration

7. ________ currencies are currencies that are traded, and thus have value, on international money markets.

Hard

45. Compensation that focuses on groups of employees such as cash bonuses and stock grants are best suited for ________ explanations of vertical integration.

Capabilities-based

12. According to the capabilities-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?

Cash bonuses for corporate performance

2. The most significant challenge in integrating bidding and target firms has to do with

Cultural differences

30. Firms that seek to maximize their local responsiveness will tend to choose a ________ structure

Decentralized federation

7. A common way of thinking about strategy across different businesses within a firm is known as the firm's

Dominant logic

2. Firms pursuing ________ have between 70% and 95% of their sales in a single product market.

Dominant-business diversification

10. Which of the following is a less costly-to-duplicate economies of scope?

Employee compensation

16. Which committee in a U-form organization meets weekly and reviews the performance of the firm on a weekly basis and typically consists of a CEO and two or three functional senior managers?

Executive committee

19. Strategic alliances can create economic value through helping firms improve their current operations by

Exploiting economies of scale

35. Agrestal Cosmetics, Inc. is a leading U.S. manufacturer of natural, herb-based cosmetic products. It started out purely as a domestic company but in 1983 established operations in India primarily to gain access to that country's abundant supply of hibiscus, a plant that provided important raw materials to the company's products. In 2009, Agrestal did business in 29 countries around the world. It has factories in Malaysia and Taiwan to use the low labor cost in those countries in making its labor-intensive products. In the late 1990s, it had to close it operations in a foreign country when, due to a change in the country's leadership, all foreign companies had to cease doing business there. During the Brazilian financial crisis, Agrestal adopted the practice of using revenues generated in Brazil to buy orange concentrate locally and sell that concentrate in the United States. Agrestal's corporate finance department aggressively uses hedging in all the countries where it operates. In a few select countries, Agrestal licenses its brand names and know-how to local licensees. Currently, Agrestal is organized whereby all strategic and operational decisions are made at its Princeton, New Jersey headquarters. Agrestal's use of hedging is a way for the company to guard against ________ risks.

Financial risks

17. ________ refers to how costly it is for a firm to alter its strategic and organizational decisions.

Flexibility

48. The ________ logic suggests that compensation that has a fixed and known downside risk and significant upside potential is important for firms implementing vertical integration strategies.

Flexibility

2. If a firm decided to maintain relationships with several different call center management companies, each of which have adopted different technological solutions to the problem of how to use call center employees to assist customers who are using very complex products, to reduce the uncertainty of whether the people staffing the phone can help the firm's customers, this would be consistent with which explanation of vertical integration?

Flexibility-based

44. A(n) ________ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.

Flexibility-based

41. When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of

Forward vertical integration

5. TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units. If TerraLoc wanted to expand into selling its GPS units through company-owned retail stores, this would be an example of ________

Forward vertical integration

6. Japanese retail distribution has historically been much more ________ than the system that exists in the United States or Western Europe.

Fragmented

24. A(n) ________ acquisition occurs when the management of a target firm wants to be acquired.

Friendly

10. Which of the following is not used to determine a firm's level of vertical integration using the value added as a percentage of sales approach?

Gross margin

40. A firm with a ________ ratio between value added and sales has brought ________ of the value-creating activities associated with its business inside its boundaries, consistent with a high level of vertical integration.

High; many

8. In a(n) ________, a firm, typically working with an investment banker, sells its equity to the public at large.

IPO

53. Which of the following statements regarding the rarity of diversification is accurate?

If only a few competing firms have exploited a particular economy of scope, that economy of scope can be rare.

6. Currently, most scholars believe that exploiting economies of scope through corporate diversification, on average,

Increased a firm's market value

37. Research suggests that, in general, vertically integrating is ________ than not vertically integrating.

Less flexible

17. In general, the ________ tangible the resources and capabilities that are to be brought to a strategy alliance, the ________ costly it will be to estimate their value before an alliance is created, and the ________ likely it is that adverse selection will occur.

Less: more: more

57. The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.

Limited corporate diversification

4. Compared to two very risky businesses that have cash flows that are not highly correlated over time and that are operating separately, the risk of a diversified firm operating in those same two businesses simultaneously is

Lower

26. When eBay acquired Baaze.com, an Indian auction firm, in order to enter the Indian online auction market, this was an example of a ________ merger.

Market extension

34. Which one of the following is an example of the hierarchical governance option for firms pursuing international strategies?

Mergers

50. _______ exists when two or more diversified firms simultaneously compete in multiple markets.

Multipoint competition

5. Which of the following statements regarding economies of scope is accurate?

Only diversified firms can exploit economies of scope

58. Which type of economies of scope includes shared activities and core competencies?

Operational economies of scope

9. ________ exists when a firm is unfairly exploited in an exchange.

Opportunism

15. If a computer company decided to open its own call centers to provide technical support to its corporate customers because the employees in these call centers need a significant level of in-depth training that was highly specialized to the computer company's products, this would be consistent with which explanation of vertical integration?

Opportunism-based

6. Which of the explanations of vertical integration is the oldest and has received the greatest empirical support?

Opportunism-based

4. TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units. TerraLoc's decision to manufacture the battery in-house is most consistent with which explanation of vertical integration?

Opportunism-based explanations

43. According to ________ of when vertical integration creates value, vertical integration is valuable when it reduces threats from a firm's suppliers or buyer due to any transaction-specific investments a firm has made.

Opportunism-based explanations

5. P&G is a leading consumer goods company in the United States that has grown its business through a combination of international growth, alliances, acquisitions and mergers. In 2003, P&G acquired the beauty care company Wella to acquire products that would complement its current product. In 2004, P&G acquired AG-Hutchison Ltd to establish a stronger presence in the Chinese consumer goods products market. In 2005, P&G acquired Gillette, another consumer goods company, in a deal worth approximately $57 billion dollars.

P&G's purchase of AG-Hutchison Ltd in 2004 is an example of a market extension merger.

55. When a firm operates in multiple industries simultaneously, it is said to be implementing a

Product diversification strategy

23. In a ________ merger, firms acquire complementary products through their merger and acquisition activities.

Product extension

49. When a firm implements both a product diversification strategy and a geographic market diversification strategy it is said to be implementing a(n)

Product-market diversification strategy

20. ________ theory suggests that under conditions of high uncertainty, firms may be unwilling to commit to a particular course of action by engaging in an exchange with a firm and will choose, instead, the strategic flexibility associated with alliances

Real options

3. Firms such as PepsiCo that operate a number of businesses around the world that share a number of inputs, production technologies, or distribution channels but none of whose businesses account for more than 70% of a firm's revenues are said to be implementing a

Related-constrained diversification

56. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. By 2003, Peach Computers' diversification strategy was best characterized as

Related-constrained diversification

36. In 1937, which Nobel Prize-winning economist first articulated the question of vertical integration, which stages of the value chain should be included within a firm's boundaries and why?

Ronal Coase

19. If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of which type of economy of scope?

Shared activities

52. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. Which type of economies of scope is Peach Computers experiencing between its units?

Shared activities

17. In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market?

Single-business firms

39. According to the flexibility-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?

Stock options for individual performance

16. To the extent that a strategic alliance is based on ________ relations, it will make the alliances costly to imitate.

Socially complex

54. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. Peach Computers' equity holders, its employees, suppliers and customers along with all of those groups and individuals who have an interest in how Peach Computers performs are referred to as

Stakeholders

7. According to the opportunism-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategy implementation?

Stock grants for individual performance

46. ________ are when employees are given the right, but not the obligation, to purchase stock at predetermined prices.

Stock options

51. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. In 2001, if Peach Computers did not want to employ a diversification strategy to enter the personal electronics industry, it could use which substitute for diversification?

Strategic alliances

14. _____ exists when firms coordinate their production and pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate

Tacit collusion

59. ________ is an example of a less costly-to-duplicate economies of scope.

Tax advantages

4. ________ economies are scale economies that occur when the physical processes inside a firm are altered so that the same amounts of input produce a higher quantity of outputs.

Technical

10. eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp. eBay's agreement with ________ is the most likely to be susceptible to holdup.

The Australian partner

47. Evaluating a functional manager's performance relative to budgets can be an effective control when

The process used in developing budgets is open and participative

32. Which one of the following is not a determinant of the ability of a firm to learn from its international operations?

The resources for learning

20. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. One of the limits of the economies of scope that Peach Computers is leveraging in its diversification strategy is

They may limit the ability of a particular business to meet specific customers needs

2. Which one of the following is not a potential source of economies of scope for firms pursuing international strategies?

To control countertrade

33. Firms that attempt to optimize both local responsiveness and international integration will choose a ________ organizational structure.

Transitional

60. Firms such as General Electric that generate less than 70% of their revenues from a single product market and whose businesses share few, if any, common attributes are said to be pursuing ________ corporate diversification.

Unrelated

9. ________ firms typically raise money from numerous smaller investors, which they then invest in a portfolio of entrepreneurial firms.

Venture capital

22. If an electronics manufacturer were to acquire a chain of retail electronic stores to sell its products, this would be an example of a ________ merger.

Vertical

3. The number of steps in a firm's value chain that it accomplishes within its boundaries describes the firm's level of

Vertical integration

27. A ________ is another bidding firm that agrees to acquire a particular target in the place of the original bidding firm.

White knight

14. Investments made by employees that have more value in a particular company than in alternative companies are known as

firm-specific investments.

10. Agrestal Cosmetics, Inc. is a leading U.S. manufacturer of natural, herb-based cosmetic products. It started out purely as a domestic company but in 1983 established operations in India primarily to gain access to that country's abundant supply of hibiscus, a plant that provided important raw materials to the company's products. In 2009, Agrestal did business in 29 countries around the world. It has factories in Malaysia and Taiwan to use the low labor cost in those countries in making its labor-intensive products. In the late 1990s, it had to close it operations in a foreign country when, due to a change in the country's leadership, all foreign companies had to cease doing business there. During the Brazilian financial crisis, Agrestal adopted the practice of using revenues generated in Brazil to buy orange concentrate locally and sell that concentrate in the United States. Agrestal's corporate finance department aggressively uses hedging in all the countries where it operates. In a few select countries, Agrestal licenses its brand names and know-how to local licensees. Currently, Agrestal is organized whereby all strategic and operational decisions are made at its Princeton, New Jersey headquarters. An important economy of scope for Agrestal in pursuing international opportunities is

access to raw materials.

15. eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp. If, prior to entering the cooperative agreement with eBay, eBay's Korean partner stated that it had the technological capabilities to facilitate eBay's Korean auction business when, in fact, the Korean company did not have these capabilities, this would be an example of

adverse selection

5. In a ________ structure, operational decisions are delegated to division general managers/country presidents, but broader strategic decisions are made at corporate headquarters.

coordinated federation

9. Even if direct duplication of a firm's international strategies is ________, ________ might still exist that limit the ability of that strategy to generate sustained competitive advantages.

costly; substitutes

3. The rarity of strategic alliances

depends not only on the number of competing firms that have already implemented an alliance but also on whether or not the benefits that firms obtain their alliances are not common across competing firms in the industry

11. The essence of the ________ to vertical integration is that if a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, it should vertically integrate into that activity otherwise it should not vertically integrate into that activity.

firm capability explanation

7. Consistent with a real options perspective, firms in new and uncertain environments are likely to

develop numerous strategic alliances

____ exists when firms directly communicate with each other to coordinate their levels of production and/ or their prices

explicit collusion

6. P&G is a leading consumer goods company in the United States that has grown its business through a combination of international growth, alliances, acquisitions and mergers. In 2003, P&G acquired the beauty care company Wella to acquire products that would complement its current product. In 2004, P&G acquired AG-Hutchison Ltd to establish a stronger presence in the Chinese consumer goods products market. In 2005, P&G acquired Gillette, another consumer goods company, in a deal worth approximately $57 billion dollars. If P&G's bid for Gillette was invited by Gillette's management, this would be an example of a

friendly acquisition.

15. When a firm operates in multiple geographic markets simultaneously it is said to be implementing a(n)

geographic market diversification strategy.

6. Firms ________ when they attempt to develop all the resources and capabilities they need to exploit market opportunities and neutralize market threats by themselves

go it alone

11. Substitutes for exploiting economies of scope in diversification include

growing and developing independent businesses within a diversified firm and strategic alliances.

19. TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units. TerraLoc's development of the new battery technology is likely to

increase the rarity of TerraLoc's vertical integration strategy since TerraLoc has reduced uncertainties related to increased battery life in its products.

9. Adverse selection in a strategic alliance is likely only when

it is difficult or costly to observe the resources or capabilities that a partner brings to an alliance.

13. eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp. eBay's former agreement with ecorp is best characterized as a(n)

joint venture

12. eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp. eBay's agreement with MBNA is most accurately characterized as a(n)

licensing agreement

13. Research over the years has demonstrated conclusively that the primary determinant of the compensation of top managers in a firm is

not the economic performance of the firm but the size of the firm, usually measured in sales.

20. Digipics is an assembler of digital cameras. As an assembler, Digipics' operations are limited to purchasing all of the components necessary to assemble the cameras and then selling these cameras to wholesalers who, in turn, sell them through online stores and in retail electronics stores. If one of the suppliers that Digipics purchases its components from purposefully delivered a batch of its product that was substandard but did not inform Digipics of this, this would be an example of

opportunism.

4. Embargoes are an example of

quotas.

12. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. If no other firm in the computer industry were using a diversification strategy similar to Peach Computers', this diversification strategy could be said to be

rare and costly to duplicate.

5. One of the reasons why the benefits that accrue from a particular strategic alliance may be rare is that

relatively few firms may have the complementary resources and abilities needed to form an alliance.

9. The only economy of scope that an unrelated firm can try to realize is

risk reduction.

28. P&G is a leading consumer goods company in the United States that has grown its business through a combination of international growth, alliances, acquisitions and mergers. In 2003, P&G acquired the beauty care company Wella to acquire products that would complement its current product. In 2004, P&G acquired AG-Hutchison Ltd to establish a stronger presence in the Chinese consumer goods products market. In 2005, P&G acquired Gillette, another consumer goods company, in a deal worth approximately $57 billion dollars. If Gillette's managers wanted to maximize the value that Gillette received from its acquisition by P&G, they should

seek information from P&G about the value that P&G will receive from its acquisition of Gillette.

8. For multipoint competition to lead to mutual forbearance,

the threat of retaliation must be substantial and the firms pursuing this strategy must have strong linkages among their diversified businesses.

14. At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 95% of its revenue from the sales of computers and computer-related software and approximately 5% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues. If Peach Computers were looking to getting into the business of making telephones, its diversification would be called

unrelated.

8. As long as the cost of ________ to enter a new industry is less than the cost of ________, an alliance can be a valuable strategic opportunity.

using an alliance; learning new skills and capabilities

8. If Brenda Thompson, Tom Mix's supervisor, wanted to use a budgeting process to help evaluate Tom's performance but wanted to ensure that using a budget did not encourage Tom to focus on short-term behaviors at the expense of long-term results, she should

work with Tom in an open and participative process to develop the budget based on the economic reality facing Tom's function and use both quantitative and qualitative evaluations of the performance of Tom's function.