493 MGMT

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

The weaker firms are forced out of the industry in this stage.

Why did W. L. Gore reorganize itself into a functional structure from a simple structure?

A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

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.

Which of the following is the result of a leveraged buyout (LBO)?

An LBO changes a public company into a private company.

Which of the following is an example of an organizational value?

Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Vijay most likely to agree?

Businesses can use their resources to create profit as long as they do so within the rules of the game.

How is a cost-leader protected from threats from powerful buyers?

It is more able to absorb price increases through accepting lower profit margins.

Which of the following statements accurately describes a firm's resource flow?

It is the firm's level of investments to maintain or build a resource.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

Each stage of the industry life cycle is dominated by a different customer group.

Industry effects describe the underlying ________ structure of the industry.

Economic

What does it mean for a firm to have an 80 percent learning curve?

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

Which of the following examples describes the task of an alliance manager?

Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

________ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

Innovation

________ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Inside directors

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal?

Once the firm starts growing and attracting more customers she is likely to feel overloaded

Which of the following describes a firm in the Globalization 1.0 stage?

Robinson Inc. has a base office in New York and distributes some of its products overseas.

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance?

Segar, where people speak English and have a low standard of living

As the legal owners, ________ have the most legitimate claim on a company's profits.

Shareholders

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?

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

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases.

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

Which of the following accurately describes an organic organization?

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

Opula Inc., a luxury car company, sells the same cars 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 Opula Inc. most likely pursue?

an international strategy

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?

because of the large economic distance between U.S. and India

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

benefits from lower labor costs in manufacturing and services

According to the agency theory,

conflicts that arise in corporations should be addressed in the legal realm.

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to

gain and sustain competitive advantage.

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.?

greenfield operation

In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones?

information asymmetry

If a strategic business unit is recognized as a cash cow, it is advisable to

invest into the business to hold its current position.

If a resource is common

it will result in perfect competition.

Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies a

joint venture.

Intangible assets add great value to a firm primarily because the firm's

knowledge and culture take time to develop and are generally difficult to imitate.

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

learning-curve effect

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

lowering cost

In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for

making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.

For a multinational enterprise (MNE), applying the globalization hypothesis would mean

manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n)

non-equity alliance.

Ethics is

not synonymous with law.

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

practicing effective corporate governance

Next Door Cellular is a leading mobile network operator. Since most of the resources used by Next Door Cellular are easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Next Door Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework.

rare

To make the SWOT analysis an effective management tool, a strategist must first

scan a firm's internal and external environments.

Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect?

serial acquisitions

Creating economic value for shareholders while also creating social value is known as creating

shared value

A core tenet of stakeholder strategy is that a

single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

Economies of scale do not allow firms to

spread their variable costs over a larger output.

The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after

the Hippocratic oath in medicine.

Which of the following statements best describes local responsiveness?

the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

Diversification premium is a situation in which

the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

Which of the following is a characteristic of a fragmented industry?

there are many small firms

Outside directors are more likely to watch out for the interests of shareholders of their firm because

they have more independence than inside directors.

Investments in specialized assets tend to incur high opportunity costs because the

threat of one of the partners pursuing his or her self-interest is high.

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

to align incentives between shareholders and management

Handy Pro, Inc. is a company that manufactures electric tools like drills, screwdrivers, and saws. Which of the following best illustrates a product-oriented vision for Handy Pro?

to be the pioneering manufacturer of electric tools

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

trying to be everything to everybody by combining different competitive strategies

Product features, customer service, and complements are all examples of important

value drivers

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

vertical integration.

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve?

$4

Which of the following is true of acquisitions?

Acquisitions can be friendly or hostile.

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?

All nations around the globe should have access to a sustainable energy source.

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?

Customer-oriented visions tend to be more flexible when adapting to changing environments

How do low interest rates affect a business?

Firms can easily borrow money to finance future growth.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy?

He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then

Invoro will have a resource that is valuable but no longer rare.

Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business?

It increases the value of the focal firm's offering from a customer's perspective.

Which of the following statements best describes groupthink?

It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

Which of the following statements should ideally reflect a firm's strategy for competitive advantage?

Our aim is to create superior customer value while controlling costs.

A firm's learning curve is steeper than that of its competitor. What does this imply?

The firm is at an advantage when compared to its competitor.

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking?

The firms would eventually have no resources to invest in product and process improvements.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

Which of the following is an implication of high exit barriers in an industry?

The industry will face excess capacity.

Which of the following methods of developing a strategy best illustrates scenario planning?

The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario?

While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry.

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

Which of the following statements accurately brings out the difference between economies of scale and learning effects?

While there are no diseconomies to learning, there are diseconomies to scale.

Which of the following firms will most likely not be a complementor to a firm that manufactures computers?

a company that manufactures its own brand of desktops and laptops

Which of the following best illustrates a non-equity alliance?

a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM?

a dominant-business firm

Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely not be a complement to the car?

a premium car manufactured and sold by Mova Autos Inc., a rival company

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies?

ambidextrous

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

by lowering competitive intensity in the industry overall

How has Apple been able to sustain its competitive advantage in the smartphone industry?

by regularly introducing incremental improvements in its products

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have

competitive parity with each other.

Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a

core competency

an example of a firm's external stakeholder?

customers

Customer-oriented visions do not

define how a customer need will be met.

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation.

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are

engaging in strategic outsourcing.

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because

entering the aircraft manufacturing industry requires huge capital investments.

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)

entrepreneur who commercialized invention into an innovation.

In the AFI strategy framework, strategy analysis primarily involves

evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.

matrix

Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup?

mechanistic

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?

monoploy

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its

open innovation model.

According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to

organize resources effectively to accomplish predetermined goals.

Which of the following alternatives on the make-or-buy continuum allows for most integration?

parent-subsidiary relationship

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be

socially complex.

A(n) ________ is best described as a stand-alone division of a larger conglomerate, with its own profit-and-loss responsibility.

strategic business unit

Which of the following forces was not originally a part of Michael Porter's fives forces model?

strategic role of complement

The management team at Clear Solutions, Inc. decided to build a branch office in Memphis, Tennessee. Which of the following terms correctly describes this action?

strategy formulation

The relative bargaining power of suppliers is high when

suppliers provide products that are differentiated.

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n)

tall hierarchical structure.

In a large company, who is most responsible for devising the corporate strategy?

the CEO of the company

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group to which the firm belongs

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because most of its competitors had already been in the laptop market for five years. Blue Tech Inc.'s models were inferior to the ones in the market. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies.

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity