Exam 3 s

Which of the following accurately describes a common difference between a merger and an acquisition?

A merger tends to be friendly; an acquisition can be friendly or unfriendly.

Iselectrics, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Iselectrics's European sales?

Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels.

Which of the following statements about managing alliance-related tasks is true?

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

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

Australia

Globex Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Omni Consumer Products, a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?

Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries.

Greg is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders?

He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price.

Kate is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?

How would the media report her decision to accept the opportunity if it were to become public?

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?

It allows a high level of integration.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

In which of the following ways does Zappos achieve organizational control?

It enforces that each group member's compensation depends in part on the group's overall productivity.

What most likely happens when a firm optimizes its organizational structure to its current situation?

It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

Why is the optimal organizational structure a multidivisional structure?

Its focus is on driving down costs.

Aperture Science is a publicly traded manufacturer of home electronics. Based on what you have read, which of these actions would be wisest for Aperture Science's board of directors to take to be sure that the company's new CEO is as motivated as possible?

Link the CEO's pay to her performance but avoid high-powered incentives that may cause reckless behavior.

Oceanic, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Macmillan, an air-conditioner manufacturer, faces intense pressure from its home market. Rent a Swag, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Oceanic invest?

Macmillan, because firms that face stiff competition at home tend to do better abroad

Dinotopia 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 Dinotopia in terms of cultural distance?

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

Which of the following corresponds to the use of tacit knowledge?

Phil assembles a motorcycle from memory.

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?

The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.

Which of the following is true of acquisitions?

They can be friendly or hostile.

Which of the following is true of the codes of conduct of an organization?

They detail how the organization expects an employee to behave and to represent the company in business dealings.

Three months ago, Colin became a board member at Hooli, a publicly traded company. Two weeks ago, the board members discovered that Hooli's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Colin and the other board members hold the CEO?

They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign-entry mode?

They reduce a firm's exposure to loss of reputation.

Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take?

Turn down the acquisition offer and prepare to resist a hostile takeover.

Yubaba Inc., a fidget spinner manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Bill has worked at Yubaba for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

Yubaba Inc. has a flat organizational structure.

Yubaba Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. Axe Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

Yubaba Inc. will sell the same products in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements.

Angelika is the Chief Operating Officer of One Spice Inc., a firm that grows and processes the Naga Viper pepper, one of the world's hottest peppers. Angelika wants to better understand the relationship between her firm's organizational culture and the ability to achieve competitive advantage. The relationship between these two states that

a firm can achieve competitive advantage if their organizational culture follows the VRIO principles.

Which of the following is an example of explicit knowledge?

a research summary

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)

acquisition

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways?

acquisitions

The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion. All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate?

an acquisition

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

Jonathan is interested in building the centerpiece of his firm's corporate governance, and so hires a ________ that is made up of individuals from both inside and outside the firm.

board of directors

How does horizontal integration within an industry affect the surviving firms?

by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Tom and James are customer care employees at Omni Consumer Products. In between calls, Tom and James spend time on Facebook and YouTube. The relaxed guidelines at Omni Consumer Products allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior

can be stopped by implementing performance incentives and strict control mechanisms.

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?

co-opetition

A firm that uses a functional structure will typically have efficient top-down and bottom-up communication, but

communication may be hampered among the horizontal, distinct organizational functions.

Jane is the CEO of Aperture Science LLC and wishes to develop additional competencies for her business. She is mostly interested in taking advantage of the ________, which are clustered firms that have unique skill sets located in specific geographic regions.

communities of learning

Some argue that the global financial crisis of 2008 was worsened because large fortune 500 companies did not practice effective

corporate governance.

Because of poor management, the stock price of Rearden Steel Inc. falls and many investors sell their shares. Soon Rearden Steel becomes the target of a hostile takeover, during which Dildred buys enough shares to exert control over the firm. In this scenario, Dildred performs the role of a(n)

corporate raider.

Jordan is president of a medium-sized bank. What can he do to lessen the chance of employees or board members taking part in insider trading?

create a strict code of ethics and explain that inside traders will be fired

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

cultural

Maria wants to pursue an international strategy but is concerned that foreign markets aren't ready for her products and services. You recommend that she engage in ________, which would be contract based and would limit risk and exposure of her investments.

exporting

Which of the following modes of entering a foreign market allows for the lowest level of control?

exporting

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

exporting goods.

The University of Central Florida has a typical College of Business which houses several specific mini-departments such as management, marketing, finance, accounting, economics, and real estate. This College of Business best resembles a(n) ________ structure.

functional

Paul runs an organization that implements a cost-leadership strategy. This business-level strategy supports both a ________ and ________ structure.

functional; mechanistic

Aperture Science relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Aperture Science should

give employees a "free day" every two weeks to pursue ideas for new educational toys.

Blue Cat Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Blue Cat most likely pursue?

global-standardization strategy

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

globalization.

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

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

What do we call 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

When firms sell their products overseas with little or no change to the products, they may increase the expropriation of intellectual property and increase the risk of piracy. This is considered a serious disadvantage when pursuing a(n) ________ strategy.

international

Hooper's Corn Inc. produces an inexpensive microwave popcorn that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has Hooper's Corn performed poorly in?

local responsiveness

Why did Quaker Oats Company's acquisition of Snapple fail?

managerial hubris

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

matrix

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

mechanistic

PolyCon's, a large and successful retail chain on the East Coast, decides to expand its operations across the United States. Which of the following organizational structures should PolyCon's use?

multidivisional

Michael Porter's diamond framework explains

national competitive advantage.

A payroll company in the nation of Osterlich is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion?

one that used to have a colonizer or colonized relationship with Osterlich

AT&T, IBM, Siemens, and Pfizer, have been shifting their innovation strategy toward a model designed to blend internal knowledge with external knowledge by sourcing strategic alliances. This example best represents the

open innovation framework.

Leslie has completed the organizational design of her firm but is now interested in the second key informal building block, which she believes will help her firm achieve a competitive advantage. Specifically, she's interested in how things will get done on a day-to-day basis and the intangible piece of her organization that cannot be easily codified. Leslie wants to build an effective

organizational culture.

Amanda, the CEO of Weyland YutaniInc., reports to the board of directors appointed by the shareholders of Weyland Yutani. Based on shareholder suggestions, the board ties Amanda's compensation to the performance of Weyland Yutani. Due to this pressure, Amanda begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Amanda's compensation to firm performance is to overcome

principal-agent problem.

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

related-linked diversification.

Hooper's Store Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, Hooper's Store defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, Hooper's Store developed a(n)

resistance to change.

Which of the following characteristics of a public stock company deals with principals and agents?

separation of legal ownership and management control

All of the following are examples of external-governance mechanisms except

shareholders.

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

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

Employees learn about an organization's culture through the process of

socialization.

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible

strategic alliance with another firm already established in those markets.

Oceanic Airlines Inc., a transportation firm, is headed by Denise Cordova, 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, Oceanic Airlines Inc. can be said to have a(n)

tall hierarchical structure.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because

the U.S. population was growing slowly and becoming more health conscious.

The downside of equity alliances is

the amount of investment that can be involved.

Which of the following is the source of the principal-agent problem in publicly traded companies?

the separation of ownership and control

Which of the following factors is the most important determinant of economic distance?

the wealth and per capita income of consumers

In a public stock company, senior executives, such as the CEO, face agency problems when

they delegate authority of strategic business units to general managers.

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

they offer the same products or services in all their stores throughout the world.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

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

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

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework?

Doing so could yield significant business opportunities that could improve the standard of living of the poor.

Which of the following statements is true of explicit knowledge?

Explicit knowledge is shared in nonequity alliance firms.

Jeremy is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should he 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.

Omni Consumer Products operates as a strategic business unit (SBU) under Total Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that

Omni Consumer Products is led by its own CEO (or equivalent general manager).

Sarah, 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 Sarah?

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

Carla recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Carla to undertake to help safeguard the company's financial health?

Request and review a copy of the firm's risk assessment plan, if such a plan exists.

Laura owns and runs Cyberdyne Systems Corp., a private start-up company with a current value of $1.3 billion. Cyberdyne Systems Corp.is interested in going public to fund future growth. Which action should Laura take before Cyberdyne Systems Corp.'s initial public offering?

She should investigate Cyberdyne Systems Corp.'s existing or potential problems with ethics or the law, if such problems exist.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity.

The Estelle Leonard Talent Agency recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision?

The increased span of control for remaining managers may lead to higher levels of stress and possible burnout.

Which of the following statements is true with regard to international trade between countries?

Wealthy countries engage in relatively more cross-border trade than poorer ones.

Managers at Umbrella Corporation, a firm in East Asia, want to make their company a global leader in business process outsourcing (BPO). What should the Umbrella managers look for as they decide where to locate their BPO facilities?

an abundance of well-educated English speakers

According to the perspective of shareholder capitalism, shareholders in public stock companies

have the most legitimate claim on profits.

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?

industry-specific forces

Walmart sells live animals (snakes, eels, toads, etc.) for food preparation in China whereas IKEA sells kimchi refrigerators and metal chopsticks in South Korea. These examples illustrate the need for ________ which often requires the competing firm to tailor their products and services to meet the needs of the market in which they are competing.

local responsiveness

Duke & Duke Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Duke & Duke Autos Inc. is reaping the benefits of

location economies.

In Fasehatice'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.

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) ________ in the context of a principal-agent problem.

moral hazard

Gordon's role in providing inside information to Pearson Specter Litt for the benefit of Pearson Specter Litt's stockholders and himself is an example of

moral hazard.

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

real-options perspective.

Thomás works in a rare metals industry and wants to open a business in a foreign country that is rich with natural resources. He believes that natural resources are the one and only mechanism that can help him achieve an international competitive advantage. After all, countries like Afghanistan, Iran, and Venezuela are home to the world's richest natural recourses, so, in theory they too should be able to leverage those resources in order to create a national competitive advantage. Which of the statements below best represents an appropriate response to Thomás and his theory?

Natural resources are often not needed to generate world-leading companies because competitive advantage is often based on other factor endowments such as human capital and know-how.

General Electric's board has only one inside director, John Flannery, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE?

The CEO possesses invaluable inside information that can help him or her chair the board effectively.

Which of the following statements best supports the view that GE's Ecomagination strategy is in line with the shared value creation framework?

The Ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

Warephase Airway's decision to acquire Konex Fuels Inc. proved to be ill-fated because the Warephase managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?

managerial hubris

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm's slogan, We Guarantee Success! However, Tom's constituents presented him with data on their latest project which suggests that they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can't lose. This is a classic example of

managerial hubris.

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry.