gm 170 pt 2
14. The key lesson to be drawn from the failures that Hewlett-Packard has experienced in acquiring software and services companies EDS and Autonomy is that acquisitions that aim to change a company's business model are more risky than acquisitions that seek to leverage the existing business model. T/F
T
19. Applications of complexity thinking to management suggest that top management should set rules governing the interaction of organizational members and their expected behaviour, and relinquish direct supervisory control T/F
T
2. The key feature of the "second economy" that economist Brian Arthur describes is that human decision makers have been replaced by machines. T/F
T
3. The key difference between a merger and an acquisition is that, in the case of a merger, the participating companies combine to create a new company. T/F
T
9. A growing source of competition to western companies has been new computers from emerging market countries which have made the transition from supplying OEM products to Western manufactures and distributors to providing products under their own brand names. T/F
T
24. In technology-based industries, the most common reason for established companies to acquire small, start-up firms is in order to: [See p.397] a. Preempt competitive attacks from potential rivals. b. Acquire capabilities in emerging areas of technology. c. Boost revenue growth as their own core businesses experience slower growth. d. Recruit the entrepreneurial leaders of stat-up companies in order to revitalize their own managerial ranks.
b. Acquire capabilities in emerging areas of technology.
16. In most cases, the primary goal of a strategic alliance is to acquire that than simply to access the partner's organizational capabilities. T/F
F
2. Mergers, acquisitions, and alliances may be viewed not just as instruments of corporate strategy but as strategies in themselves. T/F
F
21. Research into leadership generally supports the view that complex organizations facing uncertain environments require leaders that are decisive decision makers rather than humble. empathetic individuals endowed with social and emotional intelligence. T/F
F
3. The growth of the freelance economy in which taxi services, short-term accommodation, and home maintenance is provided by self-employed individuals rather than by firms has little to do with technology, it's mainly due to the preferences of individuals for the flexibility of self-employment over the rigidities of a full-time employment. T/F
F
6. Of the 95 Chinese companies that were members of the Fortune Global 500 in 2015, few were state-owned enterprises. T/F
F
11. The "lemons problem" in the market for companies refers to the fact that the sellers of companies have better information about the company than do would-be buyers. T/F
T
12. Cross-border acquisitions tend to have the strongest strategic logic, but give rise to the greatest challenges of post-merger integration. T/F
T
12. For shareholder value maximization to be a helpful goal for top management it needs to focus not on stock market value but on the fundamental drivers of value. T/F
T
31. During 2000-2013, the ratio of CEO compensation to the earnings of production workers among US companies averaged: [See p.414 a. 300-times b. 150-times c. 50-times d. 20-times
a. 300-times
41. Organizational identity refers to: [See p.421] a. A collective understanding among employees of what is core, enduring, and distinctive about the character of an organization. b. The set of an organization's recipes for successfully competing in the marketplace. c. Organizational values that are shared at the system level. d. The norms, values, symbols, and traditions of the organization.
a. A collective understanding among employees of what is core, enduring, and distinctive about the character of an organization.
15. "Managing real options" means that firms should take a greater interest in how share option packages are managed, to achieve the best value for shareholders T/F
F
1. Internal business venture rather than external mergers, acquisitions and alliances is the preferred means by which most established firms achieve major extensions in the scope of their activities. T/F
F
10. In order to gain a new organizational capability, it is usually cheaper and less risky to acquire a company that already possesses that capability than to develop that capability internally. T/F
F
10. The growing interconnectedness of the world economy and human society cannot be regarded as a contributing factor to the increasing volatility and unpredictability of global environment of business. T/F
F
13. In a more complex business environment where companies must pursue multiple dimensions of competitive advantage is consistent with Jim Collins' recommendation that companies should seek to be "hedgehogs" rather than "foxes." (Drawing upon the categorization of intellectuals made by Isaiah Berlin.) T/F
F
13. Issues of pre-acquisition planning and post-acquisition management should be viewed as separate: activities best led by separate teams. T/F
F
14. Companies such as Toyota, Wal-Mart, 3M, and Samsung have sustained strong performance over long periods of time by basing their competitive advantage on a single core competence. T/F
F
15. The concentration of Hollywood film industry in Los Angeles and electronics and IT companies in Silicon Valley is for different reasons than those which created the industrial districts of Italy. T/F
F
17. Complementarity research should not be used by a company as an excuse for not adopting a best practice such as a "six-sigma" quality management systems "lean production" manufacturing processes, or a "360-degree" employee appraisal system. T/F
F
18. Complexity theory predicts that complex, adaptive systems rarely have the capacity to self-organize—to avoid chaos hierarchical control is essential. T/F
F
18. In Capron and Mitchell's decision framework for selecting the right growth path, if a firm finds that its resources and capabilities do not fit with its current strategy, then acquisition should be first option considered and internal development the last option. T/F
F
4. The emergence of a multipolar world where the US no longer exercises a dominant role is a force for stability in an otherwise unstable global business environment. T/F
F
5. Mergers and acquisitions go in waves. Because acquirers prefer to pay low prices for acquired companies, these M&A waves tend to be inversely correlated with stock market fluctuations. T/F
F
7. The experiences of British retailer Marks & Spencer and chocolate maker Cadbury confirms the fact that commitment to social responsibility and the interests of employees results in a more responsive and adaptable business enterprise. T/F
F
8. The only clear finding from several decades of empirical research into the outcomes of mergers and acquisitions is that the shareholders of the acquiring firms lose money. T/F
F
9. Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of diversifying mergers and acquisitions than for horizontal mergers and acquisitions. T/F
F
1. The business environment of the 21st century has been characterized by turbulence and unpredictability. T/F
T
11. Among the mature industrialized nations, three major societal issues are impacting businesses: equity, ethics, and environmental sustainability T/F
T
16. The complementarity of management practices implies that the effectiveness of a particular management practice depends upon how it firs with all the other management practices of the company. T/F
T
17. An important lesson from the troubled development of Boeing's 787 Dreamliner is that, for developing complex, technically-advanced products, the hub firm needs to have the capability to manage networks of strategic alliances. T/F
T
20. If companies are to put in place the capabilities needed to build multiple layers of competitive advantage, their organizational structures need to become more complex. T/F
T
4. In the case of cross-border amalgamations of companies, concerns of national domination often mean that mergers are preferred to acquisitions. T/F
T
5. The rise of populist political parties (UK Independence Party, France's Front Nationale, Greece's SYRIZA) and of populist politicians such as Donald Trump in the US and Beppo Grillo in Italy is a reflection of the declining legitimacy of the capitalist market economy. T/F
T
6. The speed at which many decisions over corporate acquisitions are made as contributed to the disappointing outcomes of most mergers and acquisitions. T/F
T
7. In the automobile and beer industries, acquisitions have been motivated primarily by the goal of international expansion. T/F
T
8. The poor performance of the shares of Goldman Sachs after the 2008 financial crisis, News Corp. after the phone hacking scandal, and VW after its emissions cheating scandal provide support to the argument that maintaining legitimacy is critical to an organization's success. T/F
T
22. The fact that acquisitions impose substantial costs on acquiring firms (including both the acquisition premium and legal and advisory fees) implies that: [See pp.393-395] a. Acquirers need to be sure that potential of the acquisition to create value exceeds the costs of incurred by the acquisition. b. Acquisitions tend to be in the interests of managers but contrary to the interests of shareholders. c. Small acquisitions to be preferred to large acquisitions. d. Boards of directors should be more active in opposing acquisition proposals.
a. Acquirers need to be sure that potential of the acquisition to create value exceeds the costs of incurred by the acquisition.
33. If competition, market turbulence, and accelerating technological change are increasing the pace at which firms' competitive advantage is eroded, to sustain competitive advantage companies need to: [See p.416] a. Create multiple sources of competitive advantage. b. Build strength in intellectual property. c. Foster innovation. d. Adopt global strategies that arbitrage the resource advantages of multiple countries.
a. Create multiple sources of competitive advantage.
25. The wave of mergers and acquisitions in the beer industry that have created giants such as Anheuser Busch Inbev, SAB Miller and Heineken have been motivated primarily by the desire to: [See pp.396-397] a. Extend geographical scope b. Exploit cost savings from combining operations within the same markets c. Acquire organizational capabilities d. Reduce risk
a. Extend geographical scope
37. An implication of complexity theory for the leadership of business enterprises is: [See p.420 a. Future CEOs should relinquish rigid control and foster significant degrees of autonomy among more junior managers b. The CEO will have less influence on organizational performance c. Organisations in the future will not need a CEO d. Organisational hierarchies will be inverted
a. Future CEOs should relinquish rigid control and foster significant degrees of autonomy among more junior managers
36. Complex biological and social systems demonstrate the capacity for self-organization. Self-organizing systems require: [See pp.421-422] a. Identity, information, and relationships. b. Identity, leadership, and relationships. c. Identity, shared values, and communication. d. Common vision, shared values, and goal consensus.
a. Identity, information, and relationships.
29. Achieving social legitimacy requires that businesses should: [See p.413] a. Seek permission from the local community to operate. b. Adapt to societal pressures. c. Follow accepted ethical codes. d. Replace shareholder value maximization by stakeholder value maximization.
b. Adapt to societal pressures.
34. The main reason that a strategic alliance is often an attractive alternative to a merger or acquisition is: [See pp.402-403] a. Alliances avoid government restrictions relating to antitrust and foreign direct investment. b. Alliances permit firms to access one another's resources and capabilities without the costs and risks of a merger or acquisition. c. Alliances allow a firm to create growth options. d. Alliances allow risk sharing in giant projects.
b. Alliances permit firms to access one another's resources and capabilities without the costs and risks of a merger or acquisition.
35. Replacing mass manufacturing by lean manufacturing: [See p.418-419] a. Always improves operational performance. b. Can reduce operational performance if human resource management is not adapted to the new manufacturing processes. c. Only improves operational performance for industries subject the unpredictable demand and intense competition. d. Was successful for Toyota and several other Japanese companies, but is much less successful in the US and Europe.
b. Can reduce operational performance if human resource management is not adapted to the new manufacturing processes.
19. Mergers and acquisitions represent paradoxes in the sense that: [See pp.390-394] a. The stock market remains suspicious of them, despite widespread evidence of their effectivess as tools of corporate strategy b. Companies continue to be enthusiastic in initiating acquisitions despite empirical evidence that acquisition destroy shareholder value for acquirers c. Both of these d. Neither of these
b. Companies continue to be enthusiastic in initiating acquisitions despite empirical evidence that acquisition destroy shareholder value for acquirers
32. Which of the following was not a contributory factor to the success of Disney's post-acquisition integration of Pixar? [See p.400] a. Personal and professional respect among key personnel at the two companies. b. Disney's rapid integration of Pixar within its own animated productions unit. c. Protection of Pixar's creative culture and employment arrangements. d. Maintaining the support of Pixar's president by making him head of Disney's combined animated productions unit.
b. Disney's rapid integration of Pixar within its own animated productions unit.
36. Compared to alliances between domestic partners, international alliances typically offer: [See pp.405-406] a. Greater risk without greater potential return. b. Higher potential returns but with greater risk of disagreement and failure. c. A wider range of possible outcomes dependent upon the compatibility of the national cultures of the partners involves. d. Higher potential return and moderate risks so long as the potential for disagreement is recognized and a mechanism is established for arbitrating disputes.
b. Higher potential returns but with greater risk of disagreement and failure.
31. Which are the following statements about pre-merger planning is untrue? [See p. 398] a. It is easier to predict the outcomes of horizontal M&A than other types of M&A b. In the case of horizontal M&A, it is easier to predict the impact on revenues than the impact on costs c. The outcomes of a hostile acquisition are more difficult to predict than the outcomes of a friendly acquisition d. Acquisitions that are directed towards a firm reinventing its business model should be regarded as more risky than those which leverage its existing business model.
b. In the case of horizontal M&A, it is easier to predict the impact on revenues than the impact on costs
35. Strategic alliances frequently play an important role in a firm's internationalization strategy because: [See p.405 a. Alliances offer a means of sharing the high risks involved in international expansion. b. Internationalizing firms often lack the local knowledge and access to distribution channels that a local partner can provide. c. Alliances offer greater security than a wholly-owned subsidiary. d. Alliances offer greater flexibility than alternative internationalization modes.
b. Internationalizing firms often lack the local knowledge and access to distribution channels that a local partner can provide.
32. The most effective remedy for the problems that have arisen from top managements' pursuit of shareholder value is likely to be: [See pp.415-416] a. Increased government regulation. b. Recognition that management should focus not on stock market capitalization but upon the underlying drivers of long run profitability. c. Companies explicit commitment to the goal creating stakeholder value. d. Increased shareholder activism.
b. Recognition that management should focus not on stock market capitalization but upon the underlying drivers of long run profitability.
40. Real options theory may change strategic management by: [See pp.416-417] a. Requiring top management to become familiar with the fundamental of options theory b. Reframing the tools of industry analysis and the analysis of resources and capabilities to take account not just of the potential for profitability, but also the implications for strategic options c. Both a and b d. Neither a nor b
b. Reframing the tools of industry analysis and the analysis of resources and capabilities to take account not just of the potential for profitability, but also the implications for strategic options
22. The first two decades of the 20th and 21st centuries were similar in terms of factors that were reshaping the business environment. The most significant of these common factors were: [See p.410] a. Political turbulence: in the 20th century the collapse of the Austro-Hungarian and Ottoman empires, in the 21st century the ethnic and religious strife and the rise of populist politicians in West. b. Technology: in the 20th century electricity, the telephone and the automobile. in the 21st century the internet and mobile communication. c. Popular disaffection with big business: in the 20th century opposition to the concentration of economic power in trusts, in the 21st the inequality associated with the capitalist economy. d. Corporate social responsibility: in the 20th century outrange against unsafe and unhealthy products and worker exploitatioN. in the 20th century concerns over environmental irresponsibility and exploitation of third world workers.
b. Technology: in the 20th century electricity, the telephone and the automobile. in the 21st century the internet and mobile communication.
27. The growing number of takeovers of Western companies by Chinese and Indian companies reflects: [See p.411] a. The shifting locus of economic prosperity in the world. b. The drive by Chinese and Indian firms to internationalize. c. The impact of the 2008-2009 financial crisis in reducing the stock market value of many western companies. d. The desire of Chinese and Indian firms for Western technology.
b. The drive by Chinese and Indian firms to internationalize.
21. The transformations of: • South African Breweries into SAB Miller, the world's second biggest beer company, • North Carolina National Bank into Bank of America Corporation, the #2 bank in the US • Comcast into the world's biggest media company Are evidence of: [See p.392-394] a. The opportunities that the turbulent world offers to ambitious corporate leaders b. The potential that mergers and acquisition to effect major strategic transformations within a short time c. The critical importance of timing when using mergers and acquisitions to initiate major strategic transformations d. The need for antitrust policy to concentrate upon preventing the emergence of dominant firms, not on regulating their behavior once they have been created
b. The potential that mergers and acquisition to effect major strategic transformations within a short time
27. The continuing popularity of mergers and acquisitions among companies despite the lack of empirical evidence of their benefits suggests: [See pp.395-396] a. Many mergers and acquisitions are motivated by growth rather than profitability b. Mergers and acquisitions by the leading firms in an industry promotes imitation by other firms in the industry c. Both of these d. Neither of these
c. Both of these
23. Reckitt Benckiser's multiple acquisitions of consumer products companies have been motivated by its quest for: [See p.397] a. Restructuring opportunities. b. International diversification. c. Building a portfolio of consumer brands. d. Scale economies in production and marketing.
c. Building a portfolio of consumer brands.
29. For acquiring firms, empirical studies show that, on average, the returns to shareholders are: [See p.393-394] a. Positive, but not significantly so. b. Negative. c. Either negative or insignificant from zero. d. Too varied to generalize.
c. Either negative or insignificant from zero.
20. Most of the biggest mergers and acquisitions since 2000 have been horizontal—i.e. between companies in the same industry. This reflects the fact that: [See p.393] a. Antitrust authorities have been more concerned with vertical than horizontal mergers and acquisitions. b. By showing that diversification does not offer significant risk-spreading benefits, modern financial theory has undermined the attractions of diversifying mergers and acquisitions. c. Horizontal mergers and acquisitions offer the greatest potential for value creation through cost reduction and moderating competition. d. CEOs favor horizontal mergers and acquisitions because of their desire to eliminate rivals.
c. Horizontal mergers and acquisitions offer the greatest potential for value creation through cost reduction and moderating competition.
25. The first 16 years of the 21st century have been characterized by unprecedented turbulence in the global economy, politics, and society. Two reasons for thinking that this turbulence may continue into the future are: [See pp.412-413] a. Declining legitimacy of political leaders in many countries and growing ineffectiveness of international institutions b. A growing ineffectiveness of international institutions and a decline in US global influence c. Increased global interconnectedness causes disturbances be amplified while the declining global influence of the US implies a lack leadership in managing these disturbances d. The global financial system remains fragile
c. Increased global interconnectedness causes disturbances be amplified while the declining global influence of the US implies a lack leadership in managing these disturbances
34. During turbulent times, real options are increasingly important sources of value. The following are strategic measures can create option value for a firm: [See pp.416-417] a. Commitment to long-term fixed price contracts for key raw materials. b. Increasing levels of debt in order to reduce the firm's weighted-average cost of capital. c. Initiating multiple strategic alliances. d. Investing in projects enhances environmental sustainability.
c. Initiating multiple strategic alliances.
39. According to the predictions of complexity theory, which of the following managerial actions is not likely to promote rapid evolutionary adaptation by an organization? [See pp.420-422] a. Simple rules. b. A combination of both incremental and radical change initiatives. c. Leaders with well-developed emotional intelligence. d. An optimal level of adaptive tension.
c. Leaders with well-developed emotional intelligence.
28. A major implication of corporate scandals, inequality, and environmental sustainability implies that company executives need for firm strategy to pay greater attention to: [See pp.413-415] a. Risk management. b. Business ethics. c. Social legitimacy. d. Achieving greater diversity among boards of directors.
c. Social legitimacy.
23. According to the economist Brian Arthur, the "second economy" comprises: [See p.411] a. The "sharing economy" b. Mobile e-commerce c. System of transactions managed entirely by machines d. The rise of emerging market countries to challenge the advanced industrialized nations
c. System of transactions managed entirely by machines
33. What distinguishes a joint venture from other types of strategic alliance is that in a joint venture: [See p.401] a. The partners hold equity stakes in one another. b. The partners combine their top management teams. c. The partners create a new company which they jointly own. d. The partners are from different countries.
c. The partners create a new company which they jointly own.
24. According to systems theory, high levels of interconnectedness can lead to: [See p.412] a. More pressure on governments to regulate the economy and increase their interventionism b. A spiral of economic catastrophes and business failures c. Greater stability in the whole system d. A tendency for small initial disturbances to become amplified in unpredictable ways
d. A tendency for small initial disturbances to become amplified in unpredictable ways
28. Acquiring companies often pay excessive prices to acquire target companies because: [See pp.393-394] a. To gain acceptance of the bid by the majority of a target company's shareholders, acquirers must pay a significant premium over the target company's stock market valuation. b. Information asymmetry: acquiring companies knows less about the true value of target companies than do these companies themselves. c. Acquirer are often drawn into a competitive bidding wars. d. All of these.
d. All of these.
30. The impact of the 2008/9 financial crisis on financial service firms suggests that loss of legitimacy is likely to have the following adverse effect: [See p.413] a. Lower valuation by investors and financiers. b. Loss of employee moral. c. Adverse government policies. d. All of these.
d. All of these.
38. As organizations and their environments become more complex and less predictable, the kind of leadership that fosters effective organizational adaptation is increasingly characterized by: [See pp.422-423] a. Commitment clear performance goals b. Willingness to take tough decisions c. Management of detail d. Management of identity, meaning, and the emotional climate of the organization
d. Management of identity, meaning, and the emotional climate of the organization
30. The main reason that empirical evidence of shareholder returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that: [See pp.393-394] a. Stock market data only shows expectations about performance, not actual performance b. Stock market data is can only show the impact of M&A announcements and then only over a period of up to 12 months c. Both (a) and (b) d. Neither (a) nor (b)
d. Neither (a) nor (b)
26. Acquisition is the preferred mode of diversification for most firms because: [See p.397] a. The stock market confers with high price/earnings ratios on companies that pursue diversifying acquisitions. b. Empirical research shows that diversifying acquisitions typically create significant value for the acquiring firm. c. The alternative of acquiring a minority stake does not give the diversifying firms significant decision-making influence over the target firm. d. The alternative of setting up a new enterprise in the industry to be entered involves excessive time and risk.
d. The alternative of setting up a new enterprise in the industry to be entered involves excessive time and risk.
26. Digital technologies are increasing the intensity of competition in the markets for electronic hardware because they are causing: [See pp.410-411] a. Entry barriers to fall. b. Chinese companies that were once contract manufactures for Western and Japanese electronics producers are becoming direct competitors. c. Production costs to fall. d. The markets for once-separate products to converge.
d. The markets for once-separate products to converge.
