MAN 4720 - Exam 3

Which of the following descriptions best exemplifies adverse selection? A) A manager cannot ascertain the contributions of individual team members in team production B) A research scientist uses the organization's resources to conduct personal research C) An employee spends time on social networking sites during work hours D) An interview candidate lists his qualifications in chronological order

A manager cannot ascertain the contributions of individual team members in team production

Which of the following is one of the implications of information asymmetry between principals and agents? A) The information comes to all stakeholders simultaneously, which is disadvantageous to the stockholders B) Principals tend to be better informed than the agents, and thus will avoid delegating decision-making authority to their agents C) Outsiders, such as shareholders, are the first to learn about important developments, before the information is released to the employees D) Agents can pass on the information to select principals who can trade stocks based on this information

Agents can pass on the information to select principals who can trade stocks based on this information

Which of the following is a recommended guideline for the composition of a board of directors to implement corporate governance? A) Fortune 500 companies should only hire directors from each other's companies B) A company's board of directors should not contain more than ten members C) Close to two-thirds of the board of directors should consist of outside directors D) The CEO is the best person to act as the chairman or chairwoman of the board

Close to two-thirds of the board of directors should consist of outside directors

________ is a mechanism to direct and control an enterprise and attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal. A) Corporate social responsibility (CSR) B) Stakeholder impact analysis C) A standard operating procedure D) Corporate governance

Corporate governance

Which of the following is not true concerning corporate governance? A) It seeks to benefit multiple stakeholders, not just shareholders B) Corporate governance provides a structure for monitoring firm performance C) Corporate governance exists only in public organizations D) Corporate governance provides rules for making decisions on corporate affairs

Corporate governance exists only in public organizations

Which of the following real-world examples best exemplifies a shared value creation framework? A) Uber's use of technology to prevent law enforcement from monitoring its drivers B) GE's strategy of developing multiple products for the same purpose and altering its products to suit the culture of different countries C) HP's decision to ask its CEO, Mark Hurd, to resign after he was accused of sexual harassment D) GE's Ecomagination strategy that focuses on providing cleaner and efficient sources of energy while generating billions in revenues

GE's Ecomagination strategy that focuses on providing cleaner and efficient sources of energy while generating billions in revenues

Why was Yahoo's CEO, Jerry Yang, forced out in 2008? A) He focused on improving the user experience to drive online advertising revenues B) He failed to implement necessary strategic changes after Yahoo lost its competitive advantage C) He refused to accept the practice of obtaining consensus from his managers before making strategic changes D) He made too many changes to the organizational structure of Yahoo

He failed to implement necessary strategic changes after Yahoo lost its competitive advantage

In terms of the key features of organic organizations, which of the following firms is most likely to have an organic structure? A) Merton Inc., a retail chain, which implements a rigid division of labor B) Meridian Inc., a clothing company, which aims to produce clothes at lower prices C) Icebox, a software development firm, which focuses on building innovative products D) Underscore, a publishing company, where decision power is concentrated at the top

Icebox, a software development firm, which focuses on building innovative products

_________ seek to define and direct employee behavior through a set of codified rules and standard procedures. A) Output controls B) Input controls C) Decentralization D) Co-opetition

Input controls

Which of the following exemplifies the organic nature of W. L. Gore's organizational structure? A) Its employees exhibit lower levels of entrepreneurial behaviors and innovation B) It avoids the use of virtual teams C) It has no formal chain of command or standard operating procedures D) Its employees are not allowed to review each other during performance appraisals

It has no formal chain of command or standard operating procedures

Which of the following best indicates that W. L. Gore & Associates has an informal and decentralized organizational structure? A) It prevents its associates from becoming shareholders in the company B) It determines its employees' levels of compensation on the basis of their boss's evaluations C) It is consistently ranked among the top 100 of the best companies to work for D) It prefers face-to-face communication over email and does not have an organizational chart

It prefers face-to-face communication over email and does not have an organizational chart

Which of the following is a shortcoming of the matrix structure? A) It cannot effectively address a higher level of diversification, which often stems from further growth B) Its implementation is difficult due to significant organizational complexity and increased administrative costs C) It frequently lacks effective communication channels across departments D) It often leads to an overload for the founder and/or CEO when the firms experience growth

Its implementation is difficult due to significant organizational complexity and increased administrative costs

Why did the San Francisco's Metro Transit Authority (MTA) order Uber to cease and desist? A) MTA argued that Uber was operating a taxi service without proper licensing B) MTA claimed that Uber failed to uphold its promise to give part of its profit to MTA C) MTA argued that Uber failed to comply with the emission standards for vehicles D) MTA claimed that Uber was attempting to create a monopoly on taxi services

MTA argued that Uber was operating a taxi service without proper licensing

Why is strategy implementation referred to as the "graveyard of strategy"? A) The levers that managers have at their disposal during the implementation stage of a strategy are insufficient B) The successful implementation of a strategy requires key functions in the organization to compete with each other C) It is a process that is independent of strategy formulation and is not necessary to ensure continued success D) Managers often fail to implement a chosen strategy successfully despite extensive analysis of business environments

Managers often fail to implement a chosen strategy successfully despite extensive analysis of business environments

Why do firms' strategies often follow their structures instead of the other way around? A) Managers are eager to confront the inertia that often exists in established organizations B) Strategy and structure are usually loosely coupled, providing them independent movement C) External and internal pressures increase organizational inertia in an organization D) Managers tend to consider strategies that do not change existing organizational structures

Managers tend to consider strategies that do not change existing organizational structures

Which of the following statements are true as it relates to the topic of organizational design? A) Firms have a tendency to modify their organizational structures too often, which inhibits their ability to create a sustainable competitive advantage B) Firms that are more flexible with their organizational structure are guaranteed to generate above average returns, relative to their competitors C) Strategy should be more influential on designing an organizational structure versus how structure should influence strategy D) Large firms can maintain a simple organizational structure so long as they are pursuing a cost-leadership strategy

Strategy should be more influential on designing an organizational structure versus how structure should influence strategy

Which of the following best exemplifies information asymmetry at Rainholm Industries Inc., a publicly traded software development firm? A) The lower-level employees at Rainholm Industries are often unaware of what happens in boardroom meetings B) The new CEO of Rainholm Industries implements a new strategy that focuses on social initiatives C) The shareholders of Rainholm Industries subscribe to Milton Friedman's views of capitalism, while the agents subscribe to Michael Porter's views D) The board of directors at Rainholm Industries makes significant structural changes to the organization and waits several weeks before issuing a press release about it

The board of directors at Rainholm Industries makes significant structural changes to the organization and waits several weeks before issuing a press release about it

What, according to Greg Smith, was the cause for the change in ethical climate within Goldman Sachs? A) The company acquired Abacus, and the conflicting cultures prompted Goldman Sachs to adopt a new hybrid culture B) The company had earned a reputation that it could not live up to in the long run C) The company went public and began looking at clients and itself as counter parties to a transaction D) The company went from caring about customers to creating an inflated share price at any cost

The company went public and began looking at clients and itself as counter parties to a transaction

How is the characteristic of separation of legal ownership and management control disadvantageous to publicly traded companies? A) The managers delegated to make decisions on behalf of shareholders might pursue their personal interests B) The shareholders may misuse their power to make decisions for the company and make decisions only for their profit C) The managers delegated to make decisions may be too focused on maximizing total returns to shareholders D) The shareholders do not directly supervise the activities of the board of directors

The managers delegated to make decisions on behalf of shareholders might pursue their personal interests

Which one of the following statements below can best be linked to the Nobel laureate Milton Friedman? A) Corporate social responsibility is absolutely vital to a firm's long-term success B) The social responsibility of a business is to increase its profits C) Corporate social responsibility is a universally accepted and practiced principle in domestic markets D) Corporate social responsibility should be incorporate in MNEs

The social responsibility of a business is to increase its profits

Which of the following is true of public stock companies? A) There exists an implicit contract based on trust between society and the public stock company B) Public stock companies are not required to disclose financial statements C) The public stock company is not an important institutional arrangement in developing economies D) Society expects public stock companies to add value to society by making profits for shareholders

There exists an implicit contract based on trust between society and the public stock company

Wayne Enterprises Inc. is a publicly traded company that specializes in manufacturing consumer electronics. Which of the following best exemplifies the implementation of a shared value creation framework at Wayne Enterprises Inc.? A) Wayne Enterprises's employees work in shifts to adhere to the eight-hour workday rule B) Wayne Enterprises's products are developed in a high-tech R&D facility based in Florida C) Wayne Enterprises uses recycled materials to create its commercially successful products D) Wayne Enterprises has a customer reward program for its most loyal customers

Wayne Enterprises uses recycled materials to create its commercially successful products

In terms of agency theory, which of the following is an agency problem? A) shared value B) adverse selection C) corporate social responsibility D) stakeholder strategy

adverse selection

In public stock companies, inside directors A) generally form the lower levels of management in an organization B) are appointed by shareholders to provide the board with necessary company information C) are not full-time employees of the firm D) are more likely to watch out for shareholders' interests than external directors are

are appointed by shareholders to provide the board with necessary company information

A leveraged buyout (LBO) A) is based on an expectation that the new private owners will not restructure the company at any cost B) requires the buyer to disclose financial statements of the company once it becomes private C) forces shareholders to sell their shares at lower prices than the actual value D) changes the ownership structure of a company from public to private

changes the ownership structure of a company from public to private

Which of the following is a benefit of a high degree of formalization in an organization? A) increased creativity B) excellent customer service C) consistent results D) fast decision making

consistent results

According to agency theory, A) corporations are viewed as a set of legal contracts between different parties B) agents are viewed as people who are the legal owners of the company C) principals should empower agents to run the corporation as they deem fit D) trading stocks using inside information is ethical but not legal

corporations are viewed as a set of legal contracts between different parties

Inkwell is a pen manufacturing company based in Massachusetts. Inkwell's main area of operation is Massachusetts, and it has a stronghold over the market. It employs a robust production system, which helps it sell pens at exceptionally low prices. In this scenario, which of the following strategies is Inkwell most likely using? A) ambidextrous strategy B) differentiation strategy C) integration strategy D) cost-leadership strategy

cost-leadership strategy

The three key components of organizational ________ are structure, culture, and control. A) design B) control C) culture D) inertia

design

Strategic business units (SBUs) in a company that uses an unrelated-diversification strategy are in direct competition with each other because A) each SBU is evaluated as a standalone, profit-and-loss center B) decision making is concentrated at the top of the organization C) each SBU shares its core competencies with the other SBUs D) the firm follows a single business or dominant business strategy at the corporate level

each SBU is evaluated as a standalone, profit-and-loss center

A tightly coupled system of strategy and structure is prone to break apart when A) input and output controls restrict information flow B) organizational culture becomes adaptive to change C) managers fail to recognize the need for organizational inertia D) external and internal shifts put pressure on the system

external and internal shifts put pressure on the system

Sam Walton was responsible for Walmart's cost-leadership strategy that continues to guide the company to this day. His influence on the organization's culture is best described as A) founder imprinting B) differentiation C) groupthink D) co-opetition

founder imprinting

One disadvantage of a functional structure is that it A) cannot be converted into an ambidextrous structure B) frequently lacks effective communication channels across departments C) does not facilitate rich and extensive communication between members of the same department D) does not allow the setting up of cross-functional teams

frequently lacks effective communication channels across departments

In order to implement a cost-leadership strategy effectively, a _________ structure is preferred in a firm. A) functional and mechanistic B) simple and organic C) functional and organic D) simple and M-form

functional and mechanistic

Which of the following is a characteristic of a mechanistic organization? A) low formalization B) flat hierarchy C) decentralization D) high degree of specialization

high degree of specialization

The risk of employee opportunism, on behalf of agents, is exacerbated by the concept of A) competitive advantage B) stakeholder analysis C) information asymmetry D) corporate governance

information asymmetry

Alfred Chandler, famed business historian, suggests that a firms organizational structure should follow its business and corporate level strategy because organizational structure A) is just as dynamic as a firm's strategy B) is not as important as strategy C) is static and remains intact throughout time D) has little or no effect on strategic implementation

is just as dynamic as a firm's strategy

Donald owns shares of Meat and Bone Steakhouse, a food and beverages company. The company's financial situation takes a turn for the worse and ends up in severe debt. Despite owning shares of Meat and Bone Steakhouse, Donald is not responsible for bringing more money into the company to get it out of its debt. Which characteristic of public stock companies does this scenario best exemplify? A) transferability of investor ownership B) legal personality C) separation of legal ownership and management control D) limited liability for investors

limited liability for investors

Which of the following is instrumental in creating a tightly coupled system of strategy and structure in an organization? A) dynamic organizational strategy and structure B) limited input and output controls C) financial metrics that focus on long-term performance D) managers that achieve a mastery of the firm's current environment

managers that achieve a mastery of the firm's current environment

Since W. L. Gore's core competency is innovation, a(n) ________ would most likely be detrimental to its efforts. A) mechanistic structure B) organic structure C) differentiation strategy D) integration strategy

mechanistic structure

Robert works for Duke & Duke Industries, a large corporation. His work requires him to travel extensively and, as a result, he spends much time working remotely. Taking advantage of the situation, Robert often works on personal projects instead of company projects. Duke & Duke Industries has difficulty checking on Robert's work because he has no supervision in many of the places where he travels. This scenario exemplifies a(n) A) moral hazard B) inverse selection C) poison pill D) outside director

moral hazard

Over time, 3M has relied on the results-only-work-environment (ROWE) framework and has morphed into a highly science-driven innovation company. At 3M, employees are encouraged to spend 15 percent of their time on projects of their own choosing. If any of these projects look promising, 3M provides financing through an internal venture-capital fund and other resources to further develop their commercial potential. This real-world scenario best illustrates A) organizational culture B) input controls C) output controls D) organizational strategy

output controls

In ________, the stockholders are the legal owners of the company who delegate decision-making authority to professional managers. A) family-owned firms B) proprietorships C) nonprofit companies D) public stock companies

public stock companies

Which three key levers below are needed for an organization to effectively design its reporting relationships and broader organizational structure? A) structure, culture, and control B) structure, strategy, and strategic alliances C) cost-leadership, differentiation, and blue ocean D) mechanistic, organic, and ambidextrous organizations

structure, culture, and control

Which of the following factors has led to a shift toward open innovation? A) the decreasing supply and mobility of skilled workers B) the decreasing availability of external options to commercialize ideas C) the exponential growth of venture capital D) the increasing capability of internal suppliers

the exponential growth of venture capital

Which of the following is a problem that corporate governance seeks to address? A) limited liability for investors B) shared-value creation C) the principal-agent problem D) the Ecomagination problem

the principal-agent problem

One of the major differences between inside directors and outside directors of a company is that outside directors are more likely to A) be full-time professionals at the company B) provide the board with information regarding the company's performance C) watch out for the interests of the shareholders of the company D) align interests with the management and CEO of the company

watch out for the interests of the shareholders of the company

Michael Porter is in favor of the shared value creation framework because he believes that it A) will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society B) is the responsibility of the company to focus on creating profits and nothing else C) is the duty of a company to focus on benefitting shareholders who have the most legitimate claim on profits D) will help to pit economic and societal needs in a trade-off

will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society