MGT 301 CH. 8
In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should A) infuse more capital into the strategic business unit. B) provide more human resources to the business. C) hold the business till it turns into a star. D) divest the strategic business unit.
D
Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ________ tool . A) value chain analysis B) VRIO C) diversification premium D) Boston Consulting Group (BCG) matrix
D
Which of the following is an example of an internal transaction cost? A) the cost of searching for a contract manufacturer B) the cost of signing a contract with a supplier C) the cost of buying raw materials D) the cost of maintaining a production unit
D
Which of the following motivations for business growth involves principal-agent problems? A) increasing profits B) increasing market power C) reducing risk D) motivating managers
D
Sending jobs out of the country to lower costs is known as outsourcing.
false
The internal and external costs associated with an economic exchange are known as interaction costs.
false
One of the key lessons when differentiating between strategies is that "business level strategy" attempts to define how a firm will compete while "corporate level strategy" is defined by where they compete.
true
A primary advantage of organizing economic activity within firms is the A) ability to coordinate highly complex tasks to allow for specialized division of labor. B) low administrative costs because of reduced bureaucracy. C) eradication of the principal-agent problem. D) high-powered incentive to work as salaried employees for an existing firm.
A
Bob is the strategic business unit (SBU) CEO in charge of manufacturing cufflinks for men's clothing. While the market he competes in is low growth, Bob's SBU's earnings and cash flow are both ranked at high and stable. When examining Bob's SBU through the Boston Consulting Group (BCG) matrix lens, we can conclude that his SBU would be classified as a A) cash cow. B) dog. C) star. D) question mark.
A
Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies. A) backward vertical integration B) forward vertical integration C) backward horizontal integration D) forward horizontal integration
A
Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Golddex should pursue A) backward integration. B) forward integration. C) product diversification. D) geographic diversification.
A
________ is best described as a situation in which one party is more informed than another, because of the possession of private information. A) Information governance B) Information asymmetry C) Information deregulation D) Information piracy
B
Initech Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A) licensing B) franchising C) crowdsourcing D) bootlegging
A
Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation
A
John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his A) corporate level strategy. B) business level strategy. C) functional level strategy. D) geographic scope.
A
Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as A) taper integration. B) strategic off shoring. C) forward vertical integration. D) a balanced score card.
A
Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate? A) a joint venture B) a franchisee C) a licensing contract D) a corporate acquisition
A
Rebecca is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Rebecca should be hired as a salesperson in the company. However, in her resume, Rebecca had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate? A) information asymmetry B) principal-agent problem C) experience-curve effect D) learning-curve effect
A
Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results? A) Increase investment in the personal health monitoring unit to encourage future growth. B) Seek to lower costs in the personal health monitoring unit to increase market share. C) Harvest as much cash flow as possible before shutting the business down. D) Immediately divest from the personal health monitoring industry.
A
Which of the following best illustrates forward vertical integration? A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B) A chain of ice cream parlors launches a brand of toys and accessories for children. C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.
A
A drawback of short-term contracting as an alternative to making a component in-house is that A) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C) it fails to allow a long planning period that individual market transactions provide. D) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.
B
Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation
B
How is an equity alliance different from a joint venture? A) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm. C) An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. D) An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.
B
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A) diseconomies of scale B) principal-agent problem C) experience-curve effects D) information asymmetries
B
The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? A) start-up capital required and stage of industry life cycle B) relative market share and speed of market growth C) economic value created and costs incurred D) amount of debt financing and equity financing
B
The smartphone division of the large consumer electronics company, Streethex Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under A) question marks. B) stars. C) cash cows. D) dogs.
B
There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A) increasing profits B) lowering costs C) reducing risk D) motivating managers
B
Which of the following is an example of an external transaction cost? A) the cost of setting up a production unit B) the cost of searching for a contract manufacturer C) the cost of recruiting and retaining employees D) the cost of maintaining plant and machinery
B
Danke Inc. is a diversified firm that creates more value than the cost that it incurs. As a result, they are experiencing a diversification premium in their stock price. Danke Inc. is able to accomplish all of the following except A) provide economies of scale, which reduces Danke's costs. B) exploit economies of scope, which increases Danke's value. C) increase their costs but maintain their current stock price. D) reduce Danke's costs and increase value.
C
Inity 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? A) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.
C
Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens? A) hold B) invest for growth C) harvest and/or divest D) allocate more resources for manufacturing
C
Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under A) stars. B) question marks. C) dogs. D) cash cows.
C
Which of the following is a drawback of vertical integration? A) It increases the difficulty of securing critical supplies. B) It impedes scheduling and planning. C) It increases the potential of legal repercussions. D) It impedes investments in special assets.
C
Blackzim Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady but might be growing. According to the BCG growth matrix, Blackzim is a A) cash cow. B) star. C) dog. D) question mark.
D
Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.
false
Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.
false
Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").
false
A firm that decides to stop purchasing components from suppliers and start producing them in-house is pursuing backward vertical integration.
true
