STRAT 5700 CH 8

A board of directors typically consists of

10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm

In 1970, institutions owned ________ percent of the equity traded in the United States and by 2002 they owned ________ percent of the equity traded in the United States.

32;62

In 2005, what percentage of the equity traded in the United States was owned by institutional investors?

59%

A board of directors typically consist of A. 10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm. B. 10 to 15 individuals drawn exclusively from a firm's top management group. C. 10 to 15 individuals drawn exclusively from individuals outside the firm. D. 10 to 15 individuals drawn from all stakeholder groups associated with the firm.

A. 10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm.

In 1970 institutions owned ______ percent of the equity traded in the United States and by 2002 they owned _______ percent of the equity traded in the United States. A. 32; 62 B. 62; 32 C. 48; 62 D. 32; 48

A. 32; 62

____________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them. A. Division general managers B. Corporate staff managers C. Senior executives D. Shared activity managers

A. Division general managers

The _________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements. A. audit committee B. finance committee C. nominating committee D. personnel and compensation committee

A. audit committee

The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive. A. corporate staff B. board of directors C. division general managers D. shared activity managers

A. corporate staff

In the __________ organizational structure, each company in a country in which a firm operates is organized as a full profit-and-loss division headed by a divisional general manager who is typically the president of the company in that particular country. A. decentralized federation B. coordinated federation C. centralized hub D. transnational structure

A. decentralized federation

Most accounting measures of divisional performance have a common limitation in that they A. have a short-term bias. B. are costly to implement. C. are difficult to interpret. D. have a long-term bias.

A. have short-term bias

When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division, general managers have a strong incentive ________. A. less than; to use the services of shared activities B. greater than; to use the services of shared activities C. less than; to use the services of an outside supplier D. equal to; to use the services of an outside supplier

A. less than; to use the services of shared activities

Two common agency problems include A. managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion. B. managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion. C. managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking. D. managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.

A. managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion.

The divisions of an M-form organization are true A. profit-and-loss centers. B. functional units. C. matrix teams. D. organic structures.

A. profit-and-loss centers

Grace McKenna is best described as a(n) __________ in SpandoCorp. A. senior executive B. corporate staff member C. division general manager D. institutional investor

A. senior executive

The two responsibilities of the senior executive in an M-form organization are A. strategy formulation and strategy implementation. B. strategy formulation and strategic control. C. strategic control and strategy implementation. D. strategy implementation and differentiation.

A. strategy formulation and strategy implementation.

If SpandoCorp used a ________ budgeting process it would assume that no project would received funding for the future simply because it was funded in the past and required each project to stand on its own merits each year to be included in a list of important projects that the firm can afford to fund. A. zero-based B. cost plus C. dynamic D. traditional

A. zero-based

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers is potentially the most problematic in ________ staff functions.

Accounting

The ________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements

Audit committee

If a division of a multi-divisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of A. $25 million. B. $5 million. C. $15 million. D. $20 million.

B. $5 mil.

Which of the following statements regarding CEO compensation is accurate? A. Differences in CEO cash compensation are very responsive to differences in firm performance. B. If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance. C. If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are not closely linked with changes in firm performance. D. If a substantial percentage of a CEO's compensation comes in the form of salary, changes in compensation can be expected to be closely linked with changes in firm performance.

B. If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance.

In which country are all 20 of the largest 20 firms in the economy family dominated? A. the United Kingdom B. Mexico C. Argentina D. New Zealand

B. Mexico

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers is potentially the most problematic in _______ staff functions. A. marketing B. accounting C. logistics D. production

B. accounting

If the importance of local responsiveness is low, and the importance of global integration is high, a firm should use a ________ approach to managing its international strategy. A. transnational structure B. centralized hub C. coordinated federation D. decentralized federation

B. centralized hub

Rather than having profit-and-loss responsibilities, _______ are assigned a budget and manage their operations to that budget. A. profit centers B. cost centers C. operation centers D. functional centers

B. cost centers

In a multidivisional structure, each business that the firm engages in is managed through a A. product line. B. division. C. geographic unit. D. function.

B. division

If the bulk materials division of SpandoCorp sold its reams of Spandex to the military division and set the transfer price of these reams equal to the bulk materials actual cost of production, SpandoCorp would be using the _______ transfer pricing scheme. A. exchange autonomy B. mandated full cost C. mandated market based D. dual pricing

B. mandated full cost

Wells Tucker's position in SpandoCorp is best described as A. a division general manager. B. a member of the corporate staff. C. the senior executive. D. a member of the board of directors.

B. member of the corporate staff

In an agency relationship, the party that delegates decision-making authority to another individual is known as the A. stakeholder. B. principal. C. agent. D. stockholder.

B. principal

If Todd Hienz was the Chief Operating Officer for SpandoCorp, his responsibilities would include A. supervision of the board of directors in its monitoring role. B. strategy implementation. C. strategy formulation. D. strategy control.

B. strategy implementation

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?

Board of directors

In the United States, approximately what percent of the firms in the Standard & Poor's 500 have their founding families still involved in day-to-day management? A. 50% B. 66% C. 33% D. 25%

C. 33%

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders? A. Senior executives B. Corporate staff C. Board of directors D. Division general managers

C. Board of directors

Which role in the Office of the President is responsible for strategy implementation? A. Chairman of the board B. Chief executive officer C. Chief operating officer D. Chief strategist

C. COO

______ is an economic measure of divisional performance. A. Return on assets B. Return on a division's sales C. Economic value added D. A division's growth rate

C. Economic value added

Which of the following statements regarding family owned firms is accurate? A. The agency problems that exist in professionally managed firms are more pronounced in family-dominated firms. B. Family owned firms have a lower sense of loyalty among their employees than professionally managed firms. C. Family-dominated firms can make strategic decisions faster than large bureaucratic firms. D. Family owned firms tend to respond to short-term fluctuations rather than focusing on long-term growth.

C. Family-dominated firms can make strategic decisions faster than large bureaucratic firms.

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a true profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests if equity holders. 81. Which organizational structure is SpandoCorp using? A. U-form B. Matrix C. M-form D. Functional

C. M-form

Under which transfer pricing scheme is the transfer price set equal to the selling division's actual cost of production, or set equal to the cost of production if the selling division were operating at maximum efficiency? A. Exchange autonomy B. Mandated full cost C. Mandated market based D. Dual pricing

C. Mandated market based

In an M-form organization the management of day-to-day operations is delegated to A. divisional general managers and to corporate staff managers. B. corporate staff managers and to functional managers who report to corporate staff managers. C. divisional general managers and to functional managers who report to division general managers. D. the board of directors and corporate staff managers who report to the board of directors.

C. divisional general managers and to functional managers who report to division general managers.

If SpandoCorp wanted to measure the performance of its divisions with a method that would minimize any potential short-term bias, they should use a(n) A. hurdle rate based measure of divisional performance. B. divisional budget based measure of performance. C. economic value added measures of divisional performance. D. measure of performance based on the average level of profitability of firms in a division's industry.

C. economic value added measures of divisional performance

The most common organizational structure for implementing a corporate diversification strategy is the __________ structure. A. matrix B. u-form C. m-form D. functional

C. m-form

In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests A. that combining these roles is always positively related with firm performance. B. that separating these roles is always positively related with firm performance. C. that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments. D. that separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.

C. that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.

In ________ budgeting, corporate executives create a list of all capital allocation requests from divisions in a firm, rank them from "most important" to "least important" and then fund all the projects a firm can afford, given the amount of capital that is available and no project receives funding simply because it was funded in the past. A. cost-plus B. activity-based C. zero-based D. revenue-based

C. zero-based

Which role in the office of the president is responsible for strategy implementation?

Chief operation officer

The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive.

Corporate staff

Rather than having profit-and-loss responsibilities, ________ are assigned a budget and manage their operations to that budget

Cost Centers

Which of the following statements regarding institutional investors is accurate? A. Institutional investors tend to be more interested in maximizing the short-term value of their portfolios than in the long-term performance of firms in those portfolios. B. High levels of institutional ownership are negatively related to the level of R&D in a firm. C. High levels of institutional ownership have a strong, positive relationship with the level of R&D in a firm. D. High levels of institutional ownership lead firms to sell strategically unrelated businesses.

D. High levels of institutional ownership lead firms to sell strategically unrelated businesses.

Which of the following statements regarding outside members of boards of directors is accurate? A. Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance. B. Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. C. Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. D. Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.

D. Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.

Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division? A. The process is time-consuming. B. The process is fraught with political intrigue. C. This approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm. D. The use of such a single standard ignores important differences in performance that might exist across divisions.

D. The use of such a single standard ignores important differences in performance that might exist across divisions.

When adjusting a division's accounting earnings for use in the economic value added calculations, R&D spending is usually A. subtracted from the division's performance. B. depreciated over the life of the average R&D projected and subtracted from the division's performance. C. amortized over the life of the average R&D projected and added back to the division's performance. D. added back into the division's performance.

D. added back into the division's performance

In the ___________ organizational structure each country operation is organized as a full profit-and-loss center but strategic operational decisions are delegated to division general managers but broader strategic decisions are made at corporate headquarters. A. transnational structure B. centralized hub C. decentralized federation D. coordinated federation

D. coordinated federation

A(n) __________ occurs when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent unit. A. harvest B. liquidation C. initial public offering D. corporate spin-off

D. corporate spin-off

The _________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets. A. nominating committee B. audit committee C. personnel and compensation committee D. finance committee

D. finance committee

Kelly Rae's position is SpandoCorp is best described as a(n) A. institutional investor. B. senior executive. C. division general manager. D. member of the board of directors.

D. member of the BOD

When compared to the strategy implementation responsibilities of senior executives in U-form organizations, when implementing strategy division general managers in M-form organizations A. tend to have to deal with less conflict. B. have to compete for external capital funding. C. tend to have to deal with substantially more conflict. D. must cooperate with other divisions to exploit corporate economies of scope.

D. must cooperate with other divisions to exploit corporate economies of scope.

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with A. the interests of all of its stakeholders. B. an exclusively short-term perspective. C. an exclusively long-term perspective. D. the interests of its equity holders.

D. the interests of its equity holders

In a multidivisional company, one division "sells" its products or services to a second division for a(n) ________ which is set by a firm's corporate management to accomplish corporate objectives. A. allocation price B. transfer cost C. market price D. transfer price

D. transfer price

If SpandoCorp's Board of Directors wanted to ensure that changes in the CEO's compensation would be closely linked to changes in the firm's performance they should A. use a compensation package that includes only a salary for the CEO. B. use a compensation package that includes a salary and a cash bonus for the CEO. C. use a compensation package the includes a salary, a cash bonus and stock options that represent only a relatively small percentage of for the CEO's total compensation package. D. use a compensation package that includes a salary and stock options that represent only a relatively substantial percentage of for the CEO's total compensation package.

D. use a compensation package that includes a salary and stock options that represent only a relatively substantial percentage of for the CEO's total compensation package.

In a multidivisional structure, each business that the firm engages in is managed through a

Division

________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them.

Division general managers

) It is unusual for a diversified firm to change its transfer-pricing mechanisms every few years in an attempt to find the "right" transfer-pricing mechanism

False

A board of directors typically consists of 15 to 30 indiciduals drawn from a firm's top management group

False

All firms that use the multidivisional structure use the same criteria for defining the boundaries of profit-and-loss centers.

False

An important study on executive compensation found that differences in CEO cash compensation is not very responsive to differences in firm performance even if a substantial percentage of the CEO's compensation came in the form of stock and stock options in the firm

False

Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive

False

Economic measures of divisional performance in a diversified firm compare a division's performance with a firm's cost of capital and these measures increase the potential for gaming, which is generally minimized by accounting measures.

False

If a well-managed diversified firm uses both accounting and economic measures, it will be able to unambiguously evaluate divisional performance.

False

In 1970, institutions owned 62 percent of the equity traded in the United States; by 1990, institutions owned 48 percent of this equity and by 2002, they owned only 32 percent of this equity.

False

In a diversified firm, market prices are set by a firm's corporate management to accomplish corporate objectives while transfer prices are determined by the market forces of supply and demand

False

In an M-form organization the role of the board of directors is to formulate corporate strategies consistent with equity holders' interests and to assure strategy implementation.

False

In an M-form organization, the chief executive officer is solely responsible for strategy implementation.

False

In an agency relationship the party delegating the decision-making authority is cllaed the agent

False

In principle, only the CEO and the president report to the board of directors while other senior managers report only to the CEO.

False

Only accounting measures of performance can be used in accurately measuring the performance of divisions within a diversified firm.

False

Research on outside members of boards of directors tends to show that outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance

False

The most common organization structure for implementing a corporate diversification strategy is the U-form

False

The title chairman of the board often, but not always, identifies the firm's senior executive.

False

To the extent that a firm exploits real economies of scope in implementing a diversification strategy, it will be able to unambiguously evaluate the performance of individual division in that firm.

False

The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.

Finance committee

Which of the following statements regarding institutional investors is accurate?

High levels of institutional ownership lead firms to sell strategically unrelated businesses

The most common organizational structure for implementing a corporate diversification strategy is the ________ structure

M-form

When compared to the strategy implementation responsibilities of senior executives in U-form organizations, when implementing strategy, division general managers in M-form organizations

Must cooperate with other divisions to exploit corporate econies of scope.

Which of the following statements regarding outside members of boards of directors is accurate?

Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.

In an agency relationship, the party that delegates decision-making authority to another individual is known as the

Principal

The divisions of an M-form organization are true

Profit-and-loss centers

The two responsibilities of the senior executive in an M-form organization are

Strategy formulation and strategy implementation.

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

The Interests of its equity holders

Supervision of the board of directors in its monitoring role is the responsibility of

The chairman of the board

Another Name for the M-form is the multidivisional structure.

True

By adjusting for a division's earning and accounting for the cost of investing in a division, economic value added is a much more accurate estimate of a division's economic performance than are traditional accounting measures of performance.

True

Corporate spin-offs are different from asset divestitures.

True

Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

True

Economic methods of divisional performance in a diversified firm build on accounting methods but adjust those methods to incorporate short-term investments that may generate long-term benefits.

True

In choosing which transfer pricing system to use, a firm should be less concerned about finding the "right" transfer-pricing mechanism and be more concerned about choosing a transfer-pricing policy that creates the fewest management problems

True

In the multidivisional structure, each business that the firm engages in is managed through a division

True

In zero-based budgeting, each project has to stand on its own merits each year by being included among the important projects that a firm can afford to fund and no project receives funding for the future simply because it received funding in the past.

True

Institutional owners are usually pension funds, mutual funds, insurance companies, or other groups of investors that have joined together to manage their investments

True

Intermediate products or services are those products or services that are produced in one division of a diversified firm that are used as inputs by another division.

True

One common agency problem occurs when managers decide to take some of a firm's capital and invest it in managerial perquisites that do not add economic value to the firm but that do directly benefit those managers.

True

One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions

True

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with the interests of its equity holders.

True

The divisions in an M-form organization are true profit-and-loss centers

True

The most popular economically oriented measure of division performance in a diversified firm is economic value added

True

The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation

True

To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities

True

Traditionally, the compensation of corporate managers in a diversified firm has been only loosely connected to the firm's economic performance.

True

Transfer prices should equal opportunity cost.

True

Whenever one party to an exchange delegates decision-making authority to a second party, an agency relationship has been created between these parties.

True

____________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them. a.Division general managers b.Corporate staff managers c.Senior executives d.Shared activity managers

a.Division general managers

In the __________ organizational structure, each company in a country in which a firm operates is organized as a full profit-and-loss division headed by a divisional general manager who is typically the president of the company in that particular country. a.decentralized federation b.coordinated federation c.centralized hub d.transnational structure

a.decentralized federation

Most accounting measures of divisional performance have a common limitation in that they a.have a short-term bias. b.are costly to implement. c.are difficult to interpret. d.have a long-term bias.

a.have a short-term bias.

When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division, general managers have a strong incentive ________. a.less than; to use the services of shared activities b.greater than; to use the services of shared activities c.less than; to use the services of an outside supplier d.equal to; to use the services of an outside supplier

a.less than; to use the services of shared activities

If a division of a multi-divisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of a.$25 million. b.$5 million. c.$15 million. d.$20 million.

b.$5 million.

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers is potentially the most problematic in _______ staff functions. a.Marketing b.Accounting c.Logistics d.Production

b.Accounting

Which of the following statements regarding CEO compensation is accurate? a.Differences in CEO cash compensation are very responsive to differences in firm performance. b.If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance. c.If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are not closely linked with changes in firm performance. d.If a substantial percentage of a CEO's compensation comes in the form of salary, changes in compensation can be expected to be closely linked with changes in firm performance.

b.If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance.

If the importance of local responsiveness is low, and the importance of global integration is high, a firm should use a ________ approach to managing its international strategy. a.transnational structure b.centralized hub c.coordinated federation d.decentralized federation

b.centralized hub

Rather than having profit-and-loss responsibilities, _______ are assigned a budget and manage their operations to that budget. a.profit centers b.cost centers c.operation centers d.functional centers

b.cost centers

______ is an economic measure of divisional performance. a.Return on assets b.Return on a division's sales c.Economic value added d.A division's growth rate

c.Economic value added

A business unit within a diversified firm may be sold to the public through a(n) a.corporate spin-off. b.liquidation. c.IPO. d.harvest strategy.

c.IPO.

Under which transfer pricing scheme is the transfer price set equal to the selling division's actual cost of production, or set equal to the cost of production if the selling division were operating at maximum efficiency? a.Exchange autonomy b.Mandated full cost c.Mandated market based d.Dual pricing

c.Mandated market based

In an M-form organization the management of day-to-day operations is delegated to a.divisional general managers and to corporate staff managers. b.corporate staff managers and to functional managers who report to corporate staff managers. c.divisional general managers and to functional managers who report to division general managers. d.the board of directors and corporate staff managers who report to the board of directors.

c.divisional general managers and to functional managers who report to division general managers.

In ________ budgeting, corporate executives create a list of all capital allocation requests from divisions in a firm, rank them from "most important" to "least important" and then fund all the projects a firm can afford, given the amount of capital that is available and no project receives funding simply because it was funded in the past. a.cost-plus b.activity-based c.zero-based d.revenue-based

c.zero-based

Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division? a.The process is time-consuming. b.The process is fraught with political intrigue. c.This approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm. d.The use of such a single standard ignores important differences in performance that might exist across divisions.

d.The use of such a single standard ignores important differences in performance that might exist across divisions.

When adjusting a division's accounting earnings for use in the economic value added calculations, R&D spending is usually a.subtracted from the division's performance. b.depreciated over the life of the average R&D projected and subtracted from the division's performance. c.amortized over the life of the average R&D projected and added back to the division's performance. d.added back into the division's performance.

d.added back into the division's performance.

In the ___________ organizational structure each country operation is organized as a full profit-and-loss center but strategic operational decisions are delegated to division general managers but broader strategic decisions are made at corporate headquarters. a.transnational structure b.centralized hub c.decentralized federation d.coordinated federation

d.coordinated federation

A(n) __________ occurs when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent unit. a.harvest b.liquidation c.initial public offering d.corporate spin-off

d.corporate spin-off

When compared to the strategy implementation responsibilities of senior executives in U-form organizations, when implementing strategy division general managers in M-form organizations a.tend to have to deal with less conflict. b.have to compete for external capital funding. c.tend to have to deal with substantially more conflict. d.must cooperate with other divisions to exploit corporate economies of scope.

d.must cooperate with other divisions to exploit corporate economies of scope.

In a multidivisional company, one division "sells" its products or services to a second division for a(n) ________ which is set by a firm's corporate management to accomplish corporate objectives. a.allocation price b.transfer cost c.market price d.transfer price

d.transfer price

In an M-form organization, the management of day-to-day operations is delegated to

divisional general managers and functional managers who report to division general managers

Two Common agency problems include

managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion

The senior executive (the president or CEO) in an M-form organization has two responsibilities:

strategy formulation and strategy implementation

In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests

that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments