Strategic Management Final

Michael runs an ice-cream business in Fayetteville. He recently heard that firms can increase their profit by engaging in competition reducing strategies, such as collusion. He asks his friend, Jason, and employee of Fayetteville Business Consultancy, how he can engage in this strategy. His friend suggests that: Answers: Firms can never engage in competition-reducing strategy because collusion is illegal. Firms can sometimes engage in such a strategy. However, the Fayetteville ice-cream market needs to be highly consolidated. Firms can engage in explicit collusion as it is perfectly legal in the U.S. Firms can sometimes engage in such a strategy. However, all ice-cream sellers of Fayetteville should seek local government's approval. Firms can sometimes engage in such a strategy. However, the Fayeteville ice-cream market should be monopolistic competition.

Firms can sometimes engage in such a strategy. However, the Fayetteville ice-cream market needs to be highly consolidated.

Licensing agreements, distribution agreements, and supply contracts are examples of: Equity strategic alliances Joint venture agreements Non-equity strategic alliance None of the above

Non-equity strategic alliances

Statement I: Cost minimization and opportunity maximization are the two primary approaches firms use to manage cooperative strategies. Statement II: One of the goals of opportunity maximization strategy is to reduce opportunistic behavior by a partner.

Only Statement 1 is correct

Statement I: Shareholders prefer riskier strategies than management. Statement II: Shareholders prefer higher diversification than management.

Only Statement 1 is correct

Statement I: Corporate-level strategy is concerned with the issue: in what product markets and businesses the firm should compete. Statement II: Corporate-level strategy is considered successful if "the businesses in the portfolio are worth less under the management of the company than they would be under any other ownership."

Only Statement 1 is true

5. All of the below issues are considered within demographic segment of general environment, except: a. Population size b. Age structure c. Ethnic mix d. Income distribution e. Inflation

e. Inflation

5. In the Value Chain Analysis, which of the following firm activities is a support functions? a. Distribution b. Operations c. Supply Chain management d. Marketing and Sales e. Information Systems

e. Information Systems

A firm's organizational stakeholders include: a. Customers, employees, creditors. b. Employees, shareholders, board members. c. Suppliers, unions, governments. d. Media, communities, alliance partners. e. None of the above.

e. None of the above.

3. Which of the dimensions of customer relationship is concerned with facilitating useful interactions with customers? a. Reach b. Richness c. Affiliation d. Care e. Duty

Affiliation

Mr. Smith, a resident of Fayetteville, is about to start manufacturing "Booze" t-shirts. He decides that his product will be sold at $20.99 per unit. Mr. Smith will rely on his friend Joe, who owns a local shop in town, to sell his product, at 15% commission. Mr. Smith is most likely to be using ___________________ business model: Answers: Freemium Wholesale Pay as you go Agency Subscription

Agency

United Technologies operates throughout the world, and is organized into three business units: Aircraft supplies, Food packaging, and Pharmaceutical unit. Within each business unit, there are divisions organized by key geographic areas: North America, Europe, Asia, Middle East, and Australia. These businesses are not related to each other, and the firm CEO makes no effort to share activities or to transfer competencies among them. Executives of each division report directly to CEO of United Technologies. This is an example of: Answers: Dominant-business diversification Conglomerate business Monopoly Related constrained business Single business diversification

Conglomerate business

All of the below are considered beneficial outcomes of diversification, except: Economies of scope Market power Efficient internal capital allocation Vertical integration Diversifying managerial employment risk

Diversifying managerial employment risk

2. Zone's office and house cleaning service offers high-quality service from Cleaning University, cleaners who can provide highly customized cleaning of your house, exceptionally fast service and award-winning service members that can respond to your multiple house cleaning needs. They focus on the high quality of their offerings with a slightly higher price and carry a wide range of cleaning services. They are, however, present in only a few states in the country and target affluent population with income level above 100K. Their business-level strategy could best be described as: a. Focused Cost Leadership b. Cost Leadership c. Focused Differentiation d. Integrated cost leadership/differentiation strategy e. Differentiation

Focused Differentiation

Related diversification strategy with high operational relatedness among a firm businesses may create value. However, activity sharing is also risky because: Answers: Management may not be competent to run all these businesses unrelated to each other. If demand for one business's products falls, it may not generate sufficient revenues to cover the fixed costs required to operate the shared facilities. Coordination challenges do not have to be managed effectively for the appropriate sharing of activities. Firm may have problem seeking external creditors ready to finance this business. CEO may have hard time finding talent with operational capabilities to run related businesses.

If demand for one business's products falls, it may not generate sufficient revenues to cover the fixed costs required to operate the shared facilities.

You have been asked to assess whether the composition of the Board of Directors for a major internet based company follows the principles of good corporate governance. You are discussing this issue with a Senior executive of the company who is making the case for a large number of inside directors for the company. She advances several reasons which are listed below. Choose the one that is the best for making her case. Answers: Inside Directors are more unbiased. Inside Directors better understand the contextual information of the company. Inside Directors on the Board will ensure that the challenges of moral hazard are minimized. Inside Directors on the board will ensure that there are no agency costs. Inside Directors are more likely to bring additional resources for the firm.

Inside Directors better understand the contextual information of the company.

Two-tiered board structure Is widely practiced governance mechanism in the United States Is widely practiced governance mechanism in Germany Is widely practiced governance mechanism in Japan Is widely practiced governance mechanism in China

Is widely practiced governance mechanism in Germany

Key difference among joint ventures, equity strategic alliances, and non-equity strategic alliances is: Ownership arrangement Size of the organization Leadership characteristics Level of complexity

Ownership arrangement

Rodney Entertainment Media Inc. has five separate but related businesses: media networks, parks and resorts, studio entertainment, consumer products, and interactive media. Within the firm's studio entertainment business, for example, Rodney Entertainment Media Inc. can gain economies by sharing activities among its different movie distribution companies, such as Breakstone Pictures, Bollywood Pictures, and 7Eleven Films. Broad and deep knowledge about its customers is a capability on which Rodney Entertainment media Inc. relies to develop corporate-level core competencies in terms of advertising and marketing. Thus, Rodney Entertainment Media Inc. simultaneously seeks operational and corporate relatedness to create: Answers: Vertical integration Economies of scope Financial economies Market power Business strategy

Selected Answer: Economies of scope

Pinoccio Fresh grows organic potatoes, carrots, and other vegetables and sells their products wholesale to Trader Joe's, a subsidiary of ALDI, Inc. Recently, the management team at Pinoccio Fresh has decided to open their own chain of retail outlets in which to sell their produce. This is an example of: Answers: Backward vertical integration Taper integration Forward vertical integration Strategic outsourcing Horizontal integration

Selected Answer: Forward vertical integration

Which of the below does not represent an agency relationship: Answers: Top managers hire subsidiary managers Board compensating CEO Insured contracting with an insurer Government regulating an industry Shareholders electing board members

Selected Answer: Government regulating an industry

All of the below represent internal governance mechanisms except: Answers: Ownership concentration Board of directors Executive compensation Market for corporate control

Selected Answer: Market for corporate control

Rodney Inc., a grocery retailer, moved into grocery delivery business, Razorback Co.'s stronghold; in turn, Razorback Co. bought a store to move into grocery retail business, Rodney Inc.'s stronghold. The above example demonstrates: Answers: Vertical integration Market power Synergy Multipoint competition Organizational slack

Selected Answer: Multipoint competition

In 2020, TESLA Motors (TESLA) and XIOMI jointly formed TEXIOMI Manufacturing, Inc. (TEX), a manufacturing facility in Beijing, China. Through this partnership, TESLA motive was to learn the corporate lobbying techniques pioneered by XIOMI in China and XIOMI wanted to learn how to build electric cars with an American technology. This transaction can be generally described as a(n) Answers: franchise acquisition. joint venture. equity alliance. non-equity alliance

Selected Answer: joint venture.

All of the below represent agency costs, except: Answers: incentive costs monitoring costs enforcement costs financial losses by shareholders purchasing costs

Selected Answer: purchasing costs

Which of the following strategic management concepts is not considered to be among the components of business models? Answers: Asset turnover Strategic positioning Customer value concept/proposition Revenue streams All of the above mentioned concepts are a part of business models

Strategic positioning

In 2022, it was speculated that Jay Barney Inc. received a takeover bid from Waseda Technics Co, a Japan-based information technology firm, but the takeover attempt was not successful. At only $8 billion market capitalization, Jay Barney Inc. became an attractive takeover target as the company's market capitalization had fallen sharply amidst the scandals. Waseda Technics Co 's takeover attempt shows that _________________ is an important corporate governance mechanism that can discipline poor performing and mismanaged firms. Executive compensation The board of directors The market for corporate control Corporate divestiture Corporate downsizing

The market for corporate control

It is important for a strategic manager to understand the key stakeholders of a firm and how they will be affected by strategic actions. Which of the following statements about stakeholders is False? a. In strategic decisions, all stakeholders are affected differently (for instance all positive or all negative) by a given decision. b. When a strategic decision maker formulates strategy, she may sometimes have to choose an option that is not the most economically productive for the firm because of stakeholder pressures. c. While there are many types of stakeholders, shareholders are ALWAYS the most important stakeholders for a strategic decision. d. The employees of a firm should also be considered as important stakeholders. e. Host community should be considered as stakeholders because they are affected by your actions such as the wage rates you pay your workers.

While there are many types of stakeholders, shareholders are ALWAYS the most important stakeholders for a strategic decision.

Mr. Almond established a firm to manufacture almond milk. His friend, Mr. Butler, owns a small grocery store in town. Mr. Almond and Mr. Butler agree that Mr. Almond will sell his product to Mr. Butler at a fixed price per unit. However, Mr. Butler is free to set his own price and profit any difference that arises. This business model of Mr. Almond can be termed as a ______________________ business model.

Whole

7. In an organization, if all employees perform similar tasks in an interchangeable manner, then the organization can be said to be: a. Low on specialization. b. High on specialization. c. Low on formalization d. High on formalization

a. Low on specialization.

5. Statement I: To position itself a firm must decide whether it intends to perform activities differently than rivals or to perform different activates. Statement II: Integrated cost leadership/differentiation is superior to other strategies. a. Only Statement 1 is true b. Only Statement 2 is true c. Both statements are true d. Neither of the two statements is true

a. Only Statement 1 is true

13. While working a night job at a museum, Panos creates an app called WineFast, which can be used to place orders at wineries, rate the wines from those plantations, and make reservations for fast shipping of those freshly made products. Because he receives good responses for his app, he quits his current job to focus his efforts on WineFast. He creates a start-up called TTLP and hires three people to help him improve WineFast and maintain the servers that run it. In this scenario, TTLP most likely has a _____ structure. a. Simple b. Entrepreneurial c. Mechanistic d. Principal e. Opportunistic

a. Simple

Statement I: I/O model assumes that external environment imposes pressures and constraints that determine strategies that would result in above-average returns. Statement II: Research findings generally do not offer support for I/O model predictions. Please, choose the best answer. a. Statement I is TRUE. b. Statement II is TRUE. c. Both Statement I and II are TRUE. d. Neither Statement I nor II is TRUE.

a. Statement I is TRUE

3. Which of the following best describes the key components of organizational design? a. Structure, culture, and control b. Structure, inertia, and control c. Inertia, culture, and control d. Specialization, formalization, and differentiation e. Specialization, formalization, and inertia

a. Structure, culture, and control

Which of the following statements is NOT true? a. The bargaining power of Suppliers is likely to be very low when the Supplier's products are highly differentiated. b. Intensity of competition is likely to be high when the growth rate of the industry is zero or negative. c. The bargaining power of Buyers is always very low in a monopolistic industry d. The barriers to entry in an industry are high when there are switching costs associated with the products currently offered in that industry. e. When the products of two companies complement each other, these firms are complementors.

a. The bargaining power of Suppliers is likely to be very low when the Supplier's products are highly differentiated.

10. Which of the following did management at Zappos do to reduce the level of formalization in their organization? a. They avoided asking their customer service reps in call centers to follow a detailed script. b. They reduced their reliance on permanent pay system and introduced the "beach" reward system. c. They established bottom up management as their primary strategy and abandoned title of CEO. d. They put an end to the practice that enabled employees to horizontally rotate to different jobs once they had mastered a particular job. e. They abandoned holacracy as a management style and decentralized top management hierarchy

a. They avoided asking their customer service reps in call centers to follow a detailed script.

Apple's "iSTREAM" went live this week, casting a shadow over the future of original online content streamers — and of two relatively young companies called Netflix and Hulu. Buoyed by strong iPhone and iPad sales as well as 100 billion investment in Hollywood movie studios, Apple iSTREAM allows users to have instant access to thousands of original TV shows as well as movies with their iPhones and iPads online. The company says the new service will make online streaming affordable and highly customized based on consumer's online behavior on their iPhones and iPads. This poses a bit of a challenge for Netflix and Hulu, which also aim to make online streaming more customized and valuable experience—but by consolidating user preferences of past shows. "I'd be very surprised if those guys didn't feel like a tornado just entered their world," said Pinoccio Altzman, chief product officer at WeShow, an online TV programming-design company in Silicon Valley." According to the excerpt above, Netflix and Hulu forgo their temporary competitive advantage, because: a. Apply has successfully imitated these companies' capabilities in online streaming via direct imitation b. Apply has successfully imitated these companies' capabilities in online streaming via substitution c. Firms resources in the consumer online streaming industry are extremely mobile d. Netflix and Hulu's capabilities in online streaming are no longer valuable e. None of the above

b. Apply has successfully imitated these companies' capabilities in online streaming via substitution

6. "For 110 years Hollywood studios made their money producing full length movies and screening them through movie theatres. Now they must be in the business of producing TV shows with lengthy seasons for online streaming services, such as Netflix and Hulu. They no longer can survive with sole reliance on full length single episode movies screened through traditional movie theatres—they're now calling themselves online "entertainment" creators, just in case all those predictions about the end of traditional movie theatre viewership come true. At stake is an entertainment streaming service market that Hollywood analysts believes is worth $10.2 trillion, a sum that makes you wonder why it took the movie studios so long to go after it." According to the excerpt above, which of the following capabilities of Hollywood studio firms has recently gained significant importance in their pursuit of sustainable competitive advantage in their core business? a. Traditional script writing skills b. Capability to produce lengthy shows with multiple seasons c. Autonomous movie screening technologies d. Capability to negotiate with movie theatres e. Shared-TV show production capability

b. Capability to produce lengthy shows with multiple seasons

An industry, where existing players can easily shut down and leave the industry is said to have low exit barriers. When there are low exit barriers the ___________ is likely to be ______________. a. Threat of substitutes, low. b. Competitive intensity, low. c. Competitive intensity, high. d. Threat of substitutes, high. e. Number of complements, high.

b. Competitive intensity, low.

9. Zappos' holacracy business model is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has a. Dynamic design b. Decentralized structure c. Organizational inertia d. Top-down management style e. Post holacracy management

b. Decentralized structure

1. Which of the following statements about an industry and its analysis is False? a. An industry is the set of firms that make very similar products. b. Industry boundaries are always very rigid and well defined. c. The Five Forces Model is a tool that is used to analyze an industry. d. A consolidated industry tends to be more profitable than a fragmented one. e. Strategic groups are helpful in explaining performance differences within a given industry.

b. Industry boundaries are always very rigid and well defined.

Michael is trying to consult, Jason, who is consultant at Rodney Razorback on how to earn above average returns. Jason favors the I/O model over the Resource-Based Model. Based on the above, the most likely advice Michael is going to get from Jason is. a. Michael should focus on unique resources and capabilities his firm has to earn above-average returns. b. Michael should study external environment to identify an attractive industry and implement appropriate strategy. c. Michael should not focus on I/O model since it does help explain why firms earn above-average returns.

b. Michael should study external environment to identify an attractive industry and implement appropriate strategy

4. Consider the two statements listed below and then choose the best alternative after that: Statement 1: Firms can both control the general environment's segments and predict each trend's effect on them. Statement 2: The greater a firm's capacity to favorably influence its industry environment, the greater the likelihood it will earn above-average returns. Please choose the best answer. a. Only Statement 1 is true b. Only Statement 2 is true c. Both statements are true d. Neither of the two statements is true

b. Only Statement 2 is true

2. Panos works as a front-line sales employee for FlowerGift, which is a nationwide ornamental flower retailer. He reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store? a. Flat structure b. Tall structure c. Integrated structure d. Decentralized structure e. Simple structure

b. Tall structure

1. Blackberry, a company that was deemed as the Apple of 2000s, failed to capitalize on its superior mobile phone manufacturing and design capability, as evidenced by the company's continued reliance on the touch keyboard smartphone business in both domestic and international markets throughout 2000s. Meanwhile, Samsung emphasized investment into touch screen phone technology, which proved to be the right strategy in successfully positioning the firm for the 21st century. A strategist applying the core competence framework to the Blackberry case will realize that Blackberry failed to generate returns from its mobile phone manufacturing expertise, primarily because the capability did not meet which of following criteria?

b. Valuable

1. Target has three core values and beliefs: respect for the individual, service to customers, and striving for excellence. These core values define what it means for employees to be working at Target, but it also define the _____ of Target. a. Organizational structure b. Organizational hierarchy c. Organizational culture d. Organizational strategy e. Organizational controls

c. Organizational culture

6. As firms grow and become more complex, the predictable pattern of evolution of organizational structure is: a. Functional structure to simple structure to multi-divisional structure b. Multi-divisional structure to matrix structure to functional structure c. Simple structure to functional structure to multi-divisional structure d. Simple structure to matrix structure to multi-divisional structure e. Matrix structure to functional structure to multi-divisional structure

c. Simple structure to functional structure to multi-divisional structure

2. Considering Porter's 5 Forces, which of the following would decrease the power of suppliers for firms in a particular industry? a. New technologies have enabled suppliers to differentiate their products from their competitors. b. New legislation requires incumbent firms to sign long-term contracts in order to source from any given supplier. c. The proportion of suppliers' annual revenue that comes from incumbent firms in the industry increases dramatically. d. Many suppliers have exited as the industry has matured. e. New technologies have enabled suppliers to integrate forward, and compete directly with incumbent firms.

c. The proportion of suppliers' annual revenue that comes from incumbent firms in the industry increases dramatically.

11. Super Demo Inc., a construction and land development firm, is headed by Jay Patagonis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Super Demo Inc. can be said to have a(n) a. organic organizational structure b. decentralized organizational structure c. tall hierarchical structure d. flat hierarchical structure e. orchestrated structure

c. tall hierarchical structure

8. Mechanistic structures are ideal for: a. Differentiation b. Diversification c. New product development d. Cost leadership e. M form organizations

d. Cost leadership

6. Rodney Razorback has decided he will focus on cost leadership strategy in manufacturing and selling T-shirts in Fayetteville. He decided that he will use the material with the lowest cost, utilize the least labor to manufacture its T-shirts. Finally, he thinks he can sell T-shirts online to save overhead costs and reach a broad market. While cost leadership strategy may help Rodney Razorback to operate with profit margins greater than those of competitors, all of the below are the risks associated with his chosen strategy except: a. His competitors may innovate their production and sales than even with alternative strategies they may achieve competitive advantage b. Customers may crave for unique high quality T-shirts that Rodney Razorback's product may not generate demand. c. Competition could successfully imitate Rodney's business strategy. d. He could end up producing highly unique product with no demand in Fayetteville. e. The cost leadership strategy is risk free.

d. He could end up producing highly unique product with no demand in Fayetteville.

1. In the auto industry, Mercedes Benz is an upscale auto manufacturer that focuses on superior customer experience. The firm charges premium prices for its products and services. Kia Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is BMW Inc., which offers a customer experience comparable to that of Mercedes Benz at a price almost as low as that of Kia Motors. What strategy is BMW Inc. trying to pursue in this scenario? a. Low-cost strategy b. Product differentiation strategy c. Market penetration strategy d. Integrated cost leadership/differentiation strategy e. Red ocean strategy

d. Integrated cost leadership/differentiation strategy

14. Which of the following is a disadvantage of a functional strategy? a. It frequently lacks the tools required to pursue a cost-leadership strategy b. It does not facilitate rich communication between members of the same department c. It cannot effectively address a higher level of diversification d. It does not allow organizations to be flexible or innovative e. It does not allow high specialization of a functional teams

d. It does not allow organizations to be flexible or innovative

12. Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization? a. It frequently ranks among the most boring 500 companies to work for b. Its communication lines are bottom-up and well-defined c. Its decision power is spread across the organization d. Its job descriptions are very descriptive e. Its management hierarchy is rigid and overconfident

d. Its job descriptions are very descriptive

4. Rodney Pet Inc. produces and sells food products for pets in Fayetteville. The company's mission is "to help enrich and lengthen the special relationship between people and their pets." Thus, Rodney Pet produces three types of pet food: A grade, B grade, and C grade. Although the company uses vegetables of the same quality for all pet food, the best meat in Fayetteville is used to produce A grade pet food. For B grade, the company uses expired leftover meat from local supplier of meat to local restaurants. Finally, it uses bones from meat to produce C grade pet food. Rodney Pet Inc. believes that there is a demand for all three types of pet food in Fayetteville. Based on the above, Rodney Pet Inc. is engaged in a. Price discrimination b. Cost discrimination c. Price segmentation d. Market segmentation e. Business level strategy

d. Market segmentation

3. Consider the two statements listed below and then choose the best alternative after that: Statement 1: Firms are classified into strategic groups based on their level of profitability. Statement 2: On average, the profitability of different strategic groups is identical. a. Only Statement 1 is true b. Only Statement 2 is true c. Both statements are true d. Neither of the two statements is true

d. Neither of the two statements is true

7. For a firm to achieve competitive advantage, capability must meet all of the below characteristics except:

d. Organized to capture value

6. All of the below are considered barriers to entry, except: a. Capital Requirements b. Economies of Scale c. Cost Disadvantages Independent of Scale d. Slow Industry Growth e. Government Policy

d. Slow Industry Growth

8. At the time TJ MAX and Ross had started challenging traditional retailers industry. Macy's, JC Penny, and Sears tried to counter the threat it posed by imitating the direct business processes of these stores. They widened their brand inventory, improved their online websites, and even offered customers an option to order online and pick up in stores instantly. While they made headway with their new strategy, they were bleeding money on their stores which all became loss leaders - some of them reported average threefold traffic drop. The capability of Macy's, JC Penny, and Sears to offer high variety of top brands through stores that did not help these companies to successfully imitate TJ MAX and Ross could be attributed to: a. Causal ambiguity b. Unique historical conditions c. Organizational culture d. Social complexity e. Outsourcing these activities to third parties

d. Social complexity

7. BIGSON Industries is a maker of manufacturing equipment used by makers of aircraft, such as Boeing, Airbus, and Lockheed Martin. Their research department has determined that by using some improvements in microchips, they can increase the durability of their equipment significantly. This could be considered a differentiation strategy as long as _______________________. a. BIGSON Industries can make the product at a very large scale b. BIGSON Industries can keep the cost of the product lower than that of its competition c. The Bargaining power of their buyers is low d. The Customers are willing to pay a higher price for the improvement e. BIGSON Industries is ready to sell it to other buyers beyond Boeing, Airbus, and Lockheed Martin.

d. The Customers are willing to pay a higher price for the improvement

4. Organizational ambidexterity refers to a a. Firm's ability to focus on exploitation, applying current knowledge to enhance firm performance. b. Firm's ability to address risky projects through generating absorptive capacity. c. Firm's ability to modify their strategy from cost leadership to differentiation d. Firm's ability to focus on exploration, searching new knowledge to gain competitive advantage e. Firm's ability to address the trade-off between exploration and exploitation

e. Firm's ability to address the trade-off between exploration and exploitation.

5. All of the following are building blocks of organizational structure except: a. Specialization b. Hierarchy c. Centralization d. Formalization e. Horizontal Diversification

e. Horizontal Diversification

CEO duality refers to

the situation where the CEO is also chairperson of the board of directors.