470 MGMT Final

Which of the following is not one of the advantages of a geographic structure?

Promotion of innovation and product development due to intensive cross-functional integration

Which of the following is not a necessity for a successful acquisition?

Quick completion of the acquisition

Which of the following advantages does a functional organizational structure offer a company?

Reduction in manufacturing costs and increase in operational flexibility

A firm that is pursuing a globalization strategy will typically use a worldwide-area structure.

false

A joint venture occurs when two equal-sized firms agree to blend their operations, creating one larger firm.

false

Control through organizational culture is so powerful because:

it makes employees follow organizational values, after they've internalized them, without thinking about them.

The multidivisional organization structure offers all of these advantages except:

lesser competition for resources.

Essentially, centralization or decentralization are concepts that refer to the:

levels where decisions are made in the hierarchy of an organization.

In a successful company, the purpose of a control system is to:

need answer

Problems in effectively managing the multidivisional structure include:

transfer pricing.

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as:

transfer pricing.

Companies that pursue a _____ strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations.

transnational

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition.

true

Product bundling occurs when a firm offers a range of products that are sold together at a single price.

true

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is:

unpredictable.

Which of the following statements is true in the context of a worldwide area structure?

A worldwide area structure facilitates local responsiveness, which is why companies pursuing a localization strategy favor it.

Which of the following entry strategies should be used when speed is an important consideration?

Acquisition

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?

Acquisitions

The three main types of diversification strategies are:

Acquisitions, internal new ventures, and joint ventures.

Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?

Better realization of economies of scale

Which of the following is NOT an accurate statement about current levels of pay for CEOs of U.S.-based firms?

CEO compensation is closely tied to corporate performance in most firms.

Which of the following ideas is a localization strategy is based on?

Consumer tastes and preferences differ among national markets.

Which of the following is NOT a responsibility of the board of directors?

Develop targets for divisional managers

Implementation of a global matrix provides a company with which of the following advantages?

Emphasis on a transnational strategy

Alpha LLC. is large paint manufacturing company. Despite government regulations, the company has been illegally disposing its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario?

Environmental degradation

Which of the following actions would you expect to see in a company that is undergoing a reengineering?

Examining activities from a customer's point of view

An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities.

False

An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream.

False

An effective governance arrangement exists when the CEO is also the chairman of the board of directors.

False

Emphasizing on current profitability at the expense of future profitability and profit growth makes an enterprise more attractive to shareholders.

False

Inside directors are not full-time employees of the company.

False

Principals almost always have more information about the resources that agents are managing than the agents themselves.

False

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company.

False

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products. Tina's Technologies is utilizing horizontal integration.

False

Which of the following statements is true about the multidivisional structure?

It has divisions that are dependent on each other for day-to-day value chain operations.

Which of the following is a disadvantage of the multidivisional structure?

It makes it complex for corporate managers to strike a balance between centralization and decentralization.

Supernova Inc. wishes to enter a new market to expand its business. Realizing that the resources within the firm might not be sufficient to establish a new business unit, the company has entered into an agreement with Alba Inc.; both the companies will combine their resources and skills to establish and manage the new unit. Which of the following entry modes has Supernova Inc. adopted?

Joint venture

Nutrimax is a large foods maker firm with subsidiaries in many countries. As the tastes and preferences of customers vary largely, the company has decentralized control to the subsidiaries so that they can customize their products. For example, the company's subsidiary in Selenasia only manufactures dense bread baked with a mixture of grains to meet the needs of its customers. In this scenario, Nutrimax is most likely to be using which of the following strategies?

Localization

Which of the following is not a benefit of vertical integration?

Lowered cost structure

An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event of one of the suppliers adopting an uncooperative attitude. Which of the following concepts is illustrated in this scenario?

Parallel sourcing

Which of the following is not a general organizational competency?

Product bundling

Which entry mode gives a multinational the tightest control over foreign operations?

Setting up a wholly owned subsidiary

How can strategic outsourcing strengthen a company's business model and increase its profitability?

Strategic outsourcing is the decision to allow one or more of a company's value chain activities to be performed by independent,specialist companies that focus all their skills and knowledge on just one kind of activity to increase performance and can strengthen a company's business model and profitability in several ways. Some ways are enhancing differentiation of the company, reducing the cost structure within the company and lately it gives the company to focus on other activities that need attention within the company.

In order to reduce its production costs, Delta LLC. has moved its manufacturing units to an underdeveloped country where there are few labor laws. The employees at the manufacturing units are children and teenagers, and they receive minimal wages. Which of the following ethical issues is illustrated in this scenario?

Substandard working conditions

Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is evident from the scenario?

The company will buy or merge with one of its rivals.

Which of the following statements is true in the context of financial statements and auditors?

The information contained in the financial statements can enable a stockholder to calculate the ROIC of a company in which he or she invests.

Which of the following statements is true about corporate raiders?

They may purchase stock in a company to take over the business and run it more efficiently.

Miller Brewing was related to Philip Morris's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following?

Transferring competencies

A joint venture allows a company to share the risks and costs associated with establishing a new business unit with another company.

True

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not prescribed as an ethical business practice.

True

Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

True

Ambrosia Inc. is organized into Consumer, Medical, and Pharmaceutical units to serve the needs of its different customer groups. Ambrosia is using a market structure.

True

An agency relationship continues down a hierarchy within a company.

True

An important purpose of control systems is to motivate employees to work toward increasing efficiency, quality, innovation, and responsiveness to customers.

True

Companies that outsource most or all of their value creation activities are often referred to as virtual corporations.

True

Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool, share, and utilize resources or capabilities.

True

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

True

Managers use corporate-level strategy to identify which industries a company should compete in to maximize long-run profitability.

True

One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many dimensions of a host country.

True

One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance.

True

Strategic control systems are the primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management.

True

The coordination required to realize value from a diversification strategy based on transferring, sharing, or leveraging competencies is a major source of bureaucratic costs.

True

While many agency relationships work well, problems arise when agents and principals have different goals.

True

Product bundling refers to:

a complete package of related products.

Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create:

a new business unit in a different industry.

Flat organizational structures are characterized by:

a relatively wide span of control.

Companies that are innovative and able to deal with environmental change with new strategies and structures probably have:

adaptive cultures.

Long-term contracts:

are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.

A company pursuing a strategy of vertical integration may expand its operations:

backward into an industry that produces inputs for the company's products.

Credible commitments refer to:

believable promises that support the development of a long-term relationship between companies.

To ensure that basic ethical principles are adhered to in the organization, managers should:

check with prior employees regarding someone's reputation before hiring.

Cost reduction pressures can be particularly intense in industries producing:

commodity-type products.

In a multidivisional structure:

corporate headquarters is responsible for providing guidance for interdivisional projects.

When a company decides to expand into new industries, it must:

develop "multibusiness model" that justifies its entry into different businesses.

Acquisitions often fail because of:

differences in corporate culture.

To foster ethical behavior through organizational culture, businesses should:

draft a formal statement of the ethical priorities to which a business adheres.

When decision-making responsibilities are decentralized, benefits include all of the following except:

easier coordination of functions.

A _____ structure is a structure in which horizontal differentiation proceeds along two dimensions: product division and geographic area.

global matrix

Matrix structures:

group activities vertically by function and horizontally by product or project.

A typical matrix organizational structure:

groups employees in two ways simultaneously to maximize the rate at which different kinds of products can be developed.

Outsourcing occurs when a firm:

hires another firm to perform value creation activities.

General organizational competencies are found:

in the skills of a company's top managers and functional experts.

A strategy based on diversification may fail to add value because companies:

incur bureaucratic costs that exceed the value created by the strategy.

Vertical integration can be disadvantageous when:

industry technology is changing rapidly.

Libra Inc. is a large company that wants to enter into a new market. The company has entrusted a team of managers to pioneer and lead the planned business unit. The company has decided to give the unit a certain degree of autonomy so as to foster innovation and creativity. To enter into new markets Libra Inc. has mostly likely adopted a _____ strategy.

internal new venture

In a(n) _____ strategy, product development is centralized at home and other value creation functions are decentralized to national units.

international

In any organization, for-profit or not-for-profit, span of control refers to the:

number of subordinates who report directly to one manager.

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called:

on-the-job consumption.

At LittleHippo, an online retail company, the work environment is playful. Employees often get their pictures taken wearing silly wigs and masks. This atmosphere is part of the company's:

organizational culture.

The term used to describe how people learn an organization's culture and way of behaving in the organization is:

organizational socialization.

Companies that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities.

related

Organizations strive to control employees' behavior by linking ____ systems to their control systems.

reward

Reasons why a firm might benefit from the creation of a separate new-venture division include all of the following except:

risk free and stable business

A stock option is a right to buy:

shares of the company's stock at a predetermined price at some point in the future.

The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as:

standardization.

A drawback of the functional structure is:

the difficulty in communicating and coordinating across functions.

An internal new venture is the most appropriate strategic choice when:

the firm has competencies that can be leveraged.

Organizational structure can be defined as:

the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers.

Organizational culture is:

the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.