Business Policy Final

Which of the following accurately describes a common difference between a merger and an acquisition?

A merger tends to be friendly; an acquisition can be friendly or unfriendly.

The typical four-step innovation process begins with

the presentation of an idea as findings derived from basic research

Organizational design is

the process of creating, implementing, and modifying the structure of an organization.

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

A drawback of short-term contracting as an alternative to making a component in-house is that

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality

What is an invention?

the transformation of an idea into a new product or process

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

Which of the following is an example of an internal transaction cost?

the cost of maintaining a production unit

Which of the following customer segments as described in the chasm framework make up the mass market?

the early and late majority together

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?

"It will be much more difficult to protect our intellectual property if we build factories overseas."

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation?

A sweatshop owned by an MNE has an explosion that kills hundreds of workers

How has Apple been able to sustain its competitive advantage in the smartphone industry?

by regularly introducing incremental improvements in its products

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

Australia

Arnold is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Arnold most likely to agree?

Businesses can use their resources to create profit as long as they do so within the rules of the game.

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration

Which of the following perspectives best supports the shared value creation framework?

Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Galaxy Toys Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Galaxy Toys for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

Galaxy Toys Inc. has a flat organizational structure.

Which of the following best illustrates a merger between the two companies HQ Inc. and AV Inc.?

HQ Inc. and AV Inc. join together to form a single new company called HQAV Inc.

Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger?

If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Influence costs

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy?

It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Which of the following is an advantage offered by a functional structure?

It allows for a higher degree of specialization and deeper domain expertise.

Why does a functional structure rely on a flat organizational structure?

It allows for efficient bottom-up and top-down communication.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

It reduces the trust of shareholders in the organization as a vehicle for value creation

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma?

It will lower its costs through economies of scale.

Which of the following real-world scenarios best exemplifies formalization?

McDonald's use of standard operating procedures across the world

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?

Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations

________ describes the collectively shared values and norms of an organization's members.

Organizational culture

Which of the following statements is true of strategy in an organization?

Organizational structure must follow strategy in order for firms to achieve superior performance.

What is the main reason that most mergers and acquisitions negatively effect shareholder value?

Promised synergies never take place

Which of the following scenarios would be characteristic of an entrepreneur?

Rachel implemented a new and more efficient way to produce pottery.

Sven is a senior vice president at a textile manufacturer that wants to move from being 20 percent globalized to 70 percent globalized in the next 10 years. What are some possible drawbacks that Sven's company must anticipate?

Rising wages may cancel out cost savings of access to low-cost input factors.

Ignacio Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Shareholders of Ignacio are responsible to the company only to the capital they have invested.

________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.

Strategic alliances

Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?

The firm will have more flexibility in purchasing and comparing prices of goods and services.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

The first mover will be able to reduce costs through economies of scale.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

Which of the following is most likely an accurate statement?

The multinational enterprise Starship benefited from advances in communications technology

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?

The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power

How will an increase in coordinated economic and political integration between countries affect the world economy?

There will be gains in social welfare and living standards across the globe

Which of the following statements is true of shareholders in a public stock company?

They are granted a charter of incorporation by the state and legally own company stock.

Which of the following statements is true of joint ventures?

They enable the exchange of both tacit and explicit knowledge

According to Michael Porter, which of the following is a problem with many publicly traded companies?

They have defined value creation too narrowly in terms of financial performance.

Amber is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, she knows that trade and investment barriers are falling among wealthy nations. She also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Amber and her company take?

They should seriously consider globalization because of the falling trade and investment barriers

Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

W. L. Gore & Associates 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 decentralized structure

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country?

a firm that extracts and exports iron ore

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, 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 Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate?

a joint venture

The Palace Hotel Group purchased Orange Roof Hotels for an estimated value of $120 billion. All the hotels previously owned by Orange Roof Hotels are now managed by the Palace Hotel Group and are known as Palace hotels. What does this scenario best illustrate?

an acquisition

Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily

building new core competencies to protect and extend current market position

How did Canada, Mexico, and the United States reduce the administrative and political distance between them?

by establishing the North American Free Trade Agreement (NAFTA)

A(n) ________ leverages new technologies to attack existing markets.

disruptive innovation

As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n)

entrepreneur

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?

first-mover advantages

Which of the following features helps match a cost-leadership strategy to a functional structure?

focus on economies of scale

Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

franchising

The process of closer integration and exchange between different countries and peoples worldwide is

globalization

The leading producer of cell phone backup batteries, Jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Jumpstart. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Jumpstart has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the

growth stage

A functional structure is recommended when a firm

has a low level of diversification

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

higher quality for lower costs for international routes.

Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next?

increased competition from imitators

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n)

international strategy to a global-standardization strategy

Which of the following lists the stages of the industry life cycle in the correct order?

introduction, growth, shakeout, maturity, and decline

A new product often has a high price when it is launched because of a

large investment in designing a product while producing small quantities.

Decisions relating to the range of products and services a firm will offer determine the firm's

level of diversification

Downshift Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Downshift Autos Inc. is reaping the benefits of

location economies.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

lowering costs

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.

matrix

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

Esther is the CEO of a line of accessories and cosmetics, Starring Me! Inc., which has retail stores and production units in five countries. In this scenario, Starring Me! Inc. is most likely a

multinational enterprise

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

practicing effective corporate governance

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification

WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?

product diversification

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?

purchasing competitors

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

related-linked diversification.

InSeason Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, InSeason defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, InSeason developed a

resistance to change

Which of the following characteristics of a public stock company deals with principals and agents?

separation of legal ownership and management control

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are

similar to those that need to be developed and superior to those of competitors in the targeted area

Employees learn about an organization's culture through the process of

socialization

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that

some of the firm's proprietary know-how may be appropriated by the foreign partner

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

structure

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy?

to take advantage of lower taxes in the southern United States

Gary owns shares in a company called Archibald Industries Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Gary wants to proactively cut his losses and therefore sells his shares. Anneke, a trading enthusiast, buys shares in Archibald Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?

transferability of investor ownership

The most important yet least visible element of organizational culture is

values

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

vertically integrate.

When does a firm fall into the large competitive chasm between early adopters and early majority?

when it fails to successfully launch a mass-market version of its product

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity