final exam
Which of the following accurately describes what the integration-responsiveness framework does?
By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage.
Which of the following is not true of corporate governance in public stock companies?
Corporate governance seeks to create a separation between ownership and control
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.
Which of the following statements is true of a multidomestic strategy?
Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.
Why is the optimal organizational structure a multidivisional structure?
Its focus is on driving down costs.
According to Michael Porter, which of the following is a problem with many publicly traded companies?
Many publicly traded companies have defined value creation too narrowly in terms of financial performance.
How has China been affected by its one-child-per-family policy and appreciation of its currency?
The country's advantage in low-cost manufacturing has reduced
Which of the following statements best supports the view that GE's ecomagination strategy is in line with the shared value creation framework?
The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.
Which of the following is an advantage of equity alliances when compared to non-equity alliances?
They produce stronger ties between partners.
Which of the following is true of the process of organizing for competitive advantage?
To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.
Which of the following types of groups is most susceptible to groupthink?
a cohesive group
Which of the following is the best definition of a complementary asset?
an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization
ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in?
local-responsiveness
A trend observed during the Globalization 3.0 stage involves
multinational companies organizing as global-collaboration networks
Ethics is
not synonymous with law.
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
Which of the following characteristics of a public stock company deals with principals and agents?
separation of legal ownership and management control
According to the perspective of shareholder capitalism,
shareholders in public stock companies have the most legitimate claim on profits.
Which of the following is not a reason why firms enter alliances?
to replace competitive advantage with competitive parity
As a result of globalization, the
world's market economies are becoming more integrated.
Which of the following shows founder imprinting?
A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades.
Why must managers use a mechanistic structure to implement a cost-leadership strategy?
A mechanistic structure offers a centralized structure with well-defined lines of authority.
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. .
Which of the following best defines duality in a board of directors?
A person holds both the role of CEO and chairperson of the board.
Why did W. L. Gore reorganize itself into a functional structure from a simple structure?
A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.
Which of the following will most likely harm a MNE's reputation?
A sweatshop owned by a MNE has an explosion that kills hundreds of workers.
Which of the following is true of acquisitions?
Acquisitions can be friendly or hostile.
_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.
Adverse selection
Which of the following is true of W. L. Gore & Associates, which has a lattice organizational form?
All employees are empowered to speak to all other employees in the organization.
Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM?
Apple's core competency with consumer services and IBM's core competency with business services complemented each other.
Which of the following countries has a high geographic distance but a low cultural distance from the United States?
Australia
Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?
Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.
Which of the following is an observable feature in the Globalization 3.0 stage?
Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.
Which of the following provides an example of a common drawback of a functional strategy?
Bert had a difficult time communicating efficiently with the manager of another department.
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.
Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework?
Doing so could yield significant business opportunities that could improve the standard of living of the poor.
Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company?
Each country unit owned by the company will tend to be highly autonomous.
Which of the following accurately describes GE's ecomagination initiative?
Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services
Which of the following is an implication for the strategist in the context of corporate governance and a company's success?
Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage
Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank?
Frank is an outside director on Lofloy's board of directors
Which of the following examples describes the task of an alliance manager?
Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.
Which of the following facts proves that GE's board is fairly diverse compared to other Fortune 500 companies?
GE's board is composed of 28 percent women, compared to less than 16 percent for the others.
Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy?
He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.
Janis is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?
How would the media report her decision to accept the opportunity if it were to become public?
Although demand for IKEA's low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened?
IKEA's global supply chain has become bottlenecked.
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.
What best describes transferability of investor ownership in a public stock company?
Investors are allowed to trade shares of stocks.
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.
Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?
It allows a high level of integration.
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.
How does taking a real-options perspective by entering strategic alliances help incumbent firms?
It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.
Why does Zappos offer its new recruits $2,000 to quit at the end of the first week of their job?
It believes that individuals who choose to stay on will fit in with the Zappos culture.
Which of the following is a disadvantage of a functional strategy?
It cannot effectively address a higher level of diversification.
How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?
It enabled HP to compete head on with Cisco's videoconferencing solution.
Which of the following statements is true of an international strategy?
It enables firms to leverage their home-based core competencies in foreign markets
In which of the following ways does Zappos achieve organizational control?
It enforces that each group member's compensation depends in part on the group's overall productivity.
Which of the following is a benefit of the transnational strategy?
It facilitates global learning and harnesses economies of location.
How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?
It has access to convenience stores and a new distribution channel.
Which of the following is a disadvantage of a horizontal integration corporate strategy?
It increases the potential for legal repercussions
Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business?
It increases the value of the focal firm's offering from a customer's perspective.
Which of the following statements best describes groupthink?
It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.
Which of the following statements is true of organizational culture?
It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.
Which of the following is one of the features of an international strategy?
It is characterized by limited local responsiveness.
Which of the following statements is not true of tacit knowledge?
It is regularly shared between partners in a non-equity alliance.
Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?
It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation.
What most likely happens when a firm optimizes its organizational structure to its current situation?
It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.
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.
Which of the following is true of a functional structure?
It relies on a relatively flat organizational structure.
Which of the following is a drawback of pursuing a transnational strategy?
It requires a global matrix structure, which is difficult to implement.
Which of the following is a feature of a multinational company pursuing a global-standardization strategy?
Its business-level strategy tends to be cost-leadership.
What was one of the reasons for Jerry Yang's failure at Yahoo?
Jerry's preference for obtaining consensus among his managers led to bickering and infighting.
Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company?
Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well. The continuation of Hoptin Inc. despite Jessi Hoptin's death best exemplifies legal personality. Legal personality allows a firm's continuation beyond the founder or the founder's family.
Which of the following corresponds to the use of tacit knowledge?
John assembles the motorcycle from memory.
Which of the following is a characteristic of a public stock company?
Legal personality allows a firm's continuation beyond the founder or the founder's family.
Which of the following real-world scenarios best exemplifies formalization?
McDonald's use of standard operating procedures across the world
Which of the following is a feature of the Globalization 2.0 stage?
Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.
If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy?
No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues
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.
Which of the following is an advantage that a private company enjoys over a public company?
Private companies are not required to disclose financial statements.
Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry?
Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs
Which of the following scenarios best illustrates horizontal integration?
Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.
Which of the following describes a firm in the Globalization 1.0 stage?
Robinson Inc. has a base office in New York and distributes some of its products overseas.
Jamiro 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 Jamiro are responsible to the company only for the capital they have invested.
Which of the following statements best supports the separation of ownership and control in publicly traded companies?
Shareholders own stocks but do not run the company.
GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE?
The CEO possesses invaluable inside information that can help chair the board effectively.
A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?
The bank knows that the customer will be unable to pay the loan if the interest rate rises.
Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy?
The firm reaps significant economies of scale and location economies.
What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?
The firm's culture can turn from a core competency into a core rigidity.
How does W. L. Gore exemplify founder imprinting?
The four core values articulated by Bill Gore guide the company and its associates to this day
What does the relational view of competitive advantage propose?
The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.
Which of the following is most likely an accurate statement?
The multinational enterprise PanDigital benefited from advances in communications technology.
Which of the following is a common result of a hostile takeover of a company?
The new owner sells the company in pieces.
What helps notions such as fairness, honesty, and reciprocity to be codified into law?
The notions are universal norms.
Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm, Telbok Inc.?
The owner of another company buys all the outstanding shares of Telbok.
Which of the following is a drawback of pursuing a multidomestic strategy?
The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.
Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?
Their culture reflects complex relationships with their employees, customers, and suppliers.
Which of the following is a result of horizontal integration in terms of Porter's five forces model?
There is a reduction of excess capacity in the market
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.
Why are controls like budgets and operating procedures that McDonald's implements known as input controls?
They are considered before employees make any decisions.
What are poison pills?
They are defensive provisions that kick in should a buyer reach a certain level of share ownership.
Which of the following is an advantage of non-equity alliances?
They are flexible and easy to initiate and terminate
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 is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy?
They are highly affected by exchange rate fluctuations.
Which of the following statements is true of strategic alliances?
They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.
Which of the following is not true about the members of the board of directors in a public stock company?
They are not responsible to shareholders.
Which of the following did management at Zappos do to reduce the level of formalization in their organization?
They avoided asking their customer service reps in call centers to follow a detailed script.
Which of the following is a disadvantage of equity alliances?
They can entail significant investment
Which of the following is an advantage of joint ventures?
They create strong ties, trust, and commitment between the partners.
Which of the following is true of the codes of conduct of an organization?
They detail how the organization expects an employee to behave and to represent the company in business dealings.
Which of the following statements is true of joint ventures?
They enable the exchange of both tacit and explicit knowledge.
Which of the following is a drawback of joint ventures?
They necessitate the sharing of rewards between the partners.
TopDrawer Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about TopDrawer's board of directors?
TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.
How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)?
Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.
W. L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in the U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate?
W. L. Gore is using a multidivisional structure.
Which of the following statements is true with regard to international trade between countries?
Wealthy countries engage in relatively more cross-border trade than poorer ones.
Which of the following best illustrates a non-equity alliance?
a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc
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 or not to trade with a target country?
a firm that extracts and exports iron ore
Which of the following accurately describes an organic organization?
a flexible organization that fosters fast decision making and high employee motivation
To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets?
a global-standardization strategy
Which of the following is an example of explicit knowledge?
a research summary
Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost?
a transnational strategy
Raj is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Raj based on his stated credentials without verifying them. Two days into the job, Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview. This scenario best exemplifies
adverse selection
At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of
adverse selection.
Broadview Company integrated certain important functions of Widget.com with Widget, while keeping other functions independent. To support this integration, the president of Widget shifted compensation incentives for both senior teams to accomplish joint goals rather than to focus solely on each business unit's performance. This scenario best exemplifies a(n)
ambidextrous organization.
The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?
an acquisition
A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it
attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.
Why did the American MTV network cable channel fail when pursuing a global-standardization strategy?
because cultural distance most affects products with high linguistic content
Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?
because of the large economic distance between U.S. and India
Why do shareholders of public companies need to appoint a board of directors to represent their interests?
because of the separation of ownership and control
Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?
benefits from lower labor costs in manufacturing and services
The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs.
blue ocean
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because
building downstream complementary assets can be expensive and time-consuming.
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?
by lowering competitive intensity in the industry overall
How does horizontal integration within an industry affect the surviving firms?
by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior
can be stopped by implementing performance incentives and strict control mechanisms.
Maurice sent in a complaint about a rude salesperson he dealt with at FirstElectronics Inc. He didn't get a response for about three months. Also, when the response finally came, it was just a formal, cursory letter. Based on this scenario, FirstElectronics most likely has an extremely _____ organizational structure.
centralized
According to the agency theory,
conflicts that arise in corporations should be addressed in the legal realm.
When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to
consider an outright acquisition
GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies
core rigidity.
Because of poor management, the stock prices of DigiKing Inc. falls and many investors sell their shares. Soon DigiKing becomes the target of a hostile takeover, during which Charles buys enough shares to exert control over the firm. In this scenario, Charles performs the role of a(n)
corporate raider.
One of the ways to foster ethical behavior in employees is to
create a control system that encourages desired values.
When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance.
cultural
Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter's diamond framework does this scenario best exemplify?
demand conditions
Monica's Cosmetics Inc. has a functional structure that is flexible enough to allow it to leverage its brand name across different products. By doing this, Monica's is reaping ____ from its core competencies.
economies of scope
A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n)
equity alliance.
StickOn Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies
exploitation
A firm following a multidomestic strategy
faces a greater risk of intellectual property (IP) appropriation.
According to Alfred Chandler in his book Strategy and Structure, implementing a successful strategy depends on having an organizational structure that is _____ enough to accommodate the formulated strategy and future growth and expansion.
flexible
Which of the following is an ineffective practice in alliance management?
focusing on developing an alliance-management capability in isolation
For which of the following products is an international strategy most suitable?
for luxury goods that can be shipped across the globe
McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of
formalization
A typical college of business (or school of management) has several areas such as management, marketing, finance, accounting, MIS, and so on. This is an example of a(n) _____ structure.
functional
A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure.
global matrix
Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the
globalization hypothesis.
Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.?
greenfield operation
A functional structure is recommended when a firm
has a low level of diversification.
In a strategic alliance, the firm that learns faster
has the incentive to reduce its knowledge sharing.
What element of organizational structure deals with positioned-based reporting lines?
hierarchy
Which of the following is a feature of an organic organization?
high span of control
Olympia Autos Inc. merged with its competitor Vaca Autos Inc. This allowed Olympia Autos to use its technological competencies along with Vaca Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate?
horizontal integration
Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?
Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone
Vijay is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Vijay most likely to agree?
Businesses can use their resources to create profit as long as they do so within the rules of the game.
To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate?
how an organization accommodates strategy implementation through a flexible organizational structure
A greater cultural distance between two trading countries
increases the liability of foreignness.
The board of directors of a public stock company consists of
individuals who formally represent the firm's shareholders and oversee the work of executives.
Adverse selection in a public stock company occurs when
information asymmetry increases the likelihood of selecting inferior alternatives.
Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc. The manager received some inside information about how to trade MegaRed stock to get a huge profit. He shared this information with his Jennifer. This scenario is an example of
information asymmetry.
Dmitri is a senior manager for the firm Kopney Inc. Because of his experience, he has been appointed to the board of HKS Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Dmitri is a(n) _____ for Kopney and a(n) _____ for HKS.
inside director; outside director
The informational advantage that agents possess over principals is often based on the fact that
insiders are the first to learn about important developments before the information is released to the public.
Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas.
intellectual property exposure
Which of the following is true of business ethics?
Certain notions such as fairness, honesty, and reciprocity are universal norms.
Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by
introducing results-only-work-environments to tap intrinsic motivations.
Fakhir is a board member at Garfield Motors Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Blixt Electronics. According to this scenario, Fakhir
is an inside director of Garfield Motors.
Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena
is likely to provide the board with valuable inside information.
McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's
is mechanistic in nature.
Organizational culture can be the basis of a firm's competitive advantage if
it is valuable, rare, and difficult to imitate.
EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate?
joint venture
Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies a
joint venture.
Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm?
joint ventures
Which of the following statements is true of explicit knowledge?
Explicit knowledge is shared in non-equity alliance firms.
Which of the following is an advantage offered by a functional structure?
It allows for a higher degree of specialization and deeper domain expertise.
Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization?
Its job descriptions are very descriptive.
Which of the following best exemplifies the use of input controls?
McDonald's use of standard operating procedures
Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance?
Segar, where people speak English and have a low standard of living
What does "limited liability for investors" imply in a public stock company?
Shareholders who provide the risk capital are liable only to the capital specifically invested.
Which of the following proves that GE's board of directors is significantly independent?
Sixteen of the 17 board directors are from outside the organization.
Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?
Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.
Why does strategy implementation often require changes within an organization?
Strategy implementation transforms strategy into actions and business models.
Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?
They reduce a firm's exposure to loss of reputation.
Which of the following is true of the board of directors in a public stock company?
Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario?
legal but not ethical
Kaito is the CEO of Henson and Fukui Consulting Inc. Kaito's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting. What does this scenario best exemplify?
leveraged buyout
Ridemore 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, Ridemore Autos Inc. is reaping the benefits of
location economies.
Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of
location economies.
In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for
making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.
Which of the following best illustrates an equity alliance?
a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.
A firm pursuing a transnational strategy would believe that
best practices, ideas, and innovations should be diffused throughout the world.
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.
The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the
informational advantage of the lower-level employees.
United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country
is a world leader in the pharmaceutical industry
Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?
legal personality
Adidas acquired Reebok primarily to
overcome its competitive disadvantage against Nike.
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
In which of the following situations is pursuing an international strategy advisable?
when a firm enjoys a large domestic market, strong reputation, and brand name
When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement?
when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge
Dream Slope Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleek Phantom Inc. This company produced bobsleds, but its sales had slowed. The managers of Dream Slope convinced themselves that they were able to manage the business of Sleek Phantom more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleek Phantom's bobsleds plummeted. Which of the following terms is often used to describe this scenario?
managerial hubris
For a multinational enterprise (MNE), applying the globalization hypothesis would mean
manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.
An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure.
matrix
Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup?
mechanistic
Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of
moral hazard.
DigiGames Inc. established itself as the foremost producer of computer games. However, as the market for these games moved from laptop computers to cell phones based on cloud applications, DigiGames failed to adapt its games enough to this new environment. As result, the firm soon lost its competitive advantage. Which of the following best describes this scenario?
movement from core competency to core rigidity
Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use?
multidivisional
When a firm diversifies into different product lines and geographies, a _____ structure is preferred.
multidivisional
Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n)
multidomestic strategy.
Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a
multinational enterprise.
Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n)
non-equity alliance
Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and
obeys the VRIO principles
India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because
of an abundance of well-educated, English-speaking young people.
Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of
on-the-job consumption.
An organization is characterized as having a flexible division of labor, distributed decision making, and generalized knowledge of how to accomplish strategic goals valued. This organization is most likely _____ in nature.
organic
Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos.
organizational culture
The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to
preempt its competitors from buying Waze.
GLD Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named George. The stockholders expect George to make decisions that will benefit the company. However, George begins to find ways to maximize his total compensation, which at times hinders GLD's performance. This scenario reflects
principal-agent problems.
MainLine Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, its methods of obtaining gas have at times broken down, thereby causing environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that
public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.
Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that
pursue a differentiation strategy at the business level.
Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a
real-options perspective.
SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to
reduce its cultural distance from the other countries.
Which of the following is an unintended side effect of a high degree of specialization in an organization?
reduced employee satisfaction due to repetition of tasks
Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect?
serial acquisitions
Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?
significant differences between its U.S. personnel policies and Germany's culture
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.
Larry's Auto Repair is a small business in which the founder, Larry, makes most of the important strategic decisions as well as runs the day-to-day operations. He has three mechanics and a financial secretary working for him. Based on this scenario, Larry's Auto Repair has a(n) _____ structure.
simple
Nick just graduated from law school and wants to start his own law firm. It is best for Nick to use a _____ organizational structure.
simple
A high degree of formalization in an organization is most likely to
slow down decision making.
Cynthia works as a front-line employee for a nationwide retail store. She 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?
tall structure
The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because
the U.S. population was growing slowly and becoming more health conscious.
A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?
the VRIO framework
Which of the following is a major issue at the forefront of CEO compensation in recent years?
the absolute size of the CEO pay package compared with the pay of the average employee
The downside of equity alliances is
the amount of investment that can be involved.
In a non-equity alliance, which of the following types of information would firms most likely share?
the documented information about the material composition of a product
Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to
the entrepreneurial spirit in Tesla.
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?
the expectation that the agent will act in the principal's best interest
The conflict in a principal-agent relationship arises when
the goals of the principals and agents are not aligned with each other.
It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because
the horizontal integration activity has the potential to reduce competitive intensity in an industry.
Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that
the largest but poorest socioeconomic group can yield significant business opportunities.
Which of the following statements best describes local responsiveness?
the need to tailor product and service offerings to fit native consumer preferences and host-country requirements
Organizational design is
the process of creating, implementing, and modifying the structure of an organization.
In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates
the real-options perspective
Which of the following is the source of the principal-agent problem in publicly traded companies?
the separation of ownership and control
John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies
the strong relationship between executive compensation and company performance.
The administrative and political distance between two trading countries reduces when
there is a well-functioning capital market in the host country.
In a public stock company, senior executives, such as the CEO, face agency problems when
they delegate authority of strategic business units to general managers.
Outside directors are more likely to watch out for the interests of shareholders of their firm because
they have more independence than inside directors.
Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because
they offer the same products or services in all their stores throughout the world.
Poison pills have become rare because
they retard an effective function of equity markets.
A company that is using extrinsic motivation as an output control mechanism will most likely
threaten to lay off employees if they do not achieve targets
Zappos established its unique organizational culture
through explicitly stated values that are connected to its reward system.
Which of the following best explains why a board of directors may grant stock options as part of a compensation package?
to align incentives between shareholders and management
In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)?
to learn how to implement its lean manufacturing program with an American workforce
Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?
to make small-scale investments in ventures poised to disrupt existing market economics
European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy?
to take advantage of lower taxes in the southern United States
The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)
transnational strategy
In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of
using co-opetition.
Which of the following statements about an organization's culture is not true?
A strong monitoring and supervision mechanism is needed to enforce the culture
