Management 428 Exam Study Guide

Which of the following descriptions best exemplifies adverse selection?

A manager cannot ascertain the contributions of individual team members in team production.

Which of the following examples would most likely limit a firm's growth?

A social entrepreneur makes conservation of the environment the primary goal of his firm.

Which of the following is one of the implications of information asymmetry between principals and agents?

Agents can pass on the information to select principals who can trade stocks based on this information.

What happens in the third phase of alliance management?

Alliance partners make relation-specific investments.

Why is strategy implementation referred to as the "graveyard of strategy"?

Managers often fail to implement a chosen strategy successfully despite extensive analysis of business environments.

Why do firms' strategies often follow their structures instead of the other way around?

Managers tend to consider strategies that do not change existing organizational structures.

MegaValu Inc. is a publicly traded company that specializes in manufacturing consumer electronics. Which of the following best exemplifies the implementation of a shared value creation framework at MegaValu Inc.?

MegaValu uses recycled materials to create its commercially successful products.

While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply?

While the market demand for tablets will be high, the demand for laptops will be limited.

Which of the following best illustrates backward vertical integration?

a chocolate manufacturing company setting up its own cocoa plantations

Which of the following is the best example of a platform business?

Uber ride-hailing services

Which of the following best illustrates a strategic alliance?

Velociraptor Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines

In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?

While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.

Dragon Autos Inc., an automobile company based in the country of Bear Island, made a capital investment of $300,000 to set up production units and distribution channels in the country of Westerland from where it plans to access the Westerland market. Such investments are best known as

foreign direct investments.

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n)

radical innovation

Which of the following best illustrates human-asset specificity?

training employees on how to operate a customized furnace

Apple's first-generation iPad was priced at over $800 when it launched in 2010. Three years later the same model was priced at under $300. This change is supported by all of the statements below except

Apple is using a harvest strategy for cash flow focus

Which of the following is a recommended guideline for the composition of a board of directors to implement corporate governance?

Close to two-thirds of the board of directors should consist of outside directors.

is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations

Entrepreneurship

HTC started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a line up of innovative and high-performance smartphones by acquiring One & Co., a San Francisco-based design firm. This strategic move of HTC is known as

Forward vertical integration

Which of the following real-world examples best exemplifies a shared value creation framework?

GE's Ecomagination strategy that focuses on providing cleaner and efficient sources of energy while generating billions in revenues

In a typical industry life cycle, an industry immediately moves to the _______ after the introduction stage.

Growth Stage

In terms of the key features of organic organizations, which of the following firms is most likely to have an organic structure?

Icebox, a software development firm, which focuses on building innovative products

_____ seek to define and direct employee behavior through a set of codified rules and standard procedures.

Input Controls

Which of the following is not a recommended strategic option for firms competing during the decline stage of an industry life cycle?

Invest in a large marketing campaign.

Which of the following exemplifies the organic nature of W. L. Gore's organizational structure?

It has no formal chain of command or standard operating procedures.

Which of the following best indicates that W. L. Gore & Associates has an informal and decentralized organizational structure?

It prefers face-to-face communication over e-mail and does not have an organizational chart.

Which of the following statements is true of local responsiveness?

Local responsiveness generally entails higher costs.

In the shakeout stage of the industry, competitive characteristics in the industry change. Which of the following is not a change expected during this stage?

New firms enter with features that shakeup the incumbents.

Which of the following best illustrates a dominant-business firm?

Riva Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit.

During the growth stage of an industry life cycle, the focus is on product innovation until an industry standard or dominant design is established. Once this standard has been set, a firm should do which of the following during the growth stage in order to maintain its competitive advantage(s)?

Shift to process innovation focus.

Which of the following statements is true of the real-options perspective?

The approach allows the incumbent firm to obtain additional information at predetermined stages.

What, according to Greg Smith, was the cause for the change in ethical climate within Goldman Sachs?

The company went public and began looking at clients and itself as counter parties to a transaction.

Which of the following statements is typically true of early adopters?

They appreciate new technology that can add value to their personal and professional lives.

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. Which of the following strategies does the company pursue?

a multidomestic strategy

Anderson Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help Anderson Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n)

acquisition

The purchase or takeover of one company by another is a(n)

acquisition

In terms of agency theory, which of the following is an agency problem?

adverse selection

Bela is a marketing and sales employee at Hopscotch Foods Inc. She has invented a new way to process and pack the company's food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Bela?

an intrapreneur

The local real estate companies in a city have joined together and arranged a "Property Fair." The sponsors will equally share the expenses of the event. Though many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as

co-opetition

Which of the following is a benefit of a high degree of formalization in an organization?

consistent results

According to agency theory

corporations are viewed as a set of legal contracts between different parties.

The strategic foundations of the globalization hypothesis are based primarily on

cost reduction

Inkwell is a pen manufacturing company based in Massachusetts. Inkwell's main area of operation is Massachusetts, and it has a stronghold over the market. It employs a robust production system, which helps it sell pens at exceptionally low prices. In this scenario, which of the following strategies is Inkwell most likely using?

cost-leadership strategy

The use of complementary software applications (apps) for smartphones has not only created a new "apps" industry but has also spurred market demand for smartphones themselves. Thus, apps for smartphones have largely

created a virtuous cycle reinforcing smartphones globally.

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins resources and knowledge that are

difficult to imitate

Julius bought his laptop and smartphone when these products had just entered their respective growth stages. More than the technological sophistication of these products, it was the idea that these products would allow him to multitask and work when traveling that drove him to make his purchase decision. Which of the following customer segments does Julius best represent?

early adopters

According to Porter's diamond of national competitive advantage, factor conditions are best described as a country's

endowments in terms of natural, human, and other resources.

When Gilded Products planned to start its operations in Upper Medici, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Canopy Logistics, to reach its ultimate customers. However, this would require Canopy Logistics to make huge investments, which would be of no use to it if Gilded Products decided to exit the market. Thus, to gain Canopy Logistics' confidence, Gilded Products purchased 40 percent of the stock of Canopy Logistics. What does this scenario best illustrate?

equity alliance

Aaron Inc. is an electronics company based in the country of Palmia. The company has manufacturing facilities in four other countries where labor costs are low. It also has its research centers in three other countries because these countries offer best-of-class capabilities. However, Aaron Inc. does not offer much product differentiation, which means that price is the main competitive weapon. In this scenario, Aaron Inc. most likely implements a __________ strategy.

global-standardization

"A process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs" is the definition of

globalization

Firms often consolidate industries through horizontal mergers and acquisitions to

increase their market power.

Luxury Dwellings Inc. is a condominium-building company that is based in the country of Veritas. It sells high-priced homes to consumers in Veritas as well as to consumers in other countries. It has extremely high brand loyalty. The industry it operates in is characterized by low pressure for local responsiveness and low pressure for cost reductions. In this scenario, Luxury Dwellings Inc. most likely pursues a(n) _________ strategy.

international

The additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances, are best described as a(n)

liability of foreignness.

"A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary" is the definition of

managerial hubris

Since W. L. Gore's core competency is innovation, a(n) ________ would most likely be detrimental to its efforts.

mechanistic structure

"The process of joining two independent companies with their consent to form a combined entity on a permanent basis" is the definition of a

merger

The best explanation of why Gulf airlines are giving U.S. legacy carriers stiff competition is that the Gulf carriers

offer better service for lower costs than do the U.S. legacy carriers.

Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers and Echo line of digital assistants. This is an example of

related-linked diversification.

Cantaloupe Technologies follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Cantaloupe Technologies?

social entrepreneurship

The executives of Night Sky Inc., a large conglomerate, are making decisions on the stages of the industry value chain the firm must participate in, the range of products and services it should offer, and the global markets it should compete in. What are the executives primarily determining?

the boundaries of the firm

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

the costs pertaining to setting up a shop floor

Which of the following factors has led to a shift toward open innovation?

the exponential growth of venture capital

Which of the following is an example of explicit knowledge?

the findings of a research published in a scientific journal

Which of the following is a problem that corporate governance seeks to address?

the principal-agent problem

Michael Porter is in favor of the shared value creation framework because he believes that it

will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and its relationship to society.