MGMT 4900 Exam 2

Digital photography replacing film photography is an example of which type of innovation?

Disruptive

Horizontal integration may yield disappointing financial results because:

A & B

Mediflow, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Mediflow's European sales?

Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can

A company is stuck in the middle under which of the following circumstances?

All of the above

Which of the following businesses is most likely to disrupt an existing industry? (new tech, existing market)

Closer Connex developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time.

Which of the following constitutes a disadvantage of the differentiation strategy?

Competitors are able to imitate the features well enough that they are no longer unique.

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

Coordination costs

_____________ are additional costs that are attached to the related-diversification strategy because of managing the number, size, and types of businesses that are linked to one another.

Coordination costs

The Wright Brothers creating the airplane is a(n) ______________; Boeing commercializing the airplane is a(n) _____________.

Invention; innovation

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?

It allows the conglomerate to overcome institutional weaknesses in emerging economies

Which of the following is a drawback of vertical integration?

It increases the potential of legal repercussions.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?

It is building new core competencies to protect and extend its current market position

Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price?

It is valued at less than the sum of its individual business units

Which of the following is NOT a characteristic of a red ocean strategy?

Make the value cost tradeoff

Ayesha is a strategist for the firm Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Ayesha to suggest?

Optiks should acquire Expert Technology

Generally, as the level of _________ innovation declines, the level of _________ innovation increases.

Product; process

Phoenix Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?

Pursue taper integration.

Skylark Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Skylark is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Skylark pursue?

Redeploy and recombine existing core competencies to compete in markets of the future.

Economies of scope often occur when a firm is using the ______________ diversification strategy because the firm is able to pool resources and leverage competencies.

Related

Research indicates that when it comes to the diversification-performance relationship:

Related-constrained and related-linked strategies are associated with higher firm performance

About 20 years ago, Sturdy Light, Inc. produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Sturdy Light was a question mark that developed into a star

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other?

TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.

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

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.

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?

The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

A software firm is interested in acquiring an app development company that is small but highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate?

The software firm may overpay for the app developer, poorly serving the software firm's shareholders.

Which of the following is a potential result of horizontal integration in terms of Porter's five forces model?

There is a reduction of excess capacity in the market

Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take?

Turn down the acquisition offer and prepare to resist a hostile takeover

Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms?

Unlike incumbent firms, new entrants do not have formal organizational structures and processes

Which of the following frameworks helps understand or identify sources of sustained competitive advantage (or lack thereof) within a firm?

VRIO

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true?

While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation.

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.?

a dominant-business firm

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

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

A primary advantage of organizing economic activity within firms is the

ability to coordinate highly complex tasks to allow for specialized division of labor

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate?

architectural innovation

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

Dollar Shave Club is an ecommerce start-up that delivers razors to its subscribers by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market.

business model innovation

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

by regularly introducing incremental improvements in its products

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique.

crowdsourcing

As you have noticed, the demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently?

decline stage

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?

diversification discount

A multidivisional structure can be costly because, when a company has seven divisions like GE that each require special skills and knowledge, it can reduce a company's profit margin. In GE's case, departments devoted to important aspects of public relations, business development, legal, global research, human resources, and finance are maintained centrally to provide services to all seven divisions. This creates ________ and saves money.

efficiency

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)

entrepreneur who commercialized invention into an innovation.

A sneaker manufacturing company targets teenagers. It sells the sneakers to these teenagers at a price which is lower than what is offered in the market. The fact that it offers low-priced sneakers to teenagers is an example of a(n):

focused cost leadership strategy

Incline Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Incline products. In response, Incline Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?

forward vertical integration

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?

horizontal

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will

increase

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

A strategic alliance differs from a joint venture in that a strategic alliance:

is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.

Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?

managerial hubris

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its

network effects

Adidas acquired Reebok primarily to

overcome its competitive disadvantage against Nike.

Bulldog Holdings is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?

parent-subsidiary relationship

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to

preempt its competitors from buying Waze

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

Amazon.com 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.

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

Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue?

related-linked

Nocturnal Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Nocturnal pursuing in this scenario?

related-linked strategy

Edna Gomez is the founder of the restaurant chain Good and Green. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Edna's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Edna Gomez?

social entrepreneur

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

Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying?

taper integration

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

the cost of searching for a contract manufacturer

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to gain a capability in a new customer market

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.

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make?

what range of products the firm should offer