mgmt
14) Which of the following descriptions best exemplifies adverse selection? A) A manager cannot ascertain the contributions of individual team members in team production. B) A research scientist uses the organization's resources to conduct personal research. C) An employee spends time on social networking sites during work hours. D) An interview candidate lists his qualifications in chronological order.
a
21) How is a firm's task environment different from its general environment? A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B) Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C) Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D) Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.
a
26) Return on risk capital primarily includes A) stock price appreciation plus dividends received over a specific period. B) consumer surplus plus firm profit. C) account receivables plus account payables. D) economic value created by a firm plus reservation price.
a
36) Which of the following is a feature of the growth stage of the industry life cycle? A) The consumer demand increases. B) The prices of goods begin to rise. C) The basis of competition moves away from process innovation. D) The number of competitors decreases.
a
40) Which of the following is an assumption that top-down strategic planning rests on? A) We can predict the future from the past. B) Time cannot be compressed at will. C) Decisions made in the past do not affect our future. D) Change is constant.
a
42) In a public stock company, senior executives, such as the CEO, face agency problems when A) they delegate authority of strategic business units to general managers. B) they decide to get involved in the day-to-day operations of a company. C) the board of directors possesses more information about the company than they do. D) the firm designs work tasks, incentives, and employments that minimize opportunism.
a
42) In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A) entering the aircraft manufacturing industry requires huge capital investments. B) there is expected to be a huge return on investment within this industry. C) there is no credible threat of retaliation from the incumbents. D) entering the aircraft manufacturing industry means violating government policies.
a
42) The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing ________ as the approach to the development of strategy. A) scenario planning B) top-down strategic planning C) reverse engineering D) pattern recognition
a
43) In an industry, the threat of entry is high when A) capital requirements are low. B) expected returns are low. C) technological know-how is industry specific. D) switching costs are high.
a
47) Which of the conditions prevail when an industry is at the end of its life cycle? A) The level of process innovation reaches its maximum as firms attempt to lower cost. B) The industry structure is perfectly competitive with a large number of buyers and sellers. C) The strategic objectives of businesses will involve gaining market acceptance. D) The market reaches its maximum size at this stage.
a
49) Adverse selection in a public stock company occurs when A) information asymmetry increases the likelihood of selecting inferior alternatives. B) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. C) a principal is not aware of the context from which information from an agent is derived. D) an agent manipulates information to benefit stockholders.
a
59) Maddox Bauxite Extraction Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will give it strong control over all its business activities. Which of these foreign entry modes will Maddox most likely choose? A) greenfield operation B) export C) joint venture D) acquisition
a
67) Which of the following is a common result of a hostile takeover of a company? A) The new owner sells the company in pieces. B) The new owner keeps the company intact. C) The new owner keeps the board of directors of the company the same. D) The new owner enhances the reputations of the company's management.
a
75) A bank, CQC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A) The bank knows that the customer will be unable to pay the loan if the interest rate rises. B) The bank is not aware of the investments made by the customer. C) The bank has the financial statements of the customer, but it is not aware of each source of income. D) The bank is depending on the customer to pay back the loan before term completion.
a
81) A defining characteristic of the pay-as-you-go business model is that the A) users pay for only the services they consume. B) users pay for access to a product or service whether they use it during the payment term or not. C) initial product is often sold at a loss in order to drive demand for complementary goods. D) the basic features of a service are provided free of charge, but the user must pay for premium services.
a
82) In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block. A) economic B) ethical C) philanthropic D) legal
a
84) 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? A) legal but not ethical B) ethical but not legal C) legal and ethical D) neither legal nor ethical
a
17) Braintree Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Braintree and the software company best referred to as in this scenario? A) an acquisition B) a strategic alliance C) a leveraged buyout D) a proprietorship
b
17) The ratio of SG&A/Revenue is an indicator of a firm's focus on A) researching to produce innovative products and services. B) marketing and sales to promote its products and services. C) producing a good in an efficient manner. D) creating a good that is cost-effective.
b
18) Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because A) it failed to consider the competitive challenge. B) it was not backed up with strategic commitments. C) managers did not live by the company's core values. D) the company did not stake out a unique strategy position.
b
19) Starling Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that public companies A) often do not keep economic needs and societal needs separate from each other, thereby contributing to low value creation. B) have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events. C) do not focus enough on increasing firm profits, thereby contributing to low value creation. D) have defined value creation too narrowly and as a result have ignored political lobbying, thereby contributing to black swan events.
b
20) A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A) the foreign firm will need to make larger investments when compared to entering the new market on its own. B) some of the firm's proprietary know-how may be appropriated by the foreign partner. C) all potential business risks in the new market will have to be faced alone by the foreign firm. D) the shareholder value of the foreign partner will decline drastically.
b
20) GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) BC Inc. will be less competitive than GN Corp. because of its smaller investment in tangible assets. B) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C) Judging from the assets listed, BC Inc. has probably been in the industry a much shorter time than GN Corp. D) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.
b
22) What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies? A) It gives the managers greater control of the performance of the organization in the long term. B) It reduces the trust of shareholders in the organization as a vehicle for value creation. C) It helps companies increase firm profits by creating shared value. D) It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.
b
27) The primary objective of Porter's five forces model is to A) understand valuable, rare, and hard-to-imitate resources. B) understand the profit potential of industries. C) reduce the gap between the value of a firm's product and its cost of production. D) break down a firm's value chain activities into primary and support.
b
38) Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then A) Finolo and Ethver will have a VRIO resource. B) Invoro will have a resource that is valuable but no longer rare. C) Invoro will have a sustainable competitive advantage in the industry. D) Invoro will have a resource that is rare but no longer valuable.
b
46) Nate 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 Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies A) moral hazard. B) adverse selection. C) shared value creation. D) corporate governance.
b
46) ________ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A) Social complexity B) Path dependence C) Cannibalization D) Causal ambiguity
b
77) Polygon sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Polygon implementing? A) subscription-based B) razor-razor-blade C) pay-as-you-go D) direct sales
b
79) A defining characteristic of the subscription-based business model is that the A) user pays for only the services he or she consumes. B) user pays for access to a product or service whether he or she uses it during the payment term or not. C) basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D) initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.
b
79) Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A) strategy formulation B) strategy implementation C) strategy analysis D) strategy evaluation
b
82) What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A) strategic leadership and the strategy process B) competitive advantage, firm performance, and business models C) external analysis D) internal analysis
b
83) Cloudlink is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? A) subscription-based B) freemium C) pay-as-you-go D) razor-razor-blade
b
84) Fierce domestic competition in New Schuyler makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, New Schuyler's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in A) a peripheral industry. B) a focal industry. C) supportive complementors. D) related complementors.
b
21) Which of the following characteristics of a public stock company deals with principals and agents? A) limited liability of investors B) transferability of investor ownership C) separation of legal ownership and management control D) legal personality
c
22) Which of the following is a macroeconomic factor that can affect a firm's strategy? A) power of buyers B) power of suppliers C) levels of employment D) threat of substitutes
c
23) As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to A) where to compete. B) when to compete. C) how to implement business strategy. D) how to enter target markets.
c
27) RHC Pharmaceuticals Inc., Lawrence Pharma Inc., and Quincy Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A) takeover B) buyout C) co-opetition D) acquisition
c
33) For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A) choosing a distinct but different strategic position in the industry B) working toward increasing the difference between value creation and cost C) trying to be everything to everybody by combining different competitive strategies D) focusing on creating value for customers rather than destroying rivals
c
33) Which of the following is an advantage of equity alliances when compared to non-equity alliances? A) They are more flexible and easy to initiate and terminate. B) They require smaller capital investments. C) They produce stronger ties between partners. D) They are based on contracts rather than ownership.
c
36) Noodles 2 Go and Sal's Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal's Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A) benefitted from economies of scale. B) entered into a cartel arrangement. C) pursued distinct strategic positions. D) engaged in direct imitation and substitution.
c
39) 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? A) crowdsourcing B) new product development C) forward vertical integration D) conglomerate diversification
c
40) Which of the following is a feature of the shakeout phase of the industry life cycle? A) There is rapid industry growth during this stage. B) Market demand in this stage primarily consists of first-time adopters. C) Competitive intensity within the industry increases. D) The mode of competition shifts from price to non-price in this stage.
c
47) A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) ________ in the context of a principal-agent problem. A) adverse selection B) stakeholder strategy C) moral hazard D) shared value creation
c
49) Strategic commitments are actions that are A) inexpensive, long-term oriented, and difficult to reverse. B) inexpensive, short-term oriented, and easy to reverse. C) costly, long-term oriented, and difficult to reverse. D) costly, short-term oriented, and easy to reverse.
c
62) How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A) by facilitating excess capacity in the industry B) by preventing mergers from taking place C) by lowering competitive intensity in the industry overall D) by increasing the threat of entry in the industry
c
64) The tenet behind the triple-bottom-line is that A) a firm should solely focus on increasing the economic value created to/for its customers. B) a firm's primary objective should be increasing the total returns to its shareholders. C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D) a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.
c
66) Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A) to reduce the transferability of stocks between stockholders B) to bring about a separation of CEO/chair duality C) to align incentives between shareholders and management D) to change the liability of shareholders from limited to unlimited
c
68) Because of poor management, the stock price of Orange Dolphin Inc. falls and many investors sell their shares. Soon Orange Dolphin becomes the target of a hostile takeover, during which Hans buys enough shares to exert control over the firm. In this scenario, Hans performs the role of a(n) A) inside director. B) outside director. C) corporate raider. D) corporate consultant.
c
69) Which of the following is a major issue at the forefront of CEO compensation in recent years? A) a comparison of the performance of the organization before and after the CEO's tenure B) the performance of the CEO as an employee versus the performance as a board member C) the absolute size of the CEO pay package compared with the pay of the average employee D) a comparison of the compensation of senior management hired during and before the CEO's tenure
c
72) In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A) an increase in its financial resources B) an increase in its brand equity C) an increase in its customers' disposable income D) an increase in its employee productivity
c
83) Elvira 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? A) What are the chances that her decision to accept the opportunity will be made public? B) How much profit would be made if she decided to accept the opportunity? C) How would the media report her decision to accept the opportunity if it were to become public? D) How long lasting would the competitive advantage be if she decided to accept the opportunity?
c
11) The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & development expense/Revenue, and A) Accounting profitability/Revenue. B) Economic value created/Revenue. C) Total return to shareholders/Revenue. D) Selling, general, & administrative expense/Revenue.
d
15) Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? A) Cost of capital for firms will be high. B) Firms will invest less in future growth. C) Economic growth rate will fall. D) Consumer demand will increase.
d
16) The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A) a reputation for fast customer service B) a culture of proactive communication C) patents for electronic components D) the punch presses that produce parts
d
29) 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 A) managers need to keep economic needs and societal needs disconnected from each other. B) a firm should expand its internal value chain to include nontraditional partners. C) businesses should focus on creating regional clusters such as Silicon Valley in the U.S. D) the largest but poorest socioeconomic group can yield significant business opportunities.
d
35) Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies. A) grand B) corporate C) business D) functional
d
39) In which of the following situations is the power of suppliers high in an industry? A) Suppliers offer products that are undifferentiated. B) Suppliers can credibly threaten to backward integrate into the industry. C) Suppliers depend heavily on the industry for their revenues. D) Suppliers' industry is more concentrated than the industry it sells to.
d
40) Planet Resource 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 it serves. Planet Resource is most likely doing this to A) reduce its geographical distance from the other countries. B) increase its administrative distance from the other countries. C) increase its economic distance from the other countries. D) reduce its cultural distance from the other countries.
d
44) David and Fred are customer care employees at JPN Care. In between calls, David and Fred 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 A) is neither unlawful nor unethical; hence, David and Fred cannot be reprimanded. B) typically exemplifies the agency problem of adverse selection. C) demonstrates the dangers of information asymmetry. D) can be stopped by implementing performance incentives and strict control mechanisms.
d
48) When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A) the emergence of entry barriers B) the bargaining power of suppliers C) the availability of complements D) the threat of substitutes
d
49) Which of the following best illustrates a merger between the two companies HQ Inc. and AV Inc.? A) HQ Inc. purchases AV Inc. for $80 billion despite AV Inc. being against the purchase. B) HQ Inc. and AV Inc. join together to form a third new entity, while they also operate separately. C) HQ Inc. outsources a few of its business activities to AV Inc. for competitive advantage. D) HQ Inc. and AV Inc. join together to form a single new company called HQAV Inc.
d
51) 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 A) shareholder capitalism. B) adverse selection. C) shared value creation. D) moral hazard.
d
58) Which of the following statements is true of the balanced-scorecard? A) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B) It is one of the traditional approaches of measuring firm performance. C) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D) It attempts to provide a holistic perspective on firm performance.
d
59) Which of the following scenarios best illustrates horizontal integration? A) King Autos Inc. enters into a licensing contract with a distributor in a new international market. B) King Autos Inc. acquires a component parts manufacturer who previously supplied to King Autos' competitor. C) King Autos Inc. sets up its own distribution channel and retail stores. D) King Autos Inc. joins with Dimitra Motors Inc., one of its direct competitors.
d
64) According to the value chain analysis, which of the following is a primary activity? A) research and development B) human resources management C) accounting and finance D) marketing and sales
d
7) Eyenima Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? A) Frieda, a shareholder, can legally sell shares of Eyenima in the stock market. B) Tabitha is a shareholder of Eyenima but does not have any managerial duties. C) Edward, an employee at Eyenima, is not responsible for any losses that Eyenima incurs. D) Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well.
d
73) ________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set it's own price. A) Agency B) Freemium C) Bundling D) Wholesale
d
75) Which of the following scenarios best illustrates bundling? A) Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B) Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C) Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D) Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.
d
85) The name for an agreed-upon code of conduct in business, based on societal norms, is A) fiduciary responsibilities. B) poison pills. C) strategic business points. D) business ethics.
d
