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Ethics is A) not synonymous with law. B) impossible to codify into law. C) universal and cannot differ between cultures. D) the minimum acceptable standard in business practice.

An incentive system which appropriately recognizes team activities is an example of which one of the following characteristics of effective teams

internal support

In regard to the public stock company, limited liability means that _____

investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital

The theory of motivation that asserts that people are motivated by physiological, safety, love, esteem, and self-actualization needs is ______ theory.

Maslow's hierarchy of needs

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

Matrix

The theory of motivation that asserts that achievement, affiliation, and power are the major motives determining people's behavior in the workplace is called ______.

McClelland's acquired needs theory

Which of the following are considered stakeholders with regards to college football in the United States?

Media Companies Alumni Students etc.

Marissa Mayer's new _______ for Yahoo was, "to make the world's daily habits more inspiring and entertaining."

Mission

Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome?

Mohawk would pass a major portion of this increase along as a price increase to its customers.

n recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend.

Sociocultural

Internal Capital Markets

Source of value creation in a diversification strategy if the conglomerate's headquarters does a more efficient job at allocating capital through its budgeting process that what could be achieved in external capital markets.

When examining all the generic strategies, which of the following below is inherently superior in every industry?

There is no single superior business-level strategy.

It is Black Friday. Several people are waiting outside the popular electronics store for someone to unlock the doors. These people constitute a(n) _______

crowd

When applying the CAGE framework to KFC's early days in Japan, the factor with the most impact on its success seems to be

cultural

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

94. The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT a. making CEOs more accountable for their performance. b. challenges to the decisions of boards. c. focusing attention on ineffective boards of directors. d. a direct effect on firm performance.

When primarily exclusive reliance is placed on financial controls because the board is outsider-dominated, this is least likely to lead to:

high executive turnover.

Patty prefers working alone, is comfortable taking moderate risks, and feels good when accomplishing a goal. Patty probably has a

high need for achievement

With _____ degrees of ownership concentration, the probability is _____ that managers' decisions will be designed to maximize shareholder value.

high; greater

In comparison to other countries, the United States ranks ________ in terms of its acceptance of Milton Friedman's philosophy that "the social responsibility of business is to increase its profits."

near the middle

A ________ is a method of performance appraisal by which each employee is rated in comparison to other employees in his work group

multiperson comparison

In comparison to other countries, the United States ranks ______ in terms of its acceptance of Milton Friedman's philosophy that "the social responsibility of business is to increase its profits."

near the middle

When a manager stops nagging a subordinate, the manager is using

negative reinforcement

in general, ownership concentration's influence on strategies is _____ and ownership concentration's influence on firm performance is _____.

positive; positive

What are the phases of alliance management? (Check all that apply.)

post-formation alliance management alliance design and governance partner selection and alliance formation

The interests of inside directors on the board of directors typically align with those of ______.

senior management

The interests of inside directors on the board of directors typically align with those of ________.

senior management

Codehow 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 Codehow?

serial acquisitions

Mary owns Kind Corporation and wants to maintain a dual focus on creating shareholder value while at the same time increasing value for society as a whole. Mary is following the

shared value creation framework.

A firm's resource-allocation process (RAP) has very little effect on its realized strategy.

False

The risk of employee opportunism on behalf of agents is exacerbated by _______. Information asymmetry Isomorphism Network effect Groupthink

Information asymmetry

__________ is when agents are better informed than principals.

Information asymmetry

_____ are financial institutions, such as mutual funds and pension funds, that control large-block shareholder positions.

Institutional owners

Which of the following is true of tacit knowledge?

It can only be acquired through actively participating in the process.

92. As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions a. increases. b. decreases. c. remains constant. d. is eliminated.

To manage investment risk, shareholders maintain a(n) _____ portfolio by investing in several companies to _____ their overall risk.

diversified; reduce

The risk of employee opportunism, on behalf of agents, is exacerbated by the concept of

information asymmetry.

In equity theory, the education, experience, and skills that individuals contribute to their organizations are examples of ______.

inputs

Incentives that are too high-powered, such as an outsized bonus, may cause individuals to ______.

focus too much attention on the incentive and not enough on strategic activities

Incentives that are too high-powered, such as an outsized bonus, may cause individuals to __________.

focus too much attention on the incentives and not enough on strategic activities

Whole Foods focuses on a small market segment, affluent consumers who want to buy high-end, organic groceries. What is the appropriate name for Whole Foods's scope of competition?

focused

________ refers to how standardized an organization's jobs are and the extent to which employee behavior is guided by rules and procedures

formalization

A rule approved by the SEC allows large shareholders (owning 1 to 5 percent of a company's stock) to nominate up to _____ of a company's board of directors, enhancing shareholders' decision rights.

25 percent

The ratio of CEO to average employee pay in the United States is about ______.

300 to 1

The ________ method utilizes feedback from supervisors, employees, and coworkers.

360-degree appraisal

Large-block shareholders are usually those shareholders with at least _____ percent of the firm's stock.

Describe the arguments for and against the CEO of a company serving as the chair of the board of directors

: In roughly one-half of U.S. public firms, the CEO of the company also serves as chair of the board of directors. This practice of duality—holding both the role of CEO and chairperson of the board—has been declining somewhat in recent years. Arguments can be made both for and against splitting the roles of CEO and chairman of the board. On the one hand, the CEO has invaluable inside information that can help in chairing the board effectively. On the other hand, the chairperson may influence the board unduly through setting the meeting agendas or suggesting board appointees who are friendly toward the CEO. The recent trend toward separation of CEO/chair duality is likely to continue. Because one of the key roles of the board is to monitor and evaluate the CEO's performance, there is clearly a conflict of interest when the CEO actually chairs the board.

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the: A. decreasing capability of external suppliers and vendors. B. lack of reliability on venture capital. C. increasing need to internally control research and development. D. increasing supply and mobility of skilled workers.

Which of the following is stated by the long tail phenomenon? A.When production is increased by 80 percent, the decrease in cost is close to 20 percent due to economies of scale. B. To gain a competitive advantage, it is necessary for a business to internalize 80 percent of its R&D, and outsource the remaining 20 percent. C. For an incumbent firm, 80 percent of its revenue comes from existing customers, and new customers account for the remaining 20 percent. D. Almost 80 percent of sales in a given product category come from only 20 percent of the offerings in that category.

A board of directors is elected to represent the interests of ______.

shareholders

Which two parties are the focus of corporate governance?

shareholders and managers

By taking a _________ position in Abacus, Mr. Paulson made more than $1 billion in profit while his clients suffered huge losses.

short

What are the different structures that traditional organizations can have?

simple, functional, and divisional structures

ince Coca-Cola focuses on selling only soft drinks, a low degree of product diversification, we would conclude that they compete in a(n) ________ market versus their main competitor PepsiCo, that sells a wide variety of products.

single product

What Tamika loves about her job is that every day brings new challenges, and she can use different talents and abilities to complete her job tasks. This is an example of which core job characteristic?

skill variety

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

Coordination Costs

A function of the number, size, and types of businesses that are linked to one another.

A fiduciary responsibility is a ___________

A legal duty to act in another party's interest

In _________, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.

A leveraged buyout

Credible Commitment

A long-term strategic decision that is both difficult and costly to reverse.

Which of the following descriptions best exemplifies adverse selection?

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

The downside of equity alliances is

the amount of investment that can be involved.

Under its co-founder and longtime CEO, Steve Jobs, Apple was one of the few successful tech companies using

a top-down strategic planning process.

Strategic alliance

a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

What are three advantages of equity alliances? (Check all that apply.)

a window into new technology (option value) possible emergence of trust and commitment stronger ties

Helmut works for an optical engineering company in Germany. He is one of several employees that management must consult when it is considering a major layoff. Helmut is a member of ________.

a work council

The idea that a corporation is simply a collection of legal contracts is known as ___

agency theory

Managers who act upon secret company information for personal gain, such as by trading stocks based on the knowledge of future initiatives, are guilty of ____

insider trading

Shareholders is another name for:

principals

Sources of COSTS in a horizontal integration strategy are ______.

reduced flexibility integration failure

Managerial employment risks are _____ with increased diversification because a firm and its upper-level managers are less vulnerable to the _____ in demand associated with a single or limited number of product lines or businesses.

reduced; reduction

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

related-linked diversification.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of related-linked diversification. cost-leadership. unrelated diversification. hostile takeovers.

related-linked diversification.

Boston consulting group growth share matrix

relative market share and speed of market growth

instead of maximizing manager desires, shareholders would prefer that free cash flow is:

returned to them as dividends.

The separation of ownership and managerial control allows shareholders to purchase stock, but the right to purchase stock and the potential to receive income requires them to take a risk. This risk is that they will receive income only if:

revenues exceed expenses.

Sales representatives are paid a percentage of the earnings the company made from their sales in the form of a ______.

sales commission

Bob is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Bob's action best describes the concept of

satisficing.

Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

An external governance mechanism that makes a poorly managed company vulnerable to takeover by outside investors is known as ______.

the market for corporate control

All of the following are internal governance mechanisms EXCEPT:

the market for corporate control.

The degree of vertical integration corresponds to ______. a. the firm's level of integration with the host country's infrastructure b. the firm's level of integration among the alternative industry types c. the number of industry value chain stages in which a firm directly participates d. the number of parent-subsidiary relationships a firm is involved in

the number of industry value chain stages in which a firm directly participates

Which of the following is true of acquisitions?

they can be friendly or hostile.

Why might a firm create a joint venture when entering a new geographic market? (select multiple) - to adhere to domestic law - to access local contacts - to access local expertise - to adhere to local law

to access local contacts; to access local expertise; to adhere to local law

________ interact primarily to share information and to make decisions to help each member do his or her job more efficiently and effectively

work groups

_____ is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options.

Executive compensation

Ways to enhance the effectiveness of the board of directors include:

(1) increasing the diversity of the backgrounds of board members; (2) strengthening internal management and accounting control systems; (3) establishing and consistently using formal processes to evaluate board members' performance; (4) modifying the compensation of directors, especially reducing or eliminating stock options are part of their package; and (5) create a "lead director" role that has strong powers with regard to the board agenda and oversight of non-management board member activities.

Additional functions of a board of directors beyond general strategic oversight include ______. (Check all that apply.)

- assessing and mitigating risk - ensuring that the firm's accounting practices and reports are accurate - selecting, evaluating, and compensating the CEO

Financial statements by public companies must ______. (Check all that apply.)

- be audited by certified public accountants - adhere to generally accepted accounting principles (GAAP)

Which of the following are important components of fostering ethical behavior in employees?

- board members setting clear ethical expectations - strategic goals that are achievable with legal means - executive behavior that is in sync with the organization's vision and values

Long-term contracts typically last __. -6 to 12 months -1 to 2 months -1 year or more -indefinitely

-1 year or more

Which are principal perspectives on motivation? (4)

1. process 2. content 3. reinforcement 4. job design

Which types of reinforcement are intended to weaken a behavior? (2)

1. punishment 2. extinction

What does the technique called scientific management seek to do? (3)

1. reduce the number of tasks a worker performs 2. increase employee efficiency 3. raise employee productivity

Job Characteristics Model

1. skill variety 2. task identity 3. task significance 4. autonomy 5. feedback

Conflicts can be resolved by withdrawing from them or suppressing them. This conflict management technique is known as ________.

avoiding

One of the key characteristics of a leveraged buyout (LBO) is that it _______.

changes the ownership structure of a company from public to private

A leveraged buyout (LBO)

changes the ownership structure of a company from public to private.

Which of the following are core job characteristics in the Hackman and Oldham job characteristics model?

1. task significance 2. skill variety 3. feedback 4. autonomy

Which of the following is an example of the principal-agent problem if the principal's goal is to create shareholder value? -a manager controls and limits his business expenses -a manager received generous stock options -a manager files first class on all business trips -a manager makes decisions based on what is best for the company

-a manager files first class on all business trips

Financial statements by public companies must __________.

-adhere to GAAP -be audited by certified public accountants

To get the benefits of vertical integration without the accompanying risks, companies can __ (Check all that apply). -choose strategic outsourcing -use taper integration -control every element of the industry value chain -opt to become fully vertically integrated

-choose strategic outsourcing -use taper integration

Specialized assets have __. -low value in intended use -low opportunity cost -high value in next-best use -high opportunity cost

-high opportunity cost

Advantages of organizing economic activity at the market level include which of the following? (Check all that apply.) -high-powered incentives -administrative costs -increased flexibility -low-powered incentives

-high-powered incentives -increased flexibility

The __ depicts the transformation of raw materials into finished goods and services along distinct vertical stages, each of which represents a distinct industry in which a number of different firms are competing. -industry value chain -competing industry assessment -integrated materials model -joint integral framework

-industry value chain

What is the shape of the relationship between the level of diversification and performance? -U-shaped -exponential curve -inverted U -straight line representing a positive, linear relationship

-inverted U

In general, related diversification leads to high levels of performance because __. -it is unable to overcome coordination and influence costs -it allows the firm to focus on creating only one product or service -it accesses numerous areas of value creation, such as economies of scale and scope -it focuses on creating as many products or services as possible

-it accesses numerous areas of value creation, such as economies of scale and scope

Which of the following are examples of Uber's unethical, as opposed to, illegal, behavior?

-it considered hiring private investigators to find damaging information on journalists who had written negative articles about Uber, -It poached drivers from competing companies

Which of the following is an option for formulating strategy via core competencies? -combine core competencies with rivals in new markets -leverage existing core competencies to improve current market position -build new core competencies to entice shareholders to invest in the company -pursue a strategic alliance to become less vertically integrated

-leverage existing core competencies to improve current market position

Which of the following statements are correct regarding the interests of principals and agents?

-principals want to maximize shareholder returns -Agents may be more interested in personal goals, such as maximizing their compensation or gaining power.

Which of the following are the types of general diversification strategies? (Check all that apply.) -product-market -horizontal -vertical -market -product -geographic

-product-market -product -geographic

Which of the following have been found to be ethical norms in business?

-reciprocity -honesty -fairness

What are the risks of vertical integration? (Check all that apply.) -reduced flexibility -consolidation -securing critical distribution channels -reduced quality -planned emergence -increased costs

-reduced flexibility -reduced quality -increased costs

A firm follows a(n) __ diversification strategy when it derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity. -unrelated -single -related -dominant

-related

Why might a firm want to enter into an equity alliance instead of a short- or long-term contract? (Check all that apply). -to allow the partner to use the firm's trademark and business processes -to facilitate transaction-specific investments -to make a credible commitment -to get insider information about the partner's business

-to facilitate transaction-specific investments -to make a credible commitment -to get insider information about the partner's business

Which of the following are among reasons firms need to grow? (Check all that apply.) -to increase costs -to increase profits -to decrease market power -to motivate management

-to increase profits -to motivate management

Which of the following is the term for the costs associated with an economic exchange? -economies of scope -diseconomies costs -transaction costs -PESTEL costs -core competencies -economies of scale

-transaction costs

__ is an advantage of a firm in organizing economic activity. -low-powered incentives -administrative costs -transaction-specific investments -the principal-agent problem

-transaction-specific investments

Google's choice to hire programmers in-house suggests that they decided that the __ costs associated with this strategy are __ than the costs associated with contracting in the open market. -transaction; higher -administrative; higher -opportunism; lower -transaction; lower

-transaction; lower

What are the two means by which jobs are fitted to people?

1. job enrichment 2. job enlargement

Stock option

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n)

Diversification

An increase in the variety of products or markets in which to compete

Principal

An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n)

Which of the following is a trend that will affect HRM practices in the future

Baby boomers will represent the largest segment of the workforce

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's: A. level of diversification. B. geographic scope. C. vertical integration. D. absorptive capacity.

C. vertical integration.

Firms that consider international expansion will often examine absolute metrics on which countries to pursue investments in but also consider relative distance. To help firms decide where to compete, the ________ was developed to help firms make this decision.

CAGE distance framework

All of the following are examples of a leader's informational roles EXCEPT _______. Monitor Spokesperson Entrepreneur Disseminator

Entrepreneur

How has Apple been able to sustain its competitive advantage in the smartphone industry? A. By reducing its network effects B. By targeting its new products and services toward laggards C. By driving the price for the end user to zero D. By regularly introducing incremental improvements in its products

D. By regularly introducing incremental improvements in its products

Dana wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission (FTC). Which of the following strategic options should Dana pursue? Dana should implement green field operations with the marketing firm to strengthen her interanion reach. Dana should consider forming a strategic alliance with the marketing firm. Dana should move forward with a hostile takeover of the marketing firm. Dana should purchase the marketing firm outright via an acquisition.

Dana should consider forming a strategic alliance with the marketing firm.

Which of the following statements is false regarding the use of defense tactics by the target firm during a hostile takeover?

Defense tactics make the costs of a takeover lower.

Industry Value Chain

Depiction of the transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing. Two intersecting value-chains: The industry value chain running vertically from upstream to downstream and the firm-level value chain funning horizontally.

(T/F) Differentiation and cost-leadership strategies are only effective in manufacturing industries

False

A strategy of related-constrained or related-linked diversification is less likely to enhance corporate performance than either a single or dominant level of diversification or an unrelated level of diversification.

False -more likely to enhance

Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate?

Fast Engines can charge a premium price on its automobiles.

Bandwagon Effects

Firms copying moves of industry rivals.

Which of the following is not an advantage when it comes to "first-mover advantages"?

First movers must educate potential customers about the product.

Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. pursues a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?

HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

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.

Which theory proposes that work satisfaction originates from motivating factors, and dissatisfaction originates from hygiene factors?

Herzberg's 2 factor theory

This analysis tool allows the strategist to compare differences across several cultural values among different countries.

Hofstede's Cultural Index

Agency Theory

Nexus of legal contracts

________, which captures the cultural fit between different firms, is one key element needed when selecting an alliance partner.

Partner Compatibility

________, which captures the cultural fit between different firms, is one key element needed when selecting an alliance partner.

Partner compatibility

path dependence

Path dependence is a situation in which the options one faces in the current situation are limited by decisions made in the past.

Peter's Pans is trying to overcome competitive disadvantage.

Adverse Selection

Resume overstatements for Team Openings

How can a manager decide whether a decision is ethical?

Since business decisions are not made in a vacuum but are embedded within a societal context that expects ethical behavior, managers can improve their decision making by also considering: • When facing an ethical dilemma, a manager can ask whether the intended course of action falls within the acceptable norms of professional behavior as outlined in the organization's code of conduct and defined by the profession at large. • The manager should imagine whether he or she would feel comfortable explaining and defending the decision in public. How would the media report the business decision if it were to become public? How would the company's stakeholders feel about it?

Diversification Discount

Situation in which the stock price of highly diversified firms is valued at less than the sum of their individual business units.

Diversification Premium

Situation in which the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

Which firms are most harmed by bribery?

Small and medium-sized firms

The MBA Oath first developed at Harvard and now signed by students at over 500 business schools is modeled after what? The Hippocratic oath in medicine The Sarbanes-Oxley pledge Level-5 leadership None of these; it's entirely unique.

The Hippocratic oath in medicine

What are downsides of equity alliances? (Check all that apply.)

The amount of investment involved The time and effort for assembling the partnership

Which of the following is a major drawback of public stock companies, according to Michael Porter and others?

The prioritize financial performance over all else

Which of the following is true of public stock companies?

There exists an implicit contract based on trust between society and the public stock company.

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.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

There is more strategic variety in the growth stage when compared to the introduction stage.

Which of the following is a result of horizontal integration in terms of Porter's five forces model? A) There is a reduction of excess capacity in the market. B) The industry structure becomes potentially less profitable. C) The industry structure becomes less consolidated. D) There is an increase in rivalry among existing firms.

Delos Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Delos Autos controlling interests in the start-up company. However, Delos Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Delos Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

a real-options perspective

When Aviato Inc. wanted to sell its cars in the country of Yugoslakia, it lacked access to distribution channels and marketing expertise in the country. Thus, Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? increasing competitive intensity accessing critical complementary assets procuring additional capital investments reducing differentiation of product and service offerings

accessing critical complementary assets

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways? acquisitions nonequity alliances that contain contractual agreements equity alliances joint ventures

acquisition

Which of the following are types of vertical integration along the industry value chain? (select multiple) a. simultaneous b. backward c. scheduled d. forward

backward; forward

The code of professional conduct based on societal norms and expectations is known as ______.

business ethics

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company's product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of

causal ambiguity.

Organizational design is a process that involves decisions about ________.

chain of command and span of control

Vibgyor 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 cell 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 Vibgyor and the software company best referred to as in this scenario? A) A proprietorship B) A leveraged buyout C) An acquisition D) A strategic alliance

At Chemetron, all the accounting people share one large work area; all the quality control people are housed in a large office next to the production floor; and maintenance has its own space at the back of the building. Chemetron is using ________.

functional departmentalization

Based on the company description in the case, Kroger could be said to follow dominant-business diversification. According to the textbook, what type of organization most closely matches the dominant-business strategy?

functional structure

Chao's Coffee is a large chain of coffee shops. It wants to join with Rigoberto Roasters, a large coffee roasting company. Rigoberto Roasters wants to stay independent, but Chao's is able to purchase Rigoberto. This describes a(n) ______.

hostile takeover

If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a ___________.

hostile takeover

Sterling Cooper Footware and NERV Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Sterling Cooper Footware entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footware. However, Sterling Cooper Footware was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate? network effects economies of scope learning races time compression diseconomies

learning races

A fiduciary responsibility is a(n) ______.

legal duty to act in another party's interests

When KFC struggled to open its restaurants in Japan, it was experiencing one of the disadvantages of going global. KFC was encountering the

liability of foreignness.

Warephase Airway's decision to acquire Konex Fuels Inc. proved to be ill-fated because the Warephase 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? knowledge race competitive feasibility managerial hubris unfettered free market

managerial hubris

According to Woodward's studies, what type of production technology is best suited for a mechanistic structure?

mass

Influence costs

occur due to political maneuvering by managers to influence capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources

Many financial service firms, IT firms, and health care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm.

offshore outsourcing

PolyCon Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to PolyCon?

one that is in the same trading bloc as PolyCon's home country

When ASI Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as ASI Inc.'s

opportunity cost.

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. similar to those that need to be developed and inferior to those of competitors in the targeted area. different from those that need to be developed and superior to those of competitors in the targeted area. different from those that need to be developed and inferior to those of competitors in the targeted area.

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

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a proprietorship. cooperative. strategic alliance. leveraged buyout

strategic alliance.

Who sets the tone for the ethical climate within an organization?

strategic leaders

The two alternatives to vertical integration are which of the following? - specialized disintegration - horizontal integration - strategic outsourcing - taper integration - nominal innovation

strategic outsourcing; taper integration

Before Zoom went public, it enjoyed the following advantages of

strong financial reporting and auditing requirements.

Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate?

subscription-based

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?

subscription-based

________ conflict relates to the content and goals of the work.

task

The partners in non-equity alliances can have weak ties because such alliances are often ______ in nature, which can cause lack of trust and commitment. a. temporary b. intangible c. permanent d. sufficient

temporary

The shared value creation framework recognizes

that externalities such as accidents create internal costs.

Which of the following statements about the make-or-buy continuum is true? a. The "buy" choice reflects full integration. b. "Make" and "buy" are the only two choices in the continuum. c. The "make" and "buy" choices anchor each end of the continuum. d. Short-term contracts are the most costly option in the continuum.

the "make" and "buy" choices anchor each end of the continuum.

Which of the following is not captured when examining a competitive industry structure?

the ability to engage in forward vertical integration - The ability to engage in horizontal integration would capture elements in a competitive structure

Organizations seeking strategic alliances often pursue nonequity alliances because they are the easiest to create and to sever. However, the short duration of these alliances often means there is little trust or commitment on either side.

true

True or false: A horizontal integration strategy leads to industry consolidation.

true

Private start-up companies valued at over $1 billion, such as some of those in the tech sector, are called ______.

unicorns

The two types of orientations are ________

work unit orientation and organization orientation

When facing an ethical dilemma, a manager should ______. (Check all that apply.)

- determine whether he or she could comfortably defend the action to the public - consider whether the action in question conforms to the firm's code of conduct and industry practices

Which of the following are critical aspects of maintaining good relationships between a firm and its stakeholders?

- fair - transparency

What are the two significant issues regarding the CEO pay debate? (Check all that apply.)

- the relationship between firm performance and CEO pay - the size of the CEO compensation in relation to average employee pay

Which of the following are examples of moral hazard?

-Banks make risky loans with the knowledge that the government will bail them out if necessary -a copywriter secretly works on her novel while at work. -A company dumps pollution into a local lake that will be cleaned using taxpayer money.

When facing an ethical dilemma, a manager should ___________.

-Consider whether the action in question conforms to the firms code of conduct and industry practices -determine whether he or she could comfortably defend the action to the public

In the __ quadrant of the core competence-market matrix, the focus is on leveraging core competencies to improve current market position. -new competence-new market -existing competence-existing market -new competence-existing market -existing competence-new market

-existing competence-existing market

A state university hires an outside firm to develop and maintain human resource system. This is called __. -offshoring -taper integration -vertical market failure -strategic outsourcing

-strategic outsourcing

The lemons problem suggests that information asymmetries can cause __. -an equal distribution of interior and superior goods -superior goods to be replaced by interior ones -all goods to be average -interior goods to be replaced by superior ones

-superior goods to be replaced by interior ones

__ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution. -strategic outsourcing -taper integration -vertical integration -horizontal integration

-taper integration

Transaction costs include __ costs associated with an economic exchange. -only the internal -only the external -the legal -the internal and external

-the internal and external

The degree of vertical integration corresponds to __. -the number of industry value chain stages in which a firm directly participates -the firm's level of integration among the alternative industry types -the firm's level of integration with the host country's infrastructure -the number of parent-subsidiary relationships a firm is involved in

-the number of industry value chain stages in which a firm directly participates

The most integrated alternative to vertical integration is __. -the parent-subsidiary relationship -long-term contracting -the joint venture -the equity alliance

-the parent-subsidiary relationship

What are the two significant issues regrading the CEO pay debate?

-the relationship between firm performance and CEO pay -the size of the CEO compensation in relation to average employee pay

Which of the following is not a dimension along which corporate strategy is assessed? -the size of the company in comparison to its main competitors -the stages of the industry value chain in which the business participates -the range of products and services the business offers -where (geographically) to compete

-the size of the company in comparison to its main competitors

What are the four characteristics of a public stock company that make it an attractive corporate form?

-transferability of investor interest -limited liability for investors -separation of ownership and control -legal personality

3 dimensions of corporate strategy

1. Core competencies 2. Economies of scale 3. Economies of scope 4. Transaction costs

What theories of motivation would be characterized as content perspectives? (3)

1. Maslow's hierarchy of needs theory 2. Herzberg's two-factor theory 3. McClelland's acquired needs theory

Which statements about motivation are true? (2)

1. Multiple contextual and personal factors create motivation 2. Motivation can only be inferred from a person's behavior

For diversification to enhance firm performance, it must do at least one of the following

1. Provide economies of scale, and thus reduce costs. 2. Exploit economies of scope and thus increase value. 3. Reduce costs and increase value.

Executives can enhance performing using a diversification strategy by

1. Restructuring 2. Using internal capital markets

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like A) a nonequity alliance. B) an equity alliance. C) a joint venture .D) a merger.

What is the Japanese "keiretsu"?

A system of cross-shareholding among firms

Which of the following scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Sirius Cybernetics Corp.? A) The owner of another company buys all the outstanding shares of Sirius Cybernetics Corp.in order to take it private. B) A private equity firm, AllThings Inc., buys a large number of shares of Sirius Cybernetics Corp.in order to publicly trade it under a new name. C) Sirius Cybernetics Corp. sells all its shares and declares bankruptcy. D) Sirius Cybernetics Corp. buys back a large amount of its own shares from the stock market.

Concerning strategy and organizational structure, which of the following is false?

A multidivisional firm loses the ability to be flexible.

Fully Vertically Integrated

All activities are conducted within the boundaries of the firm.

The following two types of portfolio companies are focused on transformational interventions at the acquired companies:

Architect and surgeon

To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) _____. A. harvest strategy B. acquisitions-led growth strategy C. unrelated diversification strategy D. exit strategy

B. acquisitions-led growth strategy

A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A. proprietorship B. cooperative C. strategic alliance D. leveraged buyout

C. strategic alliance

Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy? a. Peter's Pans is experiencing principal-agent problems. b. Peter's Pans is positioning itself for a merger. c. Peter's Pans is trying to overcome competitive disadvantage. d. Peter's Pans has superior acquisition and integration capability.

Peter's Pans is trying to overcome competitive disadvantage

Task significance

The extent to which a job affects the lives of others, whether inside or outside the organization The extent to which a job affects the lives of others, whether inside or outside the organization

Corporate governance methods are ultimately responsible for ensuring the honesty and integrity of the firm. This can be especially problematic for high-rising "unicorn" firms that sometimes grow more quickly than their governance structures can mature. Which one of the following is the best evidence that Uber may be facing a problem of corporate governance?

Uber has shown open disregard for laws and partnerships with Carnegie Mellon University.

In ______, a single investor or group of investors buys, with the help of borrowed money, the outstanding shares of a publicly traded company and assumes control of it.

a leveraged buyout

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of a. Related-linked diversification b. Cost-leadership c. Unrelated diversification d. Hostile takeovers

a. Related-linked diversification

Corporate governance involves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest. a. True b. False

a. True

Corporate governance is a means to establish and maintain harmony between parties (the firm's owners and its top-level managers) whose interests may conflict. a. True b. False

a. True

Cultural influences may affect location advantages in that business transactions are easier for a firm to complete when there is a strong cultural match with which the firm is involved while implanting its international strategy. a. True b. False

a. True

In modern corporations—especially those in the United States and the United Kingdom—a primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders. a. True b. False

a. True

The separation of the positions of CEO and chairperson of the board of directors reduces the power of the CEO over firm governance practices. a. True b. False

a. True

accessing critical complementary assets

The scandal at Luckin Coffee is being portrayed by the company as perpetrated by ________, whereas some analysts suspect it is more likely by a ________.

bad apples; bad barrel

Taper integration

combo

Which of the following are advantages of joint ventures? (Check all that apply.)

commitment trust strong ties

As organizations become more flexible and responsive to environmental trends, there is a distinct shift toward ________ decision making.

decentralized

Bob works in a mid-sized organization with other skilled workers who all pitch in to do what needs to be done to satisfy the customer. It is likely Bob works in a ________ organization.

decentralized

Knowledge that can be codified is also called ______ knowledge.

explicit

Corporate governance needs to address the issue of adverse selection, which describes the difficult for the principal to know whether the agent has really put forth his/her best efforts.

false

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a

focused differentiation strategy.

Which of the following is an ineffective practice in alliance management? coordinating a firm's portfolio of alliances establishing knowledge-sharing routines between alliance partners developing relational capabilities to manage mergers and acquisitions focusing on developing an alliance-management capability in isolation

focusing on developing an alliance-management capability in isolation

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

A disadvantage of ________ departmentalization is poor communication across the different groups

functional

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks? the possibility for legal repercussions from the FTC integration failure higher costs reduced flexibility

higher costs

When two competitors merge, leading to industry consolidation, they are engaging in ______.

horizontal integration

age, skill, and experience are examples of _____

informal status categories

Roberta has been asked to complete a questionnaire about her job duties and the qualifications she believes a candidate for her position should have. Roberta is participating in a ________.

job analysis

Which of the following focuses on five core job characteristics that affect the psychological states of an employee, which in turn affect work outcomes?

job characteristics model

A standalone organization that two or more parent companies create and own together is a ___.

joint venture

A(n) __ is a standalone organization created and jointly owned by two or more parent companies. a. equity alliance b. standalone subsidiary c. joint venture d. strategic alliance

joint venture

The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ______.

joint venture

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm's slogan, We Guarantee Success! However, Tom's constituents presented him with data on their latest project which suggests that they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can't lose. This is a classic example of CEO dedication. managerial hubris. strategic intent. cost benefit analysis.

managerial hubris

Why did Quaker Oats Company's acquisition of Snapple fail? intercompany competitiveness managerial hubris stockholder revolt unstable market conditions

managerial hubris

The _____ is an external governance mechanism that is active when a firm's internal governance mechanisms fail.

market for corporate control

Agency costs do NOT include:

opportunity costs. Agency costs are the sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent. Agency costs do not include opportunity costs.

When prioritizing the tasks you need to complete to reach your career goals, you should ______.

order them from low importance to high importance

Many of Custom Leather's employees are experienced artisans. The jobs most of them perform are not highly standardized. They take great pride in their craft and require few formal rules and little direct supervision. These traits are most typical of a(n) ________ organization

organic

________ is the formal arrangement of jobs within an organization

organizational structure

Organic

organizations have a low degree of specialization and formalization as well as a flat organizational structure.

Horizontal integration can reduce ______.

the threat of entry

Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.)

to strengthen their competitive position to enter new markets to learn new capabilities

he ________ view of conflict management argues that conflicts must be avoided as it indicates a problem within the group.

traditional

When a firm is more efficient in organizing economic activity than markets are, the firm should ______. a. horizontally integrate b. merge with another firm c. vertically integrate d. pursue a cost-leadership strategy

vertically integrate

core competencies

unique strengths embedded deep within a firm

The building of a bridge would be a type of ________

unit production

_______ is a type of technology that centers on small-batch production.

unit production

Which of the following occurs when agents are better informed than principals?

information asymmetry

If top managers make key decisions with little input from below, then the organization is ________.

more centralized

Employees who work in organizations that emphasize ethical behavior are ______.

more likely to act ethically.

The psychological processes that arouse and direct goal-directed behavior are collectively called ______.

motivation

Ethics is A) not synonymous with law. B) impossible to codify into law. C) universal and cannot differ between cultures. D) the minimum acceptable standard in business practice.

Zipster is a local manufacturer of athletic shoes. Zipster has decided it wants to expand to global markets and to offer a larger selection of items. It plans to offer not just athletic shoes but also luggage and car accessories. Zipster is engaging in __. -fully vertical integration -backward integration -diversification -equity alliances

-diversification

In the Boston Consulting Group growth-share matrix, each of the four categories in the matrix represents __. -a kind of taper integration strategy -points on the make-or-buy continuum -a different investment strategy -individual economies of scope

-a different investment strategy

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following on the business level? -a focused cost leadership strategy -a broad differentiation strategy -a focused differentiation strategy -a broad cost leadership strategy

-a focused differentiation strategy

The luxury car division of Tata Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following on the business level? -a focused differentiation strategy -a broad cost leadership strategy -a focused cost leadership strategy -a broad differentiation strategy

-a focused differentiation strategy

Olivia's, an olive oil company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shop. Olivia's is an example of __. -a fully vertically integrated company -a horizontally disintegrated company -a vertically disintegrated company -parent-subsidiary relationship

-a fully vertically integrated company

Transaction cost economics help managers do which of the following? -understand which new products to commercialize -choose which activities to carry out within the firm -avoid paying transaction costs -make sure that the firm can fulfill its taxpayer responsibilities

-choose which activities to carry out within the firm

Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice ____________.

-conforms to the traditional notion of shareholder capitalism -fails to take into account the idea of corporate social responsibility

Which type of cost in a related-diversification strategy is a function of the number, size, and types of businesses that are linked? -influence -geographic -resource allocation -coordination

-coordination

When a business answers the question of where to compete, it is determining __. -business strategy -differentiation -corporate strategy -a marketing plan

-corporate strategy

In order to assess whether __ is working, managers can ask if the individual businesses are worth more under the firm's management or if they are worth more under individual management. -diversification -taper integration -franchising -vertical integration

-diversification

TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the __. When they announced the spin-off, the stock price of TWN went up by 5%. -diversification discount -diversification premium -influence costs -economies of scale

-diversification discount

In the Boston Consulting Group matrix, __ hold the small market share in a low-growth market. -question marks -stars -dogs -cash cows

-dogs

Addition functions of a board of directors beyond general strategic oversight include ________.

-ensuring that the firms accounting practices and reports are accurate -assessing and mitigating risk -selecting, evaluating, and compensating the CEO

Which of the following are types of strategic alliances? (Check all that apply.) -equity alliances -parent-subsidiary relationship -long-term contracts -joint ventures -mergers

-equity alliances -long-term contracts -joint ventures

In order to reconcile economic and social needs, managers should focus on ___________.

-expanding value chains to include NGOs and other organizations committed to social goals -creating new regional clusters and business centers -making products affordable for the poorest socioeconomic groups in order to improve standards of living.

Advantages of vertical integration include which of the following? (Check all that apply.) -facilitating scheduling -an FTC challenge due to monopoly concerns -bettering quality -reducing costs -diversifying partnerships with other firms

-facilitating scheduling -bettering quality -reducing costs

Which of the following are types of vertical integration along the industry value chain? (Check all that apply.) -forward -scheduled -simultaneous -backward

-forward -backward

Kanya loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kanye the right to use its trademark and name, and Kanye agrees to follow Benicio's Burritos guidelines. This is an example of __. -equity alliance -short-term contracts -franchising -licensing

-franchising

Taper integration allows firms to __ (Check all that apply). -gain knowledge from external sources -be more flexible when responding to market changes such as fluctuations in demand -avoid market competition -be fully vertically integrated without relying on outside suppliers or outside distributors

-gain knowledge from external sources -be more flexible when responding to market changes such as fluctuations in demand

Which of the following are advantages of organizing economic activity OUTSIDE of a firm? (Check all that apply.) -lower administrative costs -command-and-control decision making -high-powered incentives -the creation of a community of knowledge

-lower administrative costs -high-powered incentives

Stages four and five of the industry value chain involve __ (Check all that apply). -manufacturing -marketing -sales -final assembly -after-sales service and support

-marketing -sales -after-sales service and support

What is a related-linked diversification strategy? -one in which a firm derives more than 70% of its revenues from a single business and there are few, if any, linkages among its businesses -one in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business -one in which executives purse various businesses opportunities that share only a limited number of linkages -one in which a firm's low- and mid-level workers convince executives to give them a change to decide corporate strategy

-one in which executives purse various businesses opportunities that share only a limited number of linkages

According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard?

-organization -control

The forms of specialized assets include which of the following? (Check all that apply.) -relational specificity -operation specificity -physical-asset specificity -geographical specificity -human-asset specificity -site specificity

-physical-asset specificity -human-asset specificity -site specificity

What are the main types of corporate diversification? (Check all that apply.) -related diversification -single business -horizontal diversification -double business -unrelated diversification -dominant business

-related diversification -single business -unrelated diversification -dominant business

Corporate strategy needs to be dynamic over time in order to __ (Check all that apply). -respond to the ever-changing external environment -avoid paying for coordination and influence costs -diversify to capture growth opportunities -keep and maintain a competitive advantage

-respond to the ever-changing external environment -diversify to capture growth opportunities -keep and maintain a competitive advantage

Which type of alternative on the make-or-buy continuum involves competitive bidding by external companies hoping to acquire a temporary arrangement with a firm? -parent-subsidiary relationships -franchising -short-term contracts -joint ventures

-short-term contracts

Why did Coca-Cola enter into a strategic alliance with Monster? -so that is could gain private information to determine whether an acquisition might be beneficial -so that it could own every stage of its industry value chain -so that it could use Monster's trademark and business processes -so that it could have full control of Monster regardless of the risk

-so that is could gain private information to determine whether an acquisition might be beneficial

The shared value creation framework encourages managers to focus on which of the following needs?

-social -economic

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following? -taper integration -transaction cost economics -offshoring -strategic alliances

-strategic alliances

The Tata Group has SBUs operating in a variety of industries, from automobiles to hospitality. The Tata Group is an example of which type of diversification? -single business -dominant business -unrelated -related

-unrelated

Amazon's explosive success is largely due to which of the following? (Check all that apply.) -information asymmetry -vertical integration -single business focus -diversification

-vertical integration -diversification

When a firm is more efficient in organizing economic activity than markets are, the firm should __. -vertically integrate -merge with another firm -pursue a cost-leadership strategy -horizontally integrate

-vertically integrate

Business Level Strategy Questions

1. Who are the customer segments we will serve? 2. What customer needs, wishes and desires will we satisfy? 3. Why do we want to satisfy them? 4. How will we satisfy them?

According to self-determination theory, people's behavior and well-being are influenced by what three innate needs?

1. competence 2. autonomy 3. relatedness

What are the stages of Victor Vroom's expectancy theory of motivation? (2)

1. effort to performance 2. performance to outcomes

Which theories of motivation are characterized as process perspectives? (3)

1. equity theory 2. goal-setting theory 3. expectancy theory

Which guidelines should be followed when giving positive reinforcement? (2)

1. give rewards as soon as possible 2. be clear about what behavior is desired

Why is creating a time schedule important when it comes to developing a career management plan? (2)

1. it enables you to monitor your progress 2. it helps you organize your schedule

What three types of justice are the components of organizational justice?

1. procedural 2. interactional 3. distributive

Which of the following statements accurately brings out the difference between closed innovation and open innovation? A. Firms following the open innovation model are much more likely to be prone to the not-invented here syndrome than firms pursuing a closed innovation model. B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market. C. Firms following the open innovation model are more protective about their intellectual property than firms pursuing a closed innovation model. D. While open innovation means introducing new technologies to new markets, closed innovation refers to introducing new technologies to existing markets.

) 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.

) Shareholders of public companies need to appoint a board of directors to represent their interests because A) of the separation of ownership and control. B) employees of a company cannot be shareholders. C) the board of directors itself is made up of shareholders. D) the shareholders want tighter control over day-to-day operations of a company.

100. A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure.

104. Boards of directors are now becoming more involved in a. the strategic decision-making process. b. selecting new CEOs. c. the firm's tax issues. d. governmental relations.

114. The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is a. setting the option strike price substantially higher than the current stock price. b. insuring that the strike price value of the options can be lowered if the organizational environment becomes more risky. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope.

120. Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to 3 years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received a. a golden parachute. b. a poison pill. c. greenmail. d. a silver handshake.

121. The repurchase at a premium of the target firm's shares that were acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

123. Historically, _____ have been at the center of German corporate governance structure. a. banks b. institutional shareholders c. public pension funds d. government agencies

130. Which of the following is TRUE of trends in Japan's corporate governance structure? a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals. b. Increased regulation in the financial sector has increased the cost of mounting hostile takeovers. c. Banks' influence over corporations is increasing. d. The gap in compensation between CEOs in public and private companies is increasing.

78. An agency relationship exists when one party delegates a. decision-making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party.

82. The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry.

89. Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to a. align financial institutions' actions with society's interests. b. increase the number of foreign firms listing on U.S. stock exchanges. c. require CEOs to attest to the accuracy of their companies' financial reports. d. increase consumer protection in pharmaceutical products.

90. Usually, large-block shareholders are considered to be those shareholders with at least _____ percent of the firm's stock. a. 5 b. 25 c. 50 d. 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 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

According to the agency theory, A) conflicts that arise in corporations should be addressed in the legal realm. B) corporations are more than a set of contracts between parties. C) companies should focus on generating profits for stockholders. D) principals and agents have interchangeable roles.

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.

Arnold is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Arnold most likely to agree? A) Businesses can use their resources to create profit as long as they do so within the rules of the game. B) Firms must go beyond their economic responsibility and act in socially responsible ways. C) Firms should define value creation broadly in terms of environmental impact. D) Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.

Ben is a manager at Unique Accessories Inc. and is friends with the company's CEO. This privilege gives Ben the information that Unique Accessories is in the midst of talks to take over a leading rival. Ben buys stocks of Unique Accessories with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of Unique Accessories depreciate in the following months. Are Ben's actions unethical? Why or why not? A) Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome. B) Yes. It is illegal and unethical for Ben to possess any kind of insider information. C) No. Ben did not ask the CEO to disclose such information to him. D) No. Ben did not make any profits from trading stocks using this information.

Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test? A) Firms can apply the VRIO framework for the second test. B) Firms can implement various financial metrics like NPV and IRR. C) Firms can employ external analysis tool like PESTEL and Porters Five Forces. D) Firms can use an international framework to determine global relevancy.

Delores recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Delores to undertake to help safeguard the company's financial health? A) Request and review a copy of the firm's risk assessment plan, if such a plan exists. B) Take part in the annual reviews of employees in the financial department. C) Draft and circulate a statement that the firm's board members serve at the pleasure of the CEO. D) Determine how to postpone or evade the firm's compliance with local, regional, and national regulations.

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.

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are A) similar to those that need to be developed and superior to those of competitors in the targeted area. B) similar to those that need to be developed and inferior to those of competitors in the targeted area. C) different from those that need to be developed and superior to those of competitors in the targeted area. D) different from those that need to be developed and inferior to those of competitors in the targeted area.

Jack is a board member of firm A but is not an employee of firm A; Jack is a senior executive from firm B. Jack can best be described as a(n) A) outside director. B) inside director. C) shareholder. D) philanthropists.

Josie wants to invest in the stock market but is afraid of losing more money than what she invests. Josie need not worry because of A) limited liability for investors .B) transferability of investor ownership. C) legal personality. D) separation of legal ownership and management control.

Marika received a tip from a close friend who is an executive manager of a publicly traded company called MicroGreen Inc. The manager received some inside information about how to trade MicroGreen stock to get a huge profit. He shared this information with Marika. This scenario is an example of A) information asymmetry. B) adverse selection. C) stakeholder strategy. D) shared value creation.

Martha received a tip from a close friend who is an executive manager of a publicly traded company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of A) information asymmetry. B) adverse selection. C) stakeholder strategy. D) shared value creation.

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a A) hostile takeover. B) friendly takeover. C) joint venture. D) strategic alliance.

Sanjaya was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically? A) Observe executives at the company, and see whether they model ethical behavior and demand it of others. B) Research the results of the ethics violations. If the perpetrators were fired or jailed, then the rest of the company is sound. C) Check the company's mission statement to make sure that it guarantees respect and integrity. D) Ignore the alleged ethics violations because there is no one standard of ethical behavior.

Shareholders of public companies need to appoint a board of directors to represent their interests because A) of the separation of ownership and control. B) employees of a company cannot be shareholders. C) the board of directors itself is made up of shareholders. D) the shareholders want tighter control over day-to-day operations of a company.

Some argue that the global financial crisis of 2008 was worsened because large fortune 500 companies did not practice effective A) corporate governance. B) external analysis. C) balanced scorecard techniques. D) co-opetition.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A) informational advantage of the lower-level employees. B) higher number of lower-level employees than senior executives. C) knowledge of employees regarding day-to-day tasks. D) operational expertise of lower-level employees in concentrated areas of a particular field.

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways? A) acquisitions B) nonequity alliances that contain contractual agreements C) equity alliances D) joint ventures

When does a merger between companies typically occur? A) when two firms of comparable size join to form a combined entity B) when large, incumbent firms buy start-up companies C) when a target firm does not want to be acquired D) when two or more firms enter a temporary vertical strategic alliance

Which of the following could be used as an example of why a stakeholder strategy approach to business has shortcomings? A) the nonsustainable debt levels incurred by sovereign governments to fund social programs B) the financial crisis in Europe brought about by money lenders seeking to make quick money C) the collapse of the economy in the United States brought about by the housing crisis D) the rise of GDP in countries that do not believe in Milton Friedman's philosophy

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

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

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.

Which of the following is a common drawback of a nonequity alliance? A) lack of trust between partners B) difficulty initiating the contract C) difficulty terminating the contract D) lack of flexibility for the partners

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.

Which of the following is true of acquisitions? A) They can be friendly or hostile. B) They can occur only when the involved entities are of comparable size. C) In acquisitions, two independent companies join to form a separate third entity. D) Acquisitions increase the competitive intensity in an industry.

Which of the following is true of business ethics? A) Certain notions such as fairness, honesty, and reciprocity are universal norms. B) Business ethics is an agreed-upon code of conduct in business, based on laws. C) The perception of what is ethical and what is not is similar across different cultures. D) Business ethics needs to be codified into law in order to be followed.

Which of the following is true of the board of directors in a public stock company? A) Votes at shareholder meetings determine whose representatives are appointed to the board of directors. B) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. C) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. D) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.

Which of the following is true of the codes of conduct of an organization? A) They detail how the organization expects an employee to behave and to represent the company in business dealings. B) They are a reiteration of the laws pertaining to business dealings in a corporate environment. C) They are a guide to determine what is lawful and what is unlawful. D) They help the board of directors and the CEO implement shareholder capitalism.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A) Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. B) GE knew that it could create a profitable venture out of producing green products, so it rolled out the Ecomagination strategy. C) Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. D) Goldman Sachs followed through with the Abacus deal despite knowing its shortcomings.

Which of the following scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Rigoletto Inc.? A) The owner of another company buys all the outstanding shares of Rigoletto in order to take it private. B) A private equity firm, Stormcloud Inc., buys a large number of shares of Rigoletto in order to publicly trade it under a new name. C) Rigoletto sells all its shares and declares bankruptcy. D) Rigoletto buys back a large amount of its own shares from the stock market.

Which of the following statements is true of joint ventures? A) They enable the exchange of both tacit and explicit knowledge. B) They reduce the possibilities of trust and commitment. C) They are characterized by single reporting lines. D) They cannot entail long negotiations.

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework? A) Doing so could yield significant business opportunities that could improve the standard of living of the poor. B) Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization. C) Doing so could be the only way to meet stockholder expectations in a highly competitive market. D) Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains.

he root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A) informational advantage of the lower-level employees. B) higher number of lower-level employees than senior executives. C) knowledge of employees regarding day-to-day tasks. D) operational expertise of lower-level employees in concentrated areas of a particular field.

Which of the following are examples of moral hazard? (Check all that apply.)

A company dumps pollution into a local lake that will be cleaned using taxpayer money. Banks make very risky loans with the knowledge that the government will bail them out if necessary. A CEO with a multi-million-dollar severance agreement performs poorly knowing he will be well compensated even if he is laid off.

Moral Hazard

A company scientist working on personal research, The profits of successful risk taking stay with the private firm while the risks are shared with other parties.

Boston Consulting Group (GCG)

A corporate planning tool in which the corporation is viewed as a portfolio of business units, which are represented graphically along relative market share (horizontal axis) and speed of market growth (vertical axis). SBUs are plotted into four categories (dog, cash cow, star, and question make) each of which warrants a different investment strategy.

Which of the following are true of alliance management capability? (Select all that apply.)

A firm may need to employ it with several different alliances. It involves partner selection and alliance formation.

Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes?

A major winter storm shuts down Pete's production for several days.

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 accurately describes a common difference between a merger and an acquisition? A merger tends to include mostly small firms; an acquisition can often involve large firms. A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. A merger involves firms of different size; an acquisition involved firms of the same size. A merger tends to be friendly; an acquisition can be friendly or unfriendly

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

Equity Alliance (Strategic Alliances)

A partnership in which at least one partner takes partial ownership in the other partner; A partner purchases an ownership share by buying stock (making an equity investment).

Exvax Inc., a biotechnology company, was established to develop an effective vaccine against a deadly virus. As such, a large investment firm formed an equity alliance with Exvax that resulted in a significant financial investment that followed a string of smaller investments so long as Exvax continued to make headway towards their vaccine. This "wait and see approach" by the large investment firm can best be described as

A real-options perspective

Transaction Cost Economics

A theoretical framework in strategic management to explain and predict the scope of the firm which is central to formulating a corporate level strategy that is more likely to lead to competitive advantage. Insights gained from this help mangers decide what activities to do in-house versus what services & products to obtain from the external market.

Taper Integration (Alternatives to Vertical Integration)

A way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside market firms for some of its supplies, and/or is forwardly integrated but also relies on outside market firms for some of its distribution. Ex: Apple and Nike both use Taper Integration - they both own retail outlets but also use other retailers, both brick and mortar and online. Benefits: 1. Exposes in-house suppliers and distributors to market competition. 2. Enhances a firm's flexibility. 3. Firms can combine internal and external knowledge, possibly paving the path for innovation.

Which of the following best illustrates a non-equity alliance? A. A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. B. An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company C. A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices D. An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc.

A. A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component

6. Which of the following is true of acquisitions? A. Acquisitions can be friendly or hostile. B. Acquisitions can occur only when the involved entities are of comparable size. C. In acquisitions, two independent companies join to form a separate third entity. D. Acquisitions increase the competitive intensity in an industry.

A. Acquisitions can be friendly or hostile.

_____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies. A. Corporate venture capital investments B. Greenfield ventures C. Joint ventures D. Loan sharks

A. Corporate venture capital investments

Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A. Equity alliance B. Non-equity alliance C. Greenfield venture D. Joint venture

A. Equity alliance

Bill is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Bill should be hired as a sales person in the company. However, in his resume, Bill had not mentioned his previous work experience as he was fired from that job on the account of using illegal drugs. Which of the following does this scenario best illustrate? A. Information asymmetry B. Principal-agent problem C. Experience-curve effect D. Learning-curve effect

A. Information asymmetry

Which of the following is true of a disruptive innovation? A. It targets existing markets. B. It initially provides high-cost solutions to existing problems. C. It introduces a radical idea and creates a new industry. D. It attacks the market through a top-down process.

A. It targets existing markets.

_____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A. Learning races B. Learning networks C. Learning effects D. Learning matrices

A. Learning races

hitoro Inc. developed a superior touchscreen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A. Licensing B. Franchising C. Crowdsourcing D. Bootlegging

A. Licensing

____ is best described as a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. A. Managerial hubris B. Managerial myopia C. Self-actualization D. Self-efficacy

A. Managerial hubris

_____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea. A. patent B. promissory note C. franchise D. royalty

A. Patent

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A. PureSource Pharma will lower its costs through economies of scale. B. PureSource Pharma will diminish its economic value creation. C. PureSource Pharma will increase its cost of distribution. D. PureSource Pharma will reduce the size of its sales force.

A. PureSource Pharma will lower its costs through economies of scale.

Tommy is the CEO of a private start-up firm that is valued at just over $1.2 billion dollars. His firm can be classified as being a A) highly differentiated firm. B) unicorn. C) conglomerate. D) dominate firm.

A. PureSource Pharma will lower its costs through economies of scale.

Which of the following statements is true of joint ventures? A. They enable the exchange of both tacit and explicit knowledge. B. They reduce the possibilities of trust and commitment. C. They are characterized by single reporting lines. D. They cannot entail long negotiations.

A. They enable the exchange of both tacit and explicit knowledge.

Which of the following is NOT a reason why firms enter alliances? A. To replace competitive advantage with competitive parity B. To strengthen competitive position C. To enter new markets, either in terms of geography or products and services D. To learn new capabilities

A. To replace competitive advantage with competitive parity

4. When does a merger between companies typically occur? A. When two firms of comparable size join to form a combined entity B. When large, incumbent firms buy startup companies C. When a target firm does not want to be acquired D. When two or more firms enter a temporary vertical strategic alliance

A. When two firms of comparable size join to form a combined entity

The local real estate companies in a city have joined together and arranged a "Property Fair." The expenses of the event will be shared equally by the sponsors. 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: A. co-opetition. B. bootstrapping. C. a cartel. D. merging.

A. co-opetition.

A(n) _____ leverages new technologies to attack existing markets. A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

A. disruptive innovation

A factor favoring the success of disruptive innovation is that: A. incumbent firms are slow to change. B. new entrants have highly formal organizational structures and processes. C. the low end of the market is highly guarded. D. incumbent firms focus on radical innovation rather than incremental innovation.

A. incumbent firms are slow to change.

New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry. A. joint venture B. non-equity alliance C. hostile takeover D. equity alliance

A. joint venture

In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for: A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. B. providing technical expertise and knowledge needed for the specific technical area in an alliance. C. providing alliance training and development, as well as diagnostic tools. D. serving as an alliance process resource and business integrator between the two alliance partners.

A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of _____. A. related-linked diversification B. cost-leadership C. unrelated diversification D. hostile takeovers

A. related-linked diversification This is because some, but not all, of Disney's business activities share some common resources, capabilities, and competencies.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because: A. the U.S. population was growing slowly and becoming more health conscious. B. its strategic position in the U.S. market was well protected through high entry barriers. C. this would help the company gain access to large cocoa plantations in China. D. Hershey's main strategic focus was on product and market diversification and not on the domestic market.

A. the U.S. population was growing slowly and becoming more health conscious.

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 _____. A. the real-options perspective B. co-opetition C. explicit knowledge D. the stakeholder strategy

A. the real-options perspective

TrueAutos 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? A.The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. B. The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. C. The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. D. The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.

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

Why did Facebook acquire Instagram in 2012?

Access to a new capability or competency Access to new markets and distribution channels Pre-empt rivals

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.

Iselectrics, 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 Iselectrics's European sales? Alert the European Union that conditions in the European medical technology market are approaching oligopoly. Initiate a hostile takeover of a European rival. Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels. Contact its congressional representative to request higher tariffs on European technology products.

Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels

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

Acquisition

Effective management of the stakeholders can lead to greater organizational flexibility and __________. Credibility Core competence Adaptability Product quality

Adaptability

Domenick 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 Domenick based on his stated credentials without verifying them. Two days into the job, Domenick's team lead realizes that Domenick does not know much of what he claimed to know duringthe interview. This scenario best exemplifies

Adverse Selection

There are some industries that are more competitive in some countries than others. In order to fully understand why this occurs, we need to examine Porter's Diamond framework. Which of the following below is NOT one of the four factors in this framework?

Adverse selection

Discuss the agency problem of adverse selection

Adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principal-agent relationships, for example, adverse selection describes a situation in which an agent misrepresents his or her ability to do the job. Such misrepresentation is common during the recruiting process. Once hired, the principal may not be able to accurately assess whether the agent can do the work for which he or she is being paid.

____ are the sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent.

Agency costs

Which of the following statements is true?

Agency costs include incentives for executives, monitoring, enforcement costs, and any individual financial losses incurred by principals.

An individual who acts on behalf of others is referred to as ______. Principal Shareholder Agent Stakeholder

Agent

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.

Which of the following statements are correct regarding the interests of principals and agents? (Check all that apply.)

Agents may be more interested in personal goals, such as maximizing their compensation or gaining power. Principals want to maximize shareholder returns.

Transaction Costs

All costs associated with economic exchange, whether within a firm or in markets. Enables managers to answer the question of whether it is cost-effective for their firm to grow its scope by taking on greater ownership of the production of needed inputs or of the channels by which it distributes its outputs. When costs of pursuing an activity in-house are less than the costs of transacting for that activity in the market, then the firm should vertically integrate by owning production of the needed inputs or channels for the distribution of outputs.

Administrative Costs

All costs pertaining to organizing an economic exchange within a hierarchy, including recruiting and retaining employees, paying salaries and benefits, and setting up a business. Tend to increase with organization size and complexity.

Susan owns a firm that is considered fully integrated. Which of the following statements below would best describe a firm that is fully integrated?

All of Susan's business activities are conducted within the boundaries of the firm.

A firm's effective stakeholder management can ___________. Reduce negative outcomes and risks Induce information inflow Build a strong reputation All of these

All of these

Which of the following can be considered a firm's stakeholder? Customers Suppliers Financiers All of these

All of these

In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development? A. The alliance champion B. The alliance leader C. The alliance manager D. The alliance boss

C. The alliance manager

Which of the following statements is true about managing alliance-related tasks? Forming an alliance with another firm prohibits that firm from forming other alliances. Alliance-management capability is based on three alliance-related tasks. A merger is one of the three options for alliance design and governance. In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

Alliance-management capability is based on three alliance-related tasks

Which of the following statements about managing alliance-related tasks is true?

Alliance-management capability is based on three alliance-related tasks.

Which of the following statements about managing alliance-related tasks is true? Forming an alliance with another firm prohibits that firm from forming other alliances. Alliance-management capability is based on three alliance-related tasks. A merger is one of the three options for alliance design and governance. In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

Alliance-management capability is based on three alliance-related tasks.

SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called

An Agency

Chick-fil-A's policy of closing all of its restaurants on Sundays, Thanksgiving, and Christmas is

An artifact

Discuss the implications for the strategist in the context of corporate governance and sustained competitive advantage

An important implication for the strategist is the recognition that effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. A variety of corporate governance mechanisms can be effective in addressing the principal-agent problem. These mechanisms tend to focus on monitoring, controlling, and providing incentives, and they must be complemented by a strong code of conduct and strategic leaders who act with integrity. The strategist must help employees to "walk the talk"; leading by ethical example often has a stronger effect on employee behavior than words alone. The strategist needs to look beyond shareholders and apply a stakeholder perspective to ensure long-term survival and success of the firm. A firm that does not respond to stakeholders beyond stockholders in a way that keeps them committed to its vision will not be successful. Stakeholders want fair treatment even if not all of their demands can be met. A minimum of fairness and transparency is critical to maintaining good relationships within the network of stakeholders the firm is embedded in. Finally, the large number of glaring ethical lapses over the last decade or so makes it clear that ethical values and a code of conduct are key to the continued professionalization of management.

Retrenchment

Arc Technology Inc., an American software company, needed to cut costs to remain competitive. As a result, the firm laid off about 10 percent of its workforce in 2011 to ensure the viability of the business in the future. In this example, Arc Technology Inc. uses which of the following strategies

IBM is an example of a company that adds value through transformation of its acquisitions. This is an example of a(n) ___________ portfolio company.

Architect

American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern? Require business units at American Snacks and Très Bien to sign loyalty pledges. Encourage business units at American Snacks to act independently. Arrange for the alliance to be managed at the corporate level. Sever the relationship with Très Bien and find a more trusting corporate partner

Arrange for the alliance to be managed at the corporate level.

What is a major problem for between 30% and 70% of all strategic alliances?

At least one partner in the alliance considers the venture to be a failure.

Competitive Intensity in a Focal Industry

Auto Industry in Germany

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

Availability of Complements

101. Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet.

110. Managers in the United States receive _____ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

111. The longer the focus of managerial incentive compensation, the greater the _____ top-level managers. a. earnings potential for b. risks borne by c. incentives for d. potential tax burden for

99. The New York Stock Exchange requires that the audit committee be a. available to comment to external analysts. b. headed by outside directors. c. liable for any illegal actions by the top management team. d. made up of CPAs with auditing experience.

A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n) A) nonequity alliance. B) equity alliance. C) joint venture. D) capital venture.

113. The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.

115. The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned.

124. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision making is based on authority and few conflicts emerge. d. Mr. Abercrombie should find significant need for his services in companies in transitional economies.

126. Which of the following statements is about corporate governance in Germany is FALSE? a. The Vorstand (management board) of a German corporation makes decisions about strategy and management. b. The Vorstand is elected by the firm's employees. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock.

129. _____ is an important influence in Japanese corporate governance structures. a. Innovation b. Consensus c. Competition d. Individualism

132. The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers.

134. International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a. the director of food service for IFS b. the board of directors of IFS c. the employees directly involved in the wrongdoing d. the head of contract services for the Marines

70. In the United States, the fundamental goal of business is to a. ensure customer satisfaction. b. maximize shareholder wealth. c. provide job security. d. generate profits.

73. Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors b. shareholders and managers c. the board of directors and managers d. None of the these options are correct.

74. Corporate governance is important to nations because a. shareholders want large stock returns. b. firms seek to invest in nations with national governance standards that are acceptable to them. c. company boards have lobbied for strong governance. d. the United States requires that other nations adopt its governance practices.

75. Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is most likely to be TRUE? a. Agency costs at Amos Ball are high. b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO. c. At Amos Ball, the opportunity for managerial opportunism is high. d. The functions of risk-bearing and decision making are separate at Amos Ball.

80. Managers may decide to invest _____ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets

83. In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets.

85. Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm.

91. Ownership concentration is determined by both a. the number of stockholders and the parties they represent. b. the number of stockholders and total percentage of shares they own. c. the number of outside directors and the parties they represent. d. the number of outside directors and total percentage of shares they own.

98. Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(n) _____ director. a. lead independent b. inside c. related d. encumbered

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.

According to Michael Porter, which of the following is a problem with many publicly traded companies? A) Shareholders of publicly traded companies do not have a legitimate claim on profits. B) They have defined value creation too narrowly in terms of financial performance. C) There is no transferability of stock ownership in publicly traded companies. D) Publicly traded companies have no legal standing and are not responsible for their debts.

According to the perspective of shareholder capitalism, shareholders in public stock companies A) are restricted from buying shares of two competing companies. B) have the most legitimate claim on profits. C) have significant decision-making power. D) have unlimited financial liability.

All of the following are examples of external-governance mechanisms except A) industry analysts. B) shareholders. C) auditors. D) government regulators.

Andrew is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders? A) Andrew needs to focus on the company's earnings because that is what shareholders care about. B) He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price. C) He should discourage pension funds from investing because they are interested in safety at the expense of growth. D) He should make the company stock available only to hedge funds so he will have the freedom to take risks as the firm expands.

At Agile Ltd., a cross-functional team is formed to work on a project for a new client. The team consists of Charles and four other members. At most of the team's presentations to senior management, Charles takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Charles is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Charles did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Agile Ltd. is a typical consequence of A) moral hazard. B) adverse selection. C) shared value creation. D) corporate governance.

Barrett is the ethics officer at Exton Corp., a publicly traded company. She wants to make sure that on-the-job consumption at Exton stays within legal and ethical bounds. Which action should she and the Exton board of directors take? A) Forbid high-cost items such as executive office decoration, but permit lavish parties and celebrations because they are essential for morale. B) Set strict limits on what executives can spend on office redecoration or work-related celebrations. C) Do nothing. On-the-job consumption is a necessary part of hiring and retaining key executives. D) Permit on-the-job consumption but cancel executive bonuses.

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A) Recent advances in management science have greatly improved the success rate of strategic alliances. B) Many owners, managers, and business analysts believe they are essential to survive in an industry. C) Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D) These alliances have an excellent record of success if managers have enough confidence in the outcome.

CPA Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Joaquin. The stockholders expect Joaquin to make decisions that will benefit the company. However, Joaquin begins to find ways to maximize his total compensation, which hinders CPA's performance. This scenario reflects A) value creation problems. B) principal-agent problems. C) inside director-outside director problems. D) adverse selection problems.

Dana wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission (FTC). Which of the following strategic options should Dana pursue? A) Dana should implement green field operations with the marketing firm to strengthen her interanion reach. B) Dana should consider forming a strategic alliance with the marketing firm. C) Dana should move forward with a hostile takeover of the marketing firm. D) Dana should purchase the marketing firm outright via an acquisition.

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)? A) Uber promised a large donation to NREC but then reneged on the offer when NREC would not provide Uber with researchers. B) Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC. C) Uber allegedly stole ideas from the NREC research team and then claimed that these ideas were generated by their own researchers. D) Uber bribed NREC officials to give permission for building an extension to the NREC facility that focuses solely on Uber research.

Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda'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? A) transferability of investor ownership B) legal personality C) limited liability for investors D) separation of legal ownership and management control

Jennifer is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The Board of Directors for JustFixIt Inc. suggested that enter a contractual agreement with a partner. This scenario best illustrates the concept of A) buy-sell-or-trade framework. B) build-borrow-or-buy framework. C) the horizontal and vertical integration frameworks. D) the strategic alliance framework.

Mary owns Kind Corporation and wants to maintain a dual focus on creating shareholder value while at the same time increasing value for society as a whole. Mary is following the A) balanced scorecard framework. B) shared value creation framework. C) shareholder capitalism framework. D) philosophy of Milton Friedman.

Megan is a graduate student pursuing a course in business. Presented with the case of a company's unethical behavior, Megan wonders if the company's board of directors should ask the CEO to step down. Having a strong belief in Michael Porter's idea of value creation, Megan is most likely to conclude that company's board of directors A) should not ask the CEO to step down because doing so would cause a profit dip that would affect its shareholders. B) should ask the CEO to step down because it has a greater obligation toward society. C) should not ask the CEO to step down because he was responsible for an almost 90 percent appreciation of the company's stock. D) should ask the CEO to step down because agents, unlike principals, are disposable.

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.

One way to foster ethical behavior in employees is to A) avoid codifying organizational culture. B) create a control system that encourages desired values. C) view clients as counter parties to transactions. D) align the vision statement of the organization with its informal culture.

PolyCon 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.

Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success. A) sharing explicit knowledge B) building interorganizational trust C) a hostile takeover D) partner implementation

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.

The board of directors of a public stock company consists of A) managers appointed by the owners of a company to run its day-to-day operations. B) individuals who formally represent the firm's shareholders and oversee the work of executives. C) the legal owners of a publicly traded company that was purchased in a leveraged buyout. D) employees of a company who belong to the senior management and directly report to the CEO of the firm.

The downside of equity alliances is A) the weaker ties and reduced trust between partners. B) the amount of investment that can be involved. C) that the alliances cannot be abandoned if not promising. D) that they are not useful stepping-stones toward full integration of the partner firms.

Three months ago, Darren became a board member at Runswell, a publicly traded company. Two weeks ago, the board members discovered that Runswell's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Darren and the other board members hold the CEO? A) They should hold her to the same ethical standards that they would expect of any Runswell employee—no more, no less. B) They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny. C) If the board members are able to determine that the CEO is not a "bad apple," then they should give her their full support. D) The board members must wait until the lawsuit results in a settlement or a guilty verdict.

Tyrell Corporation, 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 Tyrell Corporation 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

What causes the winner's curse? A) buying a firm with principal-agent problems B) overpaying for an acquisition C) buying a firm with a competitive disadvantage D) underpaying for an acquisition

What is horizontal integration? A) the process of merging with a competitor at a different stage of the value chain B) the process of merging with a competitor at the same stage of the value chain C) the process of acquiring a competitor at a higher stage of the value chain D) the process of acquiring a competitor at a lower stage of the value chain

What is the main reason that most mergers and acquisitions negatively affect shareholder value? A) The entire market becomes an oligopoly or a monopoly. B) Promised synergies never take place. C) Market conditions change too quickly. D) Companies that resist acquisitions are subject to the "winner's curse."

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.

Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases competitive intensity within an industry. B) It increases the potential for legal repercussions. C) It increases the costs associated with increasing value. D) It increases the threat of new entrants in an industry.

Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A) Very few corporate-governance mechanisms can be effective in addressing the principal-agent problem. B) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. C) Leading by ethical example often has a lesser effect on employee behavior than words do. D) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.

Which of the following is the source of the principal-agent problem in publicly traded companies? A) the law of legal personality B) the separation of ownership and control C) limited liability for investors D) transferability of investor ownership

Which of the following statements is true of an equity alliance? A) An equity alliance is based on contractual agreements rather than partial ownership. B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D) An equity alliance creates weaker ties between the alliance partners when compared to a nonequity alliance.

Which of the following statements is true of shareholders in a public stock company? A) They directly supervise and coordinate the manufacture of products and delivery of services. B) They are granted a charter of incorporation by the state and legally own company stock. C) They are the centerpiece of corporate governance. D) They are appointed by a board of directors to oversee the company's management.

William founded Iron Bank of Braavos in 1993. Ten years later, the company went public. Despite William'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? A) transferability of investor ownership B) legal personality C) limited liability for investors D) separation of legal ownership and management control

________ are the board members who are part of the company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A) Outside directors B) Inside directors C) Stockholders D) Philanthropists

Vibgyor 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 cell 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 Vibgyor 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. A strategic alliance

When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A. Increasing competitive intensity B. Accessing critical complementary assets C. Procuring additional capital investments D. Reducing differentiation of product and service offerings

B. Accessing critical complementary assets

Which of the following statements is true of firms pursuing a closed innovation? A. Firms following the closed innovation model are less likely to be prone to the not-invented-here syndrome. B. Firms in the closed innovation model are extremely protective of their intellectual property. C. Firms in the closed innovation model focus on building a more effective business model to commercialize R&D, rather than focusing on being first to market. D. Firms following the closed innovation model will find activities such as spin-out ventures or strategic alliances crucial to commercialize their internally developed R&D.

B. Firms in the closed innovation model are extremely protective of their intellectual property.

In a strategic alliance, the firm that learns faster: A. has the tendency to lose its competitive advantage. B. has the incentive to reduce its knowledge sharing. C. has the tendency to move up a learning curve. D. has the incentive to invest further in the alliance.

B. Has the incentive to reduce its knowledge sharing. The firm that learns faster and accomplishes its goal more quickly has an incentive to exit the alliance or, at a minimum, to reduce its knowledge sharing.

When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as? A. Principal-agent problem B. Information asymmetry C. Experience-curve effect D. Learning-curve effect

B. Information asymmetry

_____ is best described as a situation in which one party is more informed than another, because of the possession of private information. A. Information governance B. Information asymmetry C. Information deregulation D. Information piracy

B. Information asymmetry

Which of the following is a disadvantage of a horizontal integration corporate strategy? A. It increases competitive intensity within an industry. B. It increases the potential for legal repercussions. C. It increases the costs associated with increasing value. D. It increases the threat of new entrants in an industry.

B. It increases the potential for legal repercussions.

B. It increases the potential for legal repercussions. Disadvantages of horizontal integration include reduced flexibility and increased potential for legal repercussions

When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust? A. It offered Orocobre exposure to Toyota's proprietary information. B. It made a credible commitment by taking an equity stake in Orocobre. C. It acquired Orocobre as part of its backward vertical integration plans. D. It offered Orocobre franchising opportunities to sell hybrid vehicles.

B. It made a credible commitment by taking an equity stake in Orocobre.

. _____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. A. Lean manufacturing B. Licensing C. Crowdsourcing D. Bootlegging

B. Licensing

_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A. Cartels B. Licensing agreements C. Equity alliances D. Acquisitions

B. Licensing agreements

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? A. Diseconomies of scale B. Principal-agent problem C. Experience-curve effects D. Information asymmetries

B. Principal-agent problem

. _____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. A. Reverse engineering B. Restructuring C. Rebooting D. Reverse brainstorming

B. Restructuring

Which of the following best illustrates a strategic alliance? A. GD Group Inc., a large conglomerate, taking over a startup company against its will B. Saturn Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines C. Serene Apparel Inc. taking over one of its fabric suppliers in a less developed nation D. The electronics subsidiary unit of East Goods Inc. deploying a few of its human resources to the automobile subsidiary of the company

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

In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance? A. The alliance champion B. The alliance leader C. The alliance manager D. The alliance boss

B. The alliance leader

Which of the following statements is true of the real-options perspective? A. The approach obligates the incumbent firm to make continued investments when demanded by its partner. B. The approach allows the incumbent firm to obtain additional information at predetermined stages. C. The approach fails to provide the incumbent firm a hedge against uncertainty. D. The approach involves making large investments at the end of a project, irrespective of whether the project is successful or not.

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

What does the relational view of competitive advantage propose? A. A strategic alliance has the potential to help a firm gain a competitive advantage when it joins together resources that are common, inexpensive, and easy to imitate. B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership. C. Strategic alliances fail to provide competitive advantage when they involve joining different parts of a firm's value chain, such as R&D and marketing. D. A firm has a competitive advantage over its rivals when it can provide goods or services similar to the competitors' at a higher price.

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

Which of the following is a result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms.

B. There is a reduction of excess capacity in the market.

Which of the following is an advantage of non-equity alliances? A. They produce strong ties between alliance partners as they are permanent in nature. B. They are flexible and easy to initiate and terminate. C. They facilitate the sharing of tacit knowledge between the alliance partners. D. They are based on ownership rather than contracts.

B. They are flexible and easy to initiate and terminate.

Which of the following statements is true of laggards? A. They make up the largest customer segment for any business. B. They tend to enter the market frequently during the decline stage. C. They do not like waiting too long for new technology to release. D. They are customers who adopt a new product even if it is not necessary.

B. They tend to enter the market frequently during the decline stage.

With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A. To transfer its knowledge of a completely new production system B. To learn the lean manufacturing system pioneered by Toyota C. To better understand the American work force D. To get access to Toyota's distribution system and marketing expertise

B. To learn the lean manufacturing system pioneered by Toyota

Why did Yahoo enter into a strategic alliance with Microsoft? A. To pursue an unrelated diversification strategy B. To overcome its competitive disadvantage in comparison to Google C. To invest its excess cash flow in Microsoft's superior technology D. To share its continuously updated search technology with Microsoft

B. To overcome its competitive disadvantage in comparison to Google

Fervana Autos Inc., a large automobile company, made an initial small investment in a startup company that was developing a solar-powered car. This gave Fervana Autos controlling interests in the startup company. However, Fervana Autos had no obligations to make continued investments in the experiments of the startup company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Fervana Autos would have the right to buyout the startup company. This approach to strategic alliance is referred to as _____. A. a break-even analysis B. a real-options perspective C. credible commitment D. transaction cost economics

B. a real-options perspective

DiskOne Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, DiskOne has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, DiskOne will be categorized under: A. dogs. B. cash cows. C. stars. D. question marks.

B. cash cows.

BioGrow Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, BioGrow Pharma invested $100 million in the project. This investment made by BioGrow Pharma will result in a _____. A. cartel B. credible commitment C. corrective action D. parent-subsidiary relationship

B. credible commitment

A drawback of joint ventures is that they are characterized by: A. involuntary mergers. B. double reporting lines. C. contractual agreements rather than ownership. D. weak ties between alliance partners.

B. double reporting lines. (two bosses)

A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n). A. non-equity alliance. B. equity alliance. C. joint venture. D. capital venture.

B. equity alliance.

B. has the incentive to reduce its knowledge sharing.

Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of _____. A. cartel arrangements B. non-equity alliances C. joint ventures D. equity alliances

B. non-equity alliances

When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a _____. A. promissory bill B. patent C. franchise D. royalty

B. patent

The most efficient way to overcome the principal-agent problem in a firm is to: A. increase the level of vertical integration within the firm. B. provide stock options to managers. C. downsize the existing workforce. D. organize economic activities within the firm.

B. provide stock options to managers

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high. If the company invests further resources into this division, it can increase its relative market share in the future. However, if due to technological changes the car cannot create sufficient consumer demand, then the division can prove to be unprofitable. In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under: A. dogs. B. question marks. C. stars. D. underdogs.

B. question marks.

The typical four-step innovation process begins with: A. the modification and recombination of an existing product or process. B. the presentation of an idea as findings derived from basic research. C. the commercialization of an invention by entrepreneurs. D. a competitor's attempt to imitate an innovation.

B. the presentation of an idea as findings derived from basic research.

A drawback of short-term contracting as an alternative to making a component in-house is that: A. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C. it fails to allow a long planning period that individual market transactions provide. D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

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

1. The success of the Pixar-Disney strategic alliance demonstrated that: A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities' complementary assets matched

The success of the Pixar-Disney strategic alliance demonstrated that: A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities' complementary assets matched.

Historically, which type of firm occupied the center of the German corporate governance system?

Banks

According to the opening case, why did Mark Hurd resign? Because of his incompetence in leading the company to achieve its goal Because of his unethical behavior Because of political wrestling among board members None of these

Because of his unethical behavior

Why aren't German executives dedicated to the maximization of shareholder value to the degree that their counterparts are in the UK and the United States?

Because private shareholders and large institutional investors rarely have large ownership positions in firms

BestTech 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 BestTech Inc.?

BestTech uses recycled materials to create its commercially successful products.

Why is board independence critical to effectively fulfilling a board's governance responsibilities?

Board independence is critical to effectively fulfilling a board's governance responsibilities. Given that board members are directly responsible to shareholders, they have an incentive to ensure that the shareholders' interests are pursued. If not, they can experience a loss in reputation or can be removed outright. More and more directors are also exposed to legal repercussions should they fail in their fiduciary responsibility. To perform their strategic oversight tasks, board members apply strategic management theories and concepts, as well as more specialized tools such as those originating in finance and accounting

In December 2016, ByteDance took an equity stake in Babe, an Indonesian news aggregator. This is an example of what part of the Build-Borrow-Buy Framework?

Borrow

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks? HP and DreamWorks each strengthened their separate markets without impinging on each other's markets. Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. HP was able to enter a new market, and DreamWorks was able to strengthen its old market. DreamWorks was able to enter a new market, and HP was able to strengthen its old market.

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

102. Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last 2 years. b. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. c. The CEO/chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.

103. Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance

106. One means that is considered to improve the effectiveness of outside directors is a. mandating that all outside directors be drawn from government or academia rather than industry. b. requiring that outside directors be former executives of the firm. c. requiring outside directors to own significant equity stakes in the firm. d. requiring that outside directors be truly objective by having no ownership interest in the firm.

117. The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. usually on the verge of bankruptcy. b. typically under-performing their industry. c. often performing above their industry averages. d. always outperforming their industry.

118. If the market for corporate control were efficient as a governance device, then only _____ would be targets for takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly performing firms d. over-valued firms

125. German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the UK and United States largely because a. the roles of CEO and chairperson of the board of directors are usually combined. b. large institutional investors control large blocks of stock. c. private shareholders and large institutional investors rarely have large ownership positions in firms. d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms.

131. Which of the following is FALSE about corporate governance in China? a. The Chinese governance system may be tilting toward the Western model. b. With increasing frequency, the compensation of top executives of Chinese companies is closely related to prior and current financial performance of the firm. c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more volatility in those values over time.

71. In the United States, a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.

76. Complete the following: In small firms, managers often own a _____percentage of the firm, which means there is _____ separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large

77. The separation between firm ownership and management creates a(n) _____ relationship. a. governance b. control c. agency d. dependent

79. Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dismissed.

86. Agency costs reflect all of the following EXCEPT _____ costs. a. monitoring b. enforcement c. opportunity d. incentive

87. All of the following are consequences of the Sarbanes-Oxley Act EXCEPT a. a decrease in foreign firms listing on U.S. stock exchanges. b. internal auditing scrutiny has improved and there is greater trust in financial reporting. c. an increased number of IPOs (initial public offerings) are expected. d. Section 404 creates excessive costs for firms.

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

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a A) proprietorship. B) cooperative. C) strategic alliance. D) leveraged buyout.

Berkshire Hathaway is an excellent example of a(n) ___________ portfolio company because it counts on the businesses that it looks to acquire to have a strong management in place.

Controller

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.

Bernard is a board member at Lopez Electronics Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Stanley Motors. According to this scenario, Bernard A) cannot serve on the board of any other organization. B) is more likely than Ernest to take care of stockholder interests. C) is an inside director of Lopez Electronics. D) can use information from board meetings to trade stocks of Lopez Electronics.

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?

GameGo is a publicly traded manufacturer of home electronics. Based on what you have read, which of these actions would be wisest for GameGo's board of directors to take to be sure that the company's new CEO is as motivated as possible? A) Encourage the CEO to take all of her compensations in stock options, which will motivate her to keep the stock price high. B) Offer the largest bonus possible to prevent the CEO from leaving to go a rival firm. C) Link the CEO's pay to her performance, but avoid high-powered incentives that may cause reckless behavior. D) Encourage her to emulate Warren Buffett and to take a lower salary than she might command elsewhere.

General Electric's board has only one inside director, John Flannery, 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? A) A CEO is likely to be more responsible because he or she is setting his or her own performance targets. B) The CEO might be able to influence the board through setting the meeting agendas. C) The CEO possesses invaluable inside information that can help him or her chair the board effectively. D) Any CEO will suggest board appointees who are friendly toward him or her.

Ignacio Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? A) Employees of Ignacio are legally permitted to invest their capital in the company's stock. B) Employees of Ignacio are also the owners of the company. C) Shareholders of Ignacio are responsible to the company only to the capital they have invested. D) Shareholders of Ignacio are not permitted to trade their company stock at the New York Stock Exchange (NYSE).

In a nonequity alliance, which of the following types of information would firms most likely share? A) a manager's knowledge related to solving nonroutine problems B) a top-level manager's experience related to making strategic decisions C) the documented information about the material composition of a product D) the employees' entrepreneurial skills

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN 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

Janet hires Vanessa to perform a critical task in her organization. However, Vanessa has misrepresented her knowledge, skills and abilities and Janet has no way of knowing whether Vanessa can indeed perform well. This is an example of A) agency theory. B) disparate treatment. C) adverse selection. D) ineffective corporate governance.

Jonathan is interested in building the centerpiece of his firm's corporate governance, and so hires a ________ that is made up of individuals from both inside and outside the firm. A) strategy consultant B) C-level suite team C) board of directors D) shareholders

Maritza is trying to understand the relationship between what is legal and what is ethical. Tiffany explains that both of these terms are often synonymous in business. Your response is A) Tiffany is correct; law and ethics are synonymous and should be used interchangeably in business. B) Tiffany is correct; whatever is legal is always ethical in business .C) Tiffany is incorrect; a manager's actions can be legal but ethically questionable .D) Tiffany is incorrect; there is no relationship between laws and ethics except when the board of directors approve an action.

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks? A) the possibility for legal repercussions from the FTC B) integration failure C) higher costs D) reduced flexibility

Stark Industries is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? A) Employees of Stark Industries are legally permitted to invest their capital in the company's stock. B) Employees of Stark Industries are also the owners of the company. C) Shareholders of Stark Industries are responsible to the company only to the capital they have invested. D) Shareholders of Stark Industries are not permitted to trade their company stock at the New York Stock Exchange (NYSE).

Product Diversification Strategy (General Diversification Strategies)

Corporate strategy in which a firm is active in several product markets.

The MBA oath first developed at Harvard Business School and now signed by students at over 300 business schools is modeled after A) Level-5 leadership. B) the Sarbanes-Oxley pledge. C) the Hippocratic oath in medicine. D) the Goldman Sachs code.

The informational advantage that agents possess over principals is often based on the fact that A) the information is extremely secure and protected from exposure to anyone outside the company. B) public stock companies are characterized by information symmetry. C) insiders are the first to learn about important developments before the information is released to the public. D) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.

What do we call the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance? A) investors B) outside directors C) inside directors D) auditors

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

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal? A) It was given a "triple A" rating for Abacus even though Abacus should have gotten a low rating. B) It made no effort to ascertain the stability of the real estate market, even though it had the resources and time to do so. C) It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation. D) It lost $100 million in the Abacus fiasco and endured negative treatment in the media.

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

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) adopting a narrow shareholder perspective B) separating economic interests and social needs C) practicing effective corporate governance D) adopting the principles of shareholder capitalism

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

Which of the following is an advantage of equity alliances when compared to nonequity 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.

Which of the following statements is true of explicit knowledge? A) Explicit knowledge is about knowing how to do a certain task. B) Explicit knowledge is knowledge that cannot be codified .C) Explicit knowledge is shared in nonequity alliance firms. D) Equity knowledge is acquired only through actively participating in a process.

om Terry is the CEO of BuildIt.com but wants a physical retail presence. In order to accomplish this, Tom formed a joint venture with a major real estate tycoon who has a significant foothold in the commercial property sector. This venture will require exchanging more than just codified information; as such, Tom should expect to share A) his knowledge of financial markets. B) his firm's supply chain. C) both tacit and explicit knowledge. D) only explicit knowledge.

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? A. A merger B. A joint venture C. An acquisition D. An equity alliance

C. An acquisition

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. By lowering competitive intensity in the industry overall

_____ are strategic business units that compete in a low-growth market but hold considerable market share. A. Dogs B. Question marks C. Cash cows D. Stars

C. Cash cows

FR Pharmaceuticals Inc., BioCure Pharma Inc., and Regime 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 each other. 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. Co-opetition

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Limited liability B. Proprietorship C. Co-opetition D. Commerce

C. Co-opetition

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Limited liability B. Proprietorship C. Co-opetition D. Commerce

C. Co-opetition

8. Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A. Backward integration B. Forward integration C. Horizontal integration D. Vertical integration

C. Horizontal integration

Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A. Backward integration B. Forward integration C. Horizontal integration D. Vertical integration

C. Horizontal integration Horizontal integration is the process of merging with a competitor at the same stage of the value chain.

How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010? A. Its main strategic focus is now on the domestic market. B. It opens a market for it that is growing slowly but has high profit margins. C. It has access to convenience stores and a new distribution channel. D. It automatically gains monopoly in the chocolate-manufacturing industry.

C. It has access to convenience stores and a new distribution channel.

How has the long tail business model affected eBay as an online retailer? A. It has increased the cost of the virtual shelf space. B. It has allowed eBay to offer limited product selections to its customers. C. It has helped overcome the problem of thin markets, at no cost to the buyer. D. It has made eBay highly dependent on products found in the short head to generate revenues.

C. It has helped overcome the problem of thin markets, at no cost to the buyer.

Which of the following statements is NOT true of tacit knowledge? A. It is concerned with knowing how to do a certain task. B. It is knowledge that cannot be easily codified. C. It is regularly shared between partners in a non-equity alliance. D. It is acquired only through actively participating in the process.

C. It is regularly shared between partners in a non-equity alliance. Equity alliances allow for the sharing of tacit knowledge—knowledge that cannot be codified. Tacit knowledge is concerned with knowing how to do a certain task. It can be acquired only through actively participating in the process. In an equity alliance, therefore, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible

While the personal computer industry is flooded and growing with laptops and tablets, John recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does John best represent? A. Early adopters B. Category captains C. Laggards D. Early majority

C. Laggards

FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had 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 airlines industry. What does this scenario best illustrate? A. Managerial empathy B. Managerial feasibility C. Managerial hubris D. Managerial capitalism

C. Managerial hubris The scenario best illustrates managerial hubris. Managers of the acquiring company convince themselves that they are able to manage the business of the target company more effectively and, therefore, create additional shareholder value. This justification is often used for an unrelated diversification strategy. This can lead to managerial hubris

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from non-profit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray? A. Headhunter B. Category captain C. Social entrepreneur D. Trade creditor

C. Social entrepreneur

_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. A. Embargos B. Cartel agreements C. Strategic alliances D. Corporate acquisitions

C. Strategic alliances

Which of the following has been a primary reason for increases in the Apple iPhone's installed base? A. The decision to enter into the smartphone market during the maturity stage B. The cost-leadership strategy pursued by Apple C. The availability of apps that led to network effects D. The decision to target laggards, the most profitable customer segment

C. The availability of apps that led to network effects

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy? A. The first-line employees B. The creditors C. The chief executive officer D. The middle manager

C. The chief executive officer

In a non-equity alliance, which of the following types of information would firms most likely share? A. A manager's knowledge related to solving non-routine problems B. A top-level manager's experience related to making strategic decisions C. The documented information about the material composition of a product D. The employees' entrepreneurial skills

C. The documented information about the material composition of a product

Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm? A. The firm will be protected against the principal-agent problem. B. The firm's administrative costs will be low because of necessary bureaucracy. C. The firm will have more flexibility in purchasing and comparing prices of goods and services. D. The firm will have high-powered incentives, such as hourly wages and salaries.

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

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. They produce stronger ties between partners.

in the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A. To access GM's completely new production system B. To learn and implement the just-in-time inventory system pioneered by GM C. To learn how to implement its lean manufacturing program with an American work force D. To access GM's distribution system and marketing expertise

C. To learn how to implement its lean manufacturing program with an American work force

When large, incumbent firms buy startup companies, the transaction is generally described as a(n) _____. A. joint venture B. partnership C. acquisition D. alliance

C. acquisition

When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in _____. A. regressive innovation B. radical innovation C. disruptive innovation D. architectural innovation

C. disruptive innovation

The customers entering the market in the growth stage are primarily _____. A. technology enthusiasts B. laggards C. early adopters D. late majority

C. early adopters

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to: A. imitate the actions of its competitors like Apple and Facebook. B. solve its principal-agent problems. C. fill gaps in its competency lineup. D. expand through unrelated diversification.

C. fill gaps in its competency lineup.

A non-equity alliance is the most common type of strategic alliance because: A. it produces the strongest ties between alliance partners. B. it is based on partial ownership. C. it is easy to initiate and terminate. D. it is least flexible.

C. it is easy to initiate and terminate

In a(n) __________, two or more firms create a legally independent company to share some of their resources to create a competitive advantage. A. equality-based strategic alliance B. nonequity strategic alliance C. joint venture D. equity strategic alliance

C. joint venture

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain. A. equity alliance B. joint venture C. non-equity alliance D. greenfield venture

C. non-equity alliance

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) _____. A. joint venture B. acquisition C. non-equity alliance D. greenfield venture

C. non-equity alliance

C. non-equity alliance The most common type of alliance is a non-equity alliance, which is based on contracts between firms. These contractual agreements are vertical strategic alliances, connecting different parts of the industry value

A firm's resistance to changes in the status quo is referred to as _____. A. organizational parity B. organizational liquidity C. organizational inertia D. organizational efficacy

C. organizational inertia

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of: A. time compression diseconomies. B. experience-curve effects. C. principal-agent problems. D. resource ambiguity.

C. principal-agent problems.

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A. real-options perspective B. stakeholder strategy C. relational view of competitive advantage D. non-differentiation strategy

C. relational view of competitive advantage

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in: A. reverse engineering. B. benchmarking. C. restructuring. D. crowdsourcing.

C. restructuring

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: A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. D. the surviving firms will need protection against the relaxed entry barriers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. Because of the potential to reduce competitive intensity in an industry, government authorities such as the FTC and/or the European Commission usually must approve any large horizontal integration activity.

How does taking a real-options perspective by entering strategic alliances help incumbent firms? A.It helps the incumbent firms gain the confidence of the partnering company by making credible commitments. B. It helps the incumbent firms reduce the value gap they create through their product and service offerings. C.It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. D. It reduces the incumbent firms' cost of acquisition by enabling them to make the entire investment decision in the beginning itself.

C.It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

Casual ambiguity

Demand Conditions

Cell Phone Needs in Finland

Forward Integration

Changes in an industry value chain that involve moving ownership activities close to the end (customer) point of the value chain. Allows companies to more effectively plan for and respond to changes in demand.

Backward Integration

Changes in an industry value chain that involve moving ownership activities upstream to the originating (inputs) point of the value chain.

US Bank consolidation was triggered by two new laws that were enacted in the country in 1994 and 1999. This is an example of consolidation due to:

Changes in regulation

Which of the following national governments uses state-directed capitalism to influence a company's ownership and operations? Germany France China The United States

China

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.

GE leadership and management share best practices across its holdings. This is an example of a(n) ________________ portfolio company.

Coach

Which one of the following concepts is an important influence in Japanese corporate governance structures?

Consensus

When competition becomes fierce in a maturing market, a key strategy that companies have at their disposal is:

Consolidation

Managers at SunTrustUs Properties 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?

Consumer demand will increase.

____ is the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.

Corporate governance

________ is a mechanism to direct and control an enterprise and attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal.

Corporate governance

________________ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals. Corporate social responsibility Stakeholder impact analysis Corporate governance Principal-agent theory

Corporate governance

Which of the following is not true concerning corporate governance?

Corporate governance exists only in public organizations.

Which of the following is NOT true concerning corporate governance? Corporate governance is present only in public organizations. Corporate governance provides rules for making decisions on corporate affairs. Corporate governance provides a structure for monitoring performance. It seeks to benefit multiple stakeholders, not just shareholders

Corporate governance is present only in public organizations

______ is a framework that helps firms recognize the public expectation that society has of a business at a given point in time. Core competence Stakeholder impact Corporate governance Corporate social responsibility

Corporate social responsibility

Which one of the following statements is true? Corporate social responsibility should focus only on making profits. Corporate social responsibility helps firms gain competitive advantage. Corporate social responsibility is universal across the world. Corporate social responsibility should not include NGOs

Corporate social responsibility helps firms gain competitive advantage

Which of the following summarizes the difference between corporate strategy and business strategy?

Corporate strategy deals with where to compete; business strategy deals with how to compete.

Unrelated Diversification Strategy

Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business activity and there are few, if any, linkages among its businesses. This arrangement helps firms gain and sustain competitive advantage because it allows the conglomerate to overcome institutional weaknesses in emerging economies.

Related Diversification Strategy

Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business activity but obtains revenues from lines of business that are linked to the primary business activity.

Geographic Diversifications Strategy (General Diversification Strategies)

Corporate strategy in which a firm is active in several different countries.

Product-Market Diversification Strategy (General Diversification Strategies)

Corporate strategy in which a firm is active in several different product markets and several countries.

Bill's Auto & Airplane Repair shop is able to generate a positive net income of $10,000 a week; this is the industry average. We can conclude that since he has a positive net income, he also has a competitive parity in the industry.

Correct—competitive parity is achieved by generating average returns, relative to competition in each industry.

Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying?

Cost-Leadership

After breaking your long-term goal into several short-term goals, what is the next step in developing career readiness?

Create a to-do list for accomplishing short-term goals

All of the following are roles played by the board of directors except ___________. Creating the firm's strategy Transporting information from external sources Providing leads for acquisition candidates Providing advice for the CEO and other executives

Creating the firm's strategy

105. Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. b. the board includes employees as voting members. c. the board is homogenous in composition. d. outside directors own significant equity in the organization.

107. The CEO and Chairman of the board of directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Establishing a formal process to evaluate the board's performance. c. Electing an lead director. d. All of these options are correct.

108. Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance.

109. The interests of multinational corporations' shareholders may be best served when there is a. a uniform compensation plan for all corporate executives, United States and foreign alike. b. executive compensation that is primarily based on long-term performance. c. elevation of foreign executive compensation to U.S. levels. d. a variety of compensation plans for executives of foreign subsidiaries.

112. Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data.

116. Agricultural Chemicals, Inc., was the target of a hostile takeover 6 months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE? a. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. They are more a function of general market conditions. b. The fact that a hostile takeover has occurred is proof that the firm was under-performing. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. d. The CEO and top executives should not consider their jobs secure.

119. All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. defense tactics are usually beneficial for the executives of the target firm. b. defense tactics are opposed by institutional investors. c. defense tactics vary in their effectiveness as a defense to takeovers. d. defense tactics make the costs of a takeover lower.

122. A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

127. Japanese keiretsu are a. management structures related to total quality management systems. b. company unions, which are a type of governance system. c. the banks owing the largest shares of stock in the firm. d. a system of cross-shareholding among firms.

128. In Japan, the principal source of the active monitoring of large companies comes from a. boards of directors. b. stock brokerage companies. c. the government. d. banks.

133. The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors.

69. Corporate governance is all of the following EXCEPT a. mechanisms used to determine and control the strategic direction and performance of organizations. b. a means to establish and maintain harmony between owners and top managers whose interests may conflict. c. ensuring that top managers' interests are aligned with the interests of stockholders. d. resolve conflicts among corporate employees.

72. Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

81. Product diversification provides two benefits to managers that do not accrue to shareholders: _____ and _____. a. greater experience in a wider range of industries; lessening of managerial employment risk b. the manager frequently invests in the acquired firm, which allows him or her extensive profits; the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered; the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk

84. A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to _____, whereas owners wish to diversify the firm to _____. a. generate free cash flows; reduce the risk of total firm failure b. increase the price of the firm's stock; increase the dividends paid out from free cash flows c. reduce the risk of total firm failure; reduce their total portfolio risk d. reduce their employment risk; increase the company's value

88. All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT a. consumer protection. b. CEO compensation. c. regulation of derivatives. d. retirement accounts.

96. Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors.

97. Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top managers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management.

Amanda, the CEO of Weyland YutaniInc., reports to the board of directors appointed by the shareholders of Weyland Yutani. Based on shareholder suggestions, the board ties Amanda's compensation to the performance of Weyland Yutani. Due to this pressure, Amanda begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Amanda's compensation to firm performance is to overcome A) shareholder capitalism scenario. B) inside director-outside director conflict. C) fiduciary responsibility oversight. D) principal-agent problem.

Angelica is the CEO of Sandhaven Ltd., a publicly traded company. The shareholders want Angelica on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Angelica is A) a board member of a major client. B) more likely than other board members to take care of the stockholders. C) also the CEO of other companies. D) likely to provide the board with valuable inside information.

Angie owns and runs Archana, a private start-up company with a current value of $1.3 billion. Archana is interested in going public to fund future growth. Which action should Angie take before Archana's initial public offering? A) Angie should come up with a business plan for what Archana will do once it is no longer publicly traded. B) She and senior managers should write down their code of ethics. C) Angie should not embark on an IPO until Archana's value is higher. D) She should investigate Archana's existing or potential problems with ethics or the law, if such problems exist.

Bellhaven Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about Bellhaven's board of directors? A) Bellhaven's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments. B) Bellhaven's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions. C) Bellhaven's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO. D) Bellhaven's board of directors has a minority number of inside directors and it evaluates the firm's strategic initiatives.

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.

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.

Frank is a newly elected board member of XYZ Inc., a publicly traded stock. As a newly elected board member, Frank has a(n) ________, which is a legal duty to act solely in another party's interests. A) moral code B) ethical obligation C) competitive advantage D) fiduciary responsibility

Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.

False

Gary owns shares in a company called Archibald Industries Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Gary wants to proactively cut his losses and therefore sells his shares. Anneke, a trading enthusiast, buys shares in Archibald Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A) separation of legal ownership and management control B) legal personality C) limited liability for investors D) transferability of investor ownership

Gino is the CEO of a financial services firm. What action should Gino take to be sure the firm avoids moral hazards? A) He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. B) Gino must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." C) He must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company. D) Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.

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.

How does horizontal integration within an industry affect the surviving firms? A) by increasing the threat the surviving firms will face from new entrants B) by strengthening the rivalry among existing firms C) by requiring the surviving firms to shift their focus from nonprice to price competition D) by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A) the expectation that the agent will follow the country's laws and regulations B) the expectation that the agent will go above and beyond the call of duty C) the expectation that the agent will reconnect economic and social needs D) the expectation that the agent will act in the principal's best interest

Jerry is a senior manager for the Paper Street Soap Company. Because of his experience, he has been appointed to the board of Clean Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Jerry is a(n)________ for Paper Street Soap Company and a(n) ________ for Clean Inc. A) CEO; COO B) COO; CEO C) outside director; inside director D) inside director; outside director

Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is a(n) ________ for Anderssen and a(n) ________ for EEC. A) CEO; COO B) COO; CEO C) outside director; inside director D) inside director; outside director

Laura owns and runs Cyberdyne Systems Corp., a private start-up company with a current value of $1.3 billion. Cyberdyne Systems Corp.is interested in going public to fund future growth. Which action should Laura take before Cyberdyne Systems Corp.'s initial public offering? A) Laura should come up with a business plan for what Cyberdyne Systems Corp. will do once it is no longer publicly traded. B) She and senior managers should write down their code of ethics. C) Laura should not embark on an IPO until Cyberdyne Systems Corp.'s value is higher. D) She should investigate Cyberdyne Systems Corp.'s existing or potential problems with ethics or the law, if such problems exist.

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.

Sirhan is president of a medium-sized bank. What can he do to lessen the chances of employees or board members taking part in insider trading? A) Forbid managers and executives from having access to private information. B) Forbid board members from having access to private information. C) Work with analysts and customer-facing employees to root out information asymmetry. D) Create a strict code of ethics and explain that inside traders will be fired.

Sorenson LLC, a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company—including the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders, who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to Sorenson's board to achieve board independence? A) 1 B) 3 C) 5 D) 7

Which of the following statements is true of strategic alliances? A. They are always focused on joining the same value chain activities. B. They enable firms to achieve goals faster, but at higher costs. C. They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

Stella accepts a job as vice president for human resources at a technology startup. She discovers that the startup believes that teamwork is so important that it plans to award all raises and bonuses by splitting them equally within a team rather than presenting them to individual employees. What action should Stella take regarding this plan? A) Interview new candidates extensively to avoid adverse selection. B) Expand the plan by allowing teams to make hiring decisions and eventually firing decisions as well. C) Make sure the plan goes into place only after the company has corrected information asymmetry. D) Cancel the plan because under it, opportunistic employees will do little or no work.

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.

What are poison pills? A) Shareholders use them to prevent the founder of a company from taking the company private through a leveraged buyout. B) They are unspecified conditions in the contract between stakeholders in an organization. C) Companies use them in a bid to perform a hostile takeover of competing firms. D) They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

Which of the following accurately describes a common difference between a merger and an acquisition? A) A merger tends to include mostly small firms; an acquisition can often involve large firms. B) A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. C) A merger involves firms of different size; an acquisition involved firms of the same size. D) A merger tends to be friendly; an acquisition can be friendly or unfriendly.

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.? A) Scotfind Inc. purchases Inity Inc. for $80 billion despite Inity Inc. being against the purchase. B) Scotfind Inc. and Inity Inc. join together to form a third new entity, while they also operate separately. C) Scotfind Inc. outsources a few of its business activities to Inity Inc. for competitive advantage. D) Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Which of the following perspectives best supports the shared value creation framework? A) Markets are more often than not defined by societal needs rather than economic needs. B) Failing to create value for society almost always reflects on the bottom line. C) A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D) Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Which of the following scenarios best illustrates horizontal integration? A) Silis Inc. enters into a licensing contract with a distributor in a new international market. B) Silis Inc. acquires a component parts manufacturer who previously supplied to Silis' competitor. C) Silis Inc. sets up its own distribution channel and retail stores. D) Siliss Inc. joins with Cancity Inc., one of its direct competitors.

Which of the following statements best supports the view that GE's Ecomagination strategy is in line with the shared value creation framework? A) The Ecomagination strategy is the brainchild of the founder of the company. B) The Ecomagination strategy helps GE spend more on research and development than other similar companies. C) The Ecomagination strategy generated $3 billion in revenues for GE during 2012. D) The Ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

Yelena, the CEO of Andron Inc., reports to the board of directors appointed by the shareholders of Andron. Based on shareholder suggestions, the board ties Yelena's compensation to the performance of Andron. Due to this pressure, Yelena begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Yelena's compensation to firm performance is to overcome A) shareholder capitalism scenario. B) inside director-outside director conflict. C) fiduciary responsibility oversight. D) principal-agent problem.

________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model. A) Vertical integration; horizontal integration B) Horizontal integration; vertical integration C) Vertical integration; Porter's Five Forces D) Horizontal integration; structure-conduct-performance

________ is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort. A) Disparate treatment B) Adverse selection C) The agent issue D) Moral hazard

While Cisco Systems has been successful in selecting and buying both big and small technology ventures, HP had to write off some of its recent technology acquisitions. Which of the following statements best explains this scenario? A.Cisco was successful due to its unrelated diversification, whereas HP failed by pursuing a related linked diversification strategy. B. Cisco treated the management of the larger firms it took over more like acquisitions, whereas HP treated its acquisitions as strategic alliances. C. The acquisitions were successful as the learning and experience curve effects were low. D. Acquisition and integration capabilities were not equally distributed across firms.

D. Acquisition and integration capabilities were not equally distributed across firms.

How does horizontal integration within an industry affect the surviving firms? A. By increasing the threat the surviving firms will face from new entrants B. By strengthening the rivalry among existing firms C. By requiring the surviving firms to shift their focus from non-price to price competition D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. Which of the following was a result of this corporate strategy? A. Disney attempted full integration with the subsidiaries it acquired after its merger with Pixar. B. Disney's revenue streams from its various activities became less predictable. C. Disney became a less diversified company. D. Disney compensated more easily for losses from flops.

D. Disney compensated more easily for losses from flops.

s a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A. Radical innovation B. Incremental innovation C. Architectural innovation D. Disruptive innovation

D. Disruptive innovation

Which of the following is an ineffective practice in alliance management? A. Coordinating a firm's portfolio of alliances B. Establishing knowledge-sharing routines between alliance partners C. Developing relational capabilities to manage mergers and acquisitions D. Focusing on developing an alliance-management capability in isolation

D. Focusing on developing an alliance-management capability in isolation

3. Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.? A. GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase. B. GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately. C. GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

_____ is best described as the process of merging with a competitor at the same stage of the value chain. A. Forward integration B. Taper integration C. Backward integration D. Horizontal integration

D. Horizontal integration

In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones? A. Experience-curve effects B. Time compression diseconomies C. Principal-agent problem D. Information asymmetry

D. Information asymmetry

Which of the following statements is true of a disruptive innovation? A. It begins as a low-cost solution to a new problem. B. It initially performs better than the existing technology. C. It involves leveraging existing technologies in new markets. D. It invades the market from the bottom up, by first capturing the low end. One factor favoring the success of disruptive innovation is that it relies on stealth attack: It invades the market from the bottom up, by first capturing the low end. Many times, incumbent firms fail to defend the low end of the market, because it is frequently a low-margin business.

D. It invades the market from the bottom up, by first capturing the low end.

D. Managerial capitalism

Which of the following scenarios best illustrates horizontal integration? A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. C. Regal Autos Inc. sets up its own distribution channel and retail stores. D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

Which of the following statements accurately describes social entrepreneurs? A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns. B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues. C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production. D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

Which of the following is a disadvantage of equity alliances? A. They are reflective of weaker ties between firms. B. They do not permit the exchange of explicit knowledge. C. They can bring about a lack of commitment. D. They can entail significant investments.

D. They can entail significant investments.

GreyWing 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 GreyWing Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n): A. cartel. B. affiliate leadership. C. joint venture. D. acquisition.

D. acquisition.

In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight. A. alliance manager B. alliance leader C. alliance regulator D. alliance champion

D. alliance champion

How was Wikipedia able to outperform both Encyclopedia Britannica and Microsoft Encarta? A. By lowering its network effects B. By launching an electronic encyclopedia that included a variety of entries C. By leveraging first-mover advantages D. By allowing any person, expert or novice, to generate and edit content

D. by allowing any person, expert or novice to generate and edit content

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: A. borrow via a contractual agreement. B. pursue internal development. C. enter into a licensing agreement. D. consider an outright acquisition.

D. consider an outright acquisition.

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge that are: A. less differentiated. B. inexpensive to acquire. C. common in the industry. D. difficult to imitate.

D. difficult to imitate

Digital photography replacing film photography would be an example of a(n) _____. A. regressive innovation B. radical innovation C. architectural innovation D. disruptive innovation

D. disruptive innovation

The four-step innovation process ends with: A. idea generation. B. invention. C. idea testing. D, imitation

D. imitation.

The _____ business model is best described as one in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices. A. razor-razor-blade B. freemium C. pay-as-you-go D. long tail

D. long tail

FindFriend 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, FindFriend app's value has increased primarily due to its _____. A. learning curve effects B. economies of scale C. economies of scope D. network effects

D. network effects

Equity alliances are less common than non-equity alliances because they: A. depend on contractual agreements. B. produce weaker ties between partners. C. fail to facilitate the transfer of tacit knowledge. D. often require larger investments.

D. often require larger investments.

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix. A. dogs B. stars C. cash cows D. question marks

D. question marks

A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. A. cost-leadership approach B. break-even analysis C. market risk framework D. real-options perspective

D. real-options perspective

D. real-options perspective A real-options perspective to strategic decision making breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

Dominant-Business Firm (Type of Corporate Diversification)

Derives 70-95 percent of its revenues form a single business, but it pursues at least one other business activity (Ex: Microsoft)

Single-Business Firm (Type of Corporate Diversification)

Derives 95 percent or more of its revenues from one business (Ex: Google)

Parent Subsidiary Relationship (Alternatives on the Make-or-Buy Continuum)

Describes the most integrated alternative to performing an activity within one's own corporate family. The corporate parent owns the subsidiary and can direct it via command and control.

_____ is where a large number of shareholders with small holdings and few, if any, large-block shareholders exist, producing weak monitoring of managers' decisions.

Diffuse ownership

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

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

Which of the following best explains why Disney showed superior post-merger integration capabilities? Disney pursued a combination of horizontal and vertical integration through its acquisitions. Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. Disney managed its new subsidiaries more like alliances rather than attempting full integration. Disney used a corporate strategy based on a build-borrow-or-buy framework for its acquisitions.

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

______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes. a. Strategic outsourcing b. Taper integration c. Vertical integration d. Diversification

Diversification

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should

Divest the strategic Business unit

Diversification

Divestment is often used as a means to counter the ______________ discount.

Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under

Dogs

Exporting goods

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

Each stage of the industry life cycle is dominated by a different customer group.

The group of customers referred to as the ________ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage.

Early Majority

Corporate social responsibility has four components: ______, legal, ethical, and philanthropic responsibilities. Trust Control Economic Social

Economic

Investors expect a firm to make a profit while governments expect a firm to pay taxes. This is the ________ responsibility of a firm. Economic Legal Ethical Value-driven

Economic

economies of scope

Economy of scope describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, even though using the same resources and technology.

Starbucks developed a sourcing policy to help source coffee of the highest quality while adhering to fair trade and responsible growing practices. What type of responsibility does Starbucks have in this example? Economic Legal Ethical Philanthropic

Ethical

The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ________.

Europe

Which bodies regulate mergers and acquisitions?

European Commission Federal Trade Commission

Which of the following statements is true of explicit knowledge? Explicit knowledge is about knowing how to do a certain task. Explicit knowledge is knowledge that cannot be codified. Explicit knowledge is shared in nonequity alliance firms. Equity knowledge is acquired only through actively participating in a process.

Explicit knowledge is shared in nonequity alliance firms

Which of the following statements is true of explicit knowledge?

Explicit knowledge is shared in nonequity alliance firms.

) It can be difficult for shareholders of publicly traded companies to determine how much money those companies are making or losing because these companies use different accounting firms, and each accounting firm follows different rules.

A detergent manufacturer decides to clean up the waterways it uses even though no federal, state, or local laws require the firm to do this. The firm's managers believe that the cleanup will improve the company's image and benefit the environment. This scenario is an example of shareholder capitalism.

It is up to shareholders to make certain that the financial statements that their firms release are correct and not misleading.

Jeannette was a manager at Fabco. Instead of working full-time on Fabco's projects, she used Fabco's tools, employees, computers, and other resources to work on a research project that she hopes might help her start her own firm. This is an example of adverse selection.

One of the most challenging aspects of principal—agent problems is that firms have almost no defenses against them.

Research indicates that most corporate ethics problems are caused by a few "bad apples" rather than an unethical culture.

(T/F) When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale.

False

Accounting, human resources, and research and development (R&D) are examples of primary activities that add value directly to the value chain.

False

As a rule of thumb, the stronger the five forces, the higher the industry's profit potential, which causes the industry to become less attractive for competitors.

False

Which of the following terms describes the guiding policy to address the competitive challenge, and uses corporate- and business-level strategy?

Formulation

Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company. True False

False

Foreign-entry modes such as acquisitions and greenfield projects are usually disadvantageous because they require a high level of capital and resource investment but allow for a low level of control.

False

Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital.

False

High demand for online video streaming options is one of Netflix's core competencies.

False

In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases. Group starts

False

In recent years strategic alliances have declined because of increasing government regulation.

False

Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation.

False

Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment.

False

T/F: According to Susie Quinn, as HP became larger, the leadership decided to de-centralize support functions, such as HR, because it was important to continue to provide these services locally, regardless of the costs.

False

The autocratic strategic management process exhibited by the former head of Apple, Steve Jobs, is best described as an emergent strategy.

False

The cultural distance between Australia and the United States is relatively high because of the physical distance between the two nations.

False

The term demand conditions refers to how high the volume of demand is for a particular product in a particular country.

False

There is one main theory as to what motivates people, and this theory is accepted by most people.

False

True or False: Any action take by a manager that is within the bounds of the law is, by definition, an ethical action.

False

True or false: Firms tend to enter strategic alliances when they have no other choice.

False

True or false: Money is the best motivator.

False

Victoria's Jewelry Inc. is considering a takeover of its competitor, Ace Diamond LLC. In general, Victoria's should go ahead with the acquisition as long as Ace Diamond is more valuable as a continued standalone company than it would be inside Victoria's.

False

When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners.

False

Innovation that targets new markets with existing technologies is known as disruptive innovation.

False - Architectural Innovation

The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to obtain a patent.

False - Trade Secrets are best

Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test? Firms can apply the VRIO framework for the second test. Firms can implement various financial metrics like NPV and IRR. Firms can employ external analysis tool like PESTEL and Porters Five Forces. Firms can use an international framework to determine global relevancy

Firms can apply the VRIO framework for the second test.

Less Vertically Disintegrated

Focus on only one of a limited few stages of the industry value chain.

DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently. Compete based on price in order to drive out remaining competitors and create a monopoly. Focus on research and development as a form of nonprice competition. Encourage new competitors to enter the market to improve competition. Prepare to resist a hostile takeover by buying back as much stock as possible.

Focus on research and development as a form of nonprice competition

Under the shared value creation framework, which of the following strategic actions would fail to connect economic and societal needs?

Focusing exclusively on maximizing returns for shareholders.

Treequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?

Freemium

The distribution department at Wheat, Barley and Whey Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate?

Functional strategy

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

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

Information Asymmetry

Galleon Group's Founder, agents usually know more than the principal and it causes an increased risk of employee opportunism.

The ideas of corporate social responsibility and stakeholder strategy are particularly prevalent in ______.

Germany

Hollywood studios global strategy has changed over time. At one point, cost consciousness made the studios seek less expensive locations for filming their productions. At this time, Hollywood was moving from an International Strategy to a ______________________ Strategy on the integration-responsiveness framework.

Global Standardization

Which one of the following is a benefit of global teams?

Global teams usually have a greater diversity of ideas

Which theory suggests that employees can be motivated by objectives that are specific and challenging but achievable and that have rewards tailored to individual needs?

Goal-setting theory

How do foreign governments typically influence a firm's use of strategic alliances to enter new markets?

Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders.

_____ is the repurchase of the target firm's shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover.

Greenmail

Differentiation

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model. Vertical integration; horizontal integration Horizontal integration; vertical integration Vertical integration; Porter's Five Forces Horizontal integration; structure-conduct-performance

Horizontal integration; structure-conduct-performance

How does the market for corporate control work? Provide at least one example. The example can be from your reading in this class, your reading in other classes, or your own experience.

If a company is poorly managed, its performance suffers and its stock price falls as more and more investors sell their shares. Once shares fall to a low enough level, the firm may become the target of a hostile takeover when new bidders believe they can fix the internal problems that are causing the performance decline. For example, Kraft completed a hostile takeover of Cadbury. Besides competitors, so-called corporate raiders (e.g., Carl Icahn and T. Boone Pickens) or private equity firms and hedge funds (e.g., The Blackstone Group and Soros Fund Management) may buy enough shares to exert control over a company.

What usually happens if a hostile takeover attempt is successful?

If a hostile takeover attempt is successful, the new owner frequently replaces the old management and board of directors in order to manage the company in a way that creates more value for shareholders. In some instances, the new owner will break up the company and sell off its pieces. In either case, since a firm's existing management faces the threat of losing their jobs and their reputations as effective executives if the firm sustains a competitive disadvantage, the market for corporate control is a credible governance mechanism.

Related-Linked Diversifications

If executives consider new business activities that share only a limited number of linkages (Ex: GE)

How does a leveraged buyout affect a public company?

In a leveraged buyout (LBO), a single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private. In short, an LBO changes the ownership structure of a company from public to private. The expectation is often that the private owners will restructure the company and eventually take it public again through an initial public offering (IPO).

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.

Which of the following statements is true of an equity alliance? An equity alliance is based on contractual agreements rather than partial ownership. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. An equity alliance creates weaker ties between the alliance partners when compared to a nonequity alliance.

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

How does horizontal integration affect Porter's Five Forces for the surviving firms? (Check all that apply.)

It reduces rivalry among existing firms. It reduces the threat of entry.

Describe moral hazard in the context of the principal-agent relationship. Use an example

In the principal-agent relationship, moral hazard describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort. In this situation, the agent is able to do the work but may decide not to do so. For example, a company scientist at a biotechnology company may decide to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned

Which one of the following statements is NOT true? Increased trust among stakeholders will increase the transaction cost. Satisfied stakeholders are more cooperative and can increase a firm's value creation. Negative outcomes can be avoided if stakeholders are satisfied. Firms can build a stronger reputation through effective stakeholder management.

Increased trust among stakeholders will increase the transaction cost

Information asymmetry

Describe the role of inside directors as part of a company's board of directors

Inside directors are generally part of the company's senior management team, such as the chief financial officer (CFO) and the chief operating officer (COO). They are appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. Without this valuable inside information, the board would not be able to effectively monitor the firm. As senior executives, however, inside board members' interests tend to align with management and the CEO rather than the shareholders.

What best describes transferability of investor interests? Investors can give company stocks as a gift. Investors are allowed to trade stocks. Investors are allowed to participate in strategy formulation. Investors can be hired as employees

Investors are allowed to trade stocks

How does Lyft benefit from its strategic alliances with GM and Waymo? a. It allows Lyft to more effectively compete against Uber. b. It gives Lyft access to new markets that Uber is unaware of. c. It provides Lyft with shares of GM and unlimited funds. d. It gives Lyft a winner-take-all advantage.

It allows Lyft to more effectively compete against Uber

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

It allows the conglomerate to overcome institutional weaknesses in emerging economies.

As discussed in the case, W. L. Gore eventually adopted a cooperative multidivisional organizational structure. Which of the following is not a reason why this type of structure is advantageous for firms like W. L. Gore?

It best supports a firm with low organizational complexity.

Which of the following scenarios would justify a firm using an organizational structure that supports centralized decision making?

It competes on costs and economies of scale.

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.

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? It helped HP pursue a taper integration strategy. It enabled HP to compete head on with Cisco's videoconferencing solution. It resulted in depreciation of HP's shareholder value. It failed because HP lacked the expertise in selecting and integrating technology acquisitions

It enabled HP to compete head on with Cisco's videoconferencing solution.

Suger & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Suger & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy?

It fails to face the competitive challenge.

How has Kraft Foods benefited from its hostile takeover of Cadbury PLC? Its main strategic focus is now on the domestic market. It has opened a market that is growing slowly but has high profit margins. It has access to convenience stores and a new distribution channel. It gained a monopoly in the chocolate-manufacturing industry

It has access to convenience stores and a new distribution channel

Which of the following are true of alliance management capability? (select multiple) - Every firm has alliance management capability. - It involves alliance design and governance. - It involves partner selection and alliance formation. - It has little effect on a firm's competitive advantage.

It involves alliance design and governance; It involves partner selection and alliance formation

The upper-echelons theory states that ____________. It is the top management team that primarily determines the success or failure of an organization Stakeholders are crucial to the success or failure of an organization Ethical behavior is vital to the success or failure of an organization None of these

It is the top management team that primarily determines the success or failure of an organization

Svanhildur's company is committed to corporate social responsibility but also understands that growth and profit are imperative for survival. What should Svanhildur's company do to achieve this balance?

It should use the shared value creation framework.

A low-to-moderate level of task conflict consistently has a positive effect on group performance. What is the reason for this?

It stimulates discussion of ideas that help groups be more innovative

Konmatfix Inc. recently acquired Finhigh Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Finhigh Pharmaceuticals. As a result, Konmatfix's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Konmatfix? It will lower its costs through economies of scale. It will diminish its economic value creation. Konmatfix will increase its cost of distribution. Konmatfix will reduce the size of its product line.

It will lower its costs through economies of scale

It will lower its costs through economies of scale.

Which of the following is a disadvantage of a joint venture?

Knowledge shared with the new partner could be misappropriated by opportunistic behavior.

While the personal computer industry is flooded and growing with laptops and tablets, Javier recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Javier best represent?

Laggards

Which of the following is true regarding the government and horizontal integration?

Large horizontal integration activity typically needs to be approved by government authorities.

_____ typically own at least 5 percent of a company's issued shares.

Large-block shareholders

Law and ethics are not synonymous. Elaborate on this statement with the help of an example.

Law and ethics are not synonymous. This distinction is important. Staying within the law is a minimum acceptable standard. A note of caution is therefore in order, though: A manager's actions can be completely legal, but ethically questionable. For example, consider the actions of mortgage-loan officers who—being incentivized by commissions—persuaded 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. Such actions may be legal, but they are unethical, especially if there are indications that the borrower might be unable to repay the mortgage once the interest rate moves up.

Suppose that several senior managers recently left Target Corporation and went to work at rival Walmart. What part of the ""stocks and flows"" of resources does this represent for Target Corporation?

Leakage

Which of the following is an accurate statement about learning effects?

Learning effects occur over time as output accumulates.

Managers must ensure that their firms obey all the laws, including labor, consumer, and environmental laws. This is a firm's __________ responsibility. Legal Ethical Social Economic

Legal

A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ___________

Legal personality

When congress passed the Sarbanes-Oxley Act, it forced CEOs to be more _______ responsible for the reporting of the company. Economically Legally Ethically Philanthropically

Legally

Long Term Contracts (Strategic Alliances)

Licensing - A form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. Franchising - A form of long-term contract in which a franchisor grants a franchisee the right to use the franchisors trademark and business processes to offer goods and service that carry the franchisor's brand name; the franchisee in turn pays an up-front buy-in lump sum and percentage of the revenues.

Exhibit 12.2 displayed results of a 2010 Gallup poll on honesty and ethics. Which of the following groups ranked the very lowest in honesty and ethics? Nurses Teacher Lobbyists Business executives

Lobbyists

Why did the local Metro Transit Authority (MTA) order Uber to cease and desist?

MTA argued that Uber was operating a taxi service without proper licensing.

After 75 years in business, ABC Corp. has decided it is time to overhaul its compensation system. What advice would you offer its HR manager

Make it more flexible and reduce the number of pay levels.

_____ is the risk of job loss, loss of compensation, and loss of managerial reputation

Managerial employment risk

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? Recent advances in management science have greatly improved the success rate of strategic alliances. Many owners, managers, and business analysts believe they are essential to survive in an industry. Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. These alliances have an excellent record of success if managers have enough confidence in the outcome.

Many owners, managers, and business analysts believe they are essential to survive in an industry.

_______ is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort. Moral hazard Adverse selection The board of directors The agency problem

Moral hazard

________ is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort.

Moral hazard

Describe moral hazard with an example

Moral hazard describes a situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party. For example, allowing banks to commit undue risk taking in lending is an example of moral hazard.

Strategic Outsourcing

Moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain. Reduces the level of vertical integration.

The clothing lines created by Edwin and Faeh were tailored to appeal to European tastes. What approach does this represent according to the integrative-responsiveness framework?

Multidomestic

How does McClelland view needs?

Needs are something that we learn from our culture

Overall, was the Adidas acquisition of Reebok a success? No. Adidas has slipped from number two in the U.S. market to number three. Yes. By acquiring Reebok, Adidas improved its market share and made sure that Nike could not acquire it. The acquisition was a success for Reebok but not for Adidas. The acquisition was a success for Adidas but not for Reebok.

No. Adidas has slipped from number two in the U.S. market to number three

) How does Nobel laureate Milton Friedman's view of the firm's social obligations tie in with shareholder capitalism?

Nobel laureate Milton Friedman stated his view of the firm's social obligations: "There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." This notion is often captured by the term shareholder capitalism. According to this perspective, shareholders—the providers of the necessary risk capital and the legal owners of public companies—have the most legitimate claim on profits.

Influence Costs

Occur due to political maneuvering by mangers to influence capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

In line with stakeholder theory, which of the following strategic actions would NOT, according to Michael Porter, connect economic and societal needs?

Offer financial support to local politicians

Carhartt has some noncore apparel made in China. This type of globalization is called

Offshoring

Core Competence-Market Matrix

Once managers have a clear understanding of their firm's core competencies, they have four options to formulate corporate strategy: 1. Leverage existing core competencies to improve current market position. 2. Build new core competencies to product and extend current market position. 3. Redeploy and recombine existing core competencies to compete in markets of the future. 4. Build new core competencies to create and compete in markets of the future.

Kroger's partnership with Ocado is an example of what type of innovation?

Open innovation

The U.S. banking industry is a great example of the opportunities that create value through economies of scale and elimination of redundancies. This is an example of an opportunity to consolidate _______________.

Operations

________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.

Opportunity cost

Facebook's strategy to integrate Instagram with Facebook's Messenger demonstrates Facebook is an example of a(n) _________ portfolio company.

Orchestrator

Joint Venture

Organizational form in which two or more partners create and jointly own a new organization.

What area of equity theory is concerned with the extent to which people believe they are being treated fairly at work?

Organizational justice

______ are board members who are not employees of the firm but who are frequently senior executives from other firms or full-time professionals. Inside directors Outside directors CEOs Auditors

Outside directors

Describe the role of outside directors as part of a company's board of directors

Outside directors, unlike inside directors, are not employees of the firm. They frequently are senior executives from other firms or full-time professionals, who are appointed to a board and who serve on several boards simultaneously. Given their independence, they are more likely to watch out for the interests of shareholders.

_____ is an example of self-serving and opportunistic managerial behavior.

Overdiversification

_____ is defined by the number of large-block shareholders and the total percentage of the firm's shares they own.

Ownership concentration

This strategic analysis tool provides a method for a strategist to gain an overall understanding of the external environment that the organization is facing.

PESTEL

Which of the following corresponds to the use of tacit knowledge? José studies a fact sheet about France. Cassandra reads a demographic report about minorities in Texas. Phil assembles a motorcycle from memory. Jean uses a scientific article to defend her thesis about global warming.

Phil assembles a motorcycle from memory.

Corporate citizenship refers to _______ responsibility. Economic Legal Ethical Philanthropic

Philanthropic

Corporate social responsibility has four components: economic, legal, ethical, and __________ responsibilities. Trust Control Philanthropic Social

Philanthropic

Walmart spent $288 million for education and environment protection. This is an example of what type of corporate social responsibility? Economic Legal Ethical Philanthropic

Philanthropic

______ refers to the assets whose physical and engineering properties are designed to satisfy a particular customer. a. Human asset specificity b. Physical-asset specificity c. Site specificity d. Backward integration specificity

Physical-asset specificity

Which of the following are levels of Maslow's hierarchy of needs?

Physiological Safety Love Esteem

If the market for corporate control was truly efficient as a governance mechanism, what types of firms would be targets as takeovers?

Poorly performing firms

What is the main reason that most mergers and acquisitions negatively affect shareholder value? The entire market becomes an oligopoly or a monopoly. Promised synergies never take place. Market conditions change too quickly. Companies that resist acquisitions are subject to the "winner's curse."

Promised synergies never take place

What is the connection between Rajat Gupta and insider trading?

Rajat Gupta, a former McKinsey chief executive who served on Goldman Sachs' board, provided Raj Rajaratnam with important insider tips. Often within seconds after a Goldman Sachs board meeting ended, Gupta called Rajaratnam. In one of these phone calls, Gupta revealed the impending multibillion-dollar liquidity injection by Warren Buffett into Goldman Sachs during the midst of the global financial crisis. This information allowed the Galleon Group to buy Goldman Sachs shares before the official announcement about Buffett's investment was made, profiting from the subsequent stock appreciation. In another call, Gupta informed Rajaratnam that the investment bank would miss earnings estimates. Based on this insider information, the Galleon Group was able to sell its holdings in Goldman Sachs' stock prior to the announcement, avoiding a multimillion dollar loss.

Rantouch is one of the largest tax-preparation firms in the United States. It wants to acquire Doncon , a smaller rival. After the merger, Rantouch will be one of the two largest income-tax preparers in the U.S. market. What should Rantouch include in its acquisition plans? It should refocus its attention from the national to the international market. In addition to acquiring Doncon, it should also determine the best way to drive independent "mom and pop" tax preparers out of business. Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers. Rantouch should enter a price-based competition with its other major competitor to force it out of business and become a monopoly.

Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.

Why did Deutsche Telecom prosper during the early 2000s while Canadian telecom companies were unable to compete in the emerging global telecommunications market?

Regulators protected Deutsche Telecom's position in the domestic market, while allowing them to compete globally.

Which classification of board member is defined as having some relationship with the firm, contractual or otherwise, that may create questions about their independence and these individuals are not involved with the corporation's day-to-day activities?

Related outsiders

Which of the following is a means considered to improve the effectiveness of outside directors?

Requiring outside directors to own significant equity stakes in the firm

Which of the following statements is false?

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders.

Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view?

Resource Heterogeneity

Which of the following area is NOT covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act?

Retirement accounts

When two companies that are merging have complementary products, rather than overlapping products, there is a higher potential for an increase in:

Revenue

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.?

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.?

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.? Scotfind Inc. purchases Inity Inc. for $80 billion despite Inity Inc. being against the purchase. Scotfind Inc. and Inity Inc. join together to form a third new entity, while they also operate separately. Scotfind Inc. outsources a few of its business activities to Inity Inc. for competitive advantage. Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Which of the following is a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws?

Securities and Exchange Commission

Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take? Quickly build downstream complementary assets. Enter multiple learning races within strategic alliances. Seek an alliance with a company or companies that will complete the value chain. Pursue managerial hubris at all levels of development

Seek an alliance with a company or companies that will complete the value chain

Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take?

Seek an alliance with a company or companies that will complete the value chain.

Divestment differs from retrenchment in that divestment involves

Selling off parts of firm's operations

How do principal-agent problems cascade down the hierarchy in an organization? Describe an example of principal-agent problems. The example can be from your reading in this class, your reading outside of class, or your own experience

Senior executives, such as the CEO, face agency problems when they delegate authority of strategic business units to general managers. Employees who perform the actual operational labor are agents who work on behalf of the managers. Such front-line employees often enjoy an informational advantage over management. They may tell their supervisor that it took longer to complete a project or serve a customer than it actually did, for example. Some employees may be tempted to use such informational advantage for their own self-interest. An example of the principal-agent problem allegedly happened when Anthony Levandowski set up his own autonomous-vehicle company, Otto, while working at Waymo.

All of the following are examples of external-governance mechanisms except

Shareholders

The board of directors is charged with protecting the rights of

Shareholders

What best describes the separation of ownership and control? Shareholders own stocks but do not run the company. Shareholders can freely trade the company stocks. Shareholders provide necessary information to the company. Managers control the company but may also have stock ownership.

Shareholders own stocks but do not run the company.

What happens as ownership of the corporation is diffused?

Shareholders' ability to monitor managerial decisions decreases.

Which of the following is NOT an essential component of the Sarbanes-Oxley Act? Accounting oversight by the CEO Auditor independence Shareholders' responsibility to ensure accounting integrity All of these

Shareholders' responsibility to ensure accounting integrity

Which of the following scenarios best illustrates horizontal integration?

Siliss Inc. joins with Cancity Inc., one of its direct competitors.

Which of the following scenarios best illustrates horizontal integration? Silis Inc. enters into a licensing contract with a distributor in a new international market. Silis Inc. acquires a component parts manufacturer who previously supplied to Silis' competitor. Silis Inc. sets up its own distribution channel and retail stores. Siliss Inc. joins with Cancity Inc., one of its direct competitors.

Siliss Inc. joins with Cancity Inc., one of its direct competitors.

As discussed in the case and the text, W. L. Gore and Zappos adopted new organizational structures during periods of growth. In general, most firms follow a predictable pattern of structural change. Which of the following best exemplifies this pattern?

Simple to functional to Multidivisional Stractures

Decisional roles include all the following EXCEPT _________. Entrepreneur Disturbance handler Spokesperson Negotiator

Spokesperson

_________ is an integrative framework to connect corporate governance, business ethics, and strategic leadership. Stakeholder strategy Competitive strategy Supply chain management International strategy

Stakeholder strategy

Dev is a strategist for the firm Stark Industries, 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 LENS Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Dev to suggest? Stark Industries should acquire LENS. Stark Industries should form a short-term agreement with LENS. Stark Industries should form a long-term agreement with LENS. Stark Industries should enter into co-opetition with LENS.

Stark Industries should acquire LENS.

The most common executive compensation is _______. Stock ptions Commission Health benefits Straight salary

Stock options

Principal-Agent Problem

Stockholders' relationships with managers

The task of managing an overall enterprise and influencing key organizational outcomes is referred to as __________. Managerial discretion Stakeholder analysis Management by objectives Strategic leadership

Strategic leadership

Carl Ichan's hostile take over of TWA and selling off its assets is an example of a(n) _______________ portfolio company.

Surgeon

We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's

Switching Cost

Corporate codes of conduct go beyond what the law requires, imposing higher standards of honesty and fairness.

Dinesh is a senior manager at a large, publicly traded corporation. He has access to insider information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks.

If a privately held company has a history of legal and ethical problems, those problems can prevent a successful initial public offering (IPO) from taking place.

Linda owns and runs her own firm. She also serves on the boards of several companies. Although she does not work for these companies, she attends board meetings, analyzes information, and tries to act in the best interests of their shareholders. Linda is an example of an outside director.

dialectic inquiry

Technique that can help to improve strategic decision making; key element is that two teams each generate a detailed but alternate plan of action (thesis and anti-thesis). The goal, if feasible, is to achieve a synthesis between the two plans.

Which of the following examples describes the task of an alliance manager? Sam oversaw the agreement between her company and the potential alliance partner and offered support when needed. Tom used his knowledge of digital watches to help him manage the day-to-day operations of the alliance. Jenn reviewed the alliance portfolio to make sure it fit with the corporate strategy of her firm. Teddy trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

Teddy trained the employees of his alliance partner in the skills needed to create a display for an e-notebook

A group of individuals that formally represent the firm's shareholders and oversee the work of executives are referred to as __________. Agents The board of directors Managers Governing boards

The board of directors

What is the governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture?

The board of directors

Which of the following best exemplifies information asymmetry at Lizer Tech Inc., a publicly traded software development firm?

The board of directors at Lizer Tech makes significant structural changes to the organization and issues a press release to notify the shareholders.

Which of the following best exemplifies information asymmetry at Rainholm Industries Inc., a publicly traded software development firm?

The board of directors at Rainholm Industries makes significant structural changes to the organization and waits several weeks before issuing a press release about it.

Scope of the Firm

The boundaries of the firm along Three Dimensions: Industry value chain, Products and services, and Geography.

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.

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?

The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Corporate Level Strategy

The decisions that senior management makes and the actions it takes in the quest for competitive advantage in several industries and markets simultaneously; Addresses WHERE to compete. Must align with and strengthen a firm's business level strategy. Concerns the scope of the firm.

Which of the following best describes the leader's role of spokesperson? The executive taps into a network of contracts to collect information. The executive passes necessary information on to external stakeholders. The executive passes necessary information on to internal stakeholders. The executive designs the firm's strategy

The executive passes necessary information on to external stakeholders

Which of the following best describes the leader's role of disseminator? The executive taps into a network of contracts to collect information. The executive passes necessary information on to external stakeholders. The executive passes necessary information on to internal stakeholders. The executive designs the firm's strategy

The executive passes necessary information on to internal stakeholders

Autonomy

The extent to which a job allows the worker to make choices about scheduling different tasks and/or deciding how to perform them

Skill variety

The extent to which a job requires a worker to use a wide range of different abilities

Task identity

The extent to which a job requires the worker to perform everything needed to complete the job from beginning to end

Feedback

The extent to which workers receive clear, direct information about how well they are performing the job The extent to which workers receive clear, direct information about how well they are performing the job

Hooli 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.

Vertical Integration (Along the Industry Value Chain)

The firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. The degree of vertical integration tends to correspond to the number of industry value-chain stages in which it directly participates.

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?

The framework does not explain everything about changes in industries.

How is the characteristic of separation of legal ownership and management control disadvantageous to publicly traded companies?

The managers delegated to make decisions on behalf of shareholders might pursue their personal interests.

Can't Believe It's Not Hair Inc. (CBNH) dominates the ladies' wig market and wants to expand into men's toupees. How can CBNH 's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm? To protect themselves, CBNH's managers should choose the option that leads to the largest company with the most managerial positions. The managers need to determine whether the skills needed to create wigs and toupees are similar and whether CBNH creates better hairpieces than its competitors do. The managers must determine whether wig making and toupee making require substantially different skills. If so, the company should pursue internal development. Unless the market for toupees is booming, CBNH should stick to what it knows and focus on creating the best ladies' wigs in the industry

The managers need to determine whether the skills needed to create wigs and toupees are similar and whether CBNH creates better hairpieces than its competitors do

Which of the following statements is true?

The market for corporate control may not be as efficient as a governance device as theory suggests because takeover targets are not always low performers with weak governance.

Which one of the following statements is in agreement with the approach espoused by Nobel laureate Milton Friedman? The only social responsibility of business is to increase its profits. Corporate social responsibility is vital to a firm's success. Corporate social responsibility is universal across the world. Corporate social responsibility should not include NGOs

The only social responsibility of business is to increase its profits

Restructuring

The process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

Which of the following statements about stock options is true?

The recipient is given the right to purchase stock at a predetermined price sometime in the future.

How does the separation of ownership and control in public stock companies present a problem? Provide an example of this problem from your reading in this class, your reading outside of class, or your own experience.

The separation of ownership and control is one of the major advantages of the public stock companies. This benefit, however, is also the source of the principal-agent problem. In publicly traded companies, the stockholders are the legal owners of the company, but they delegate decision-making authority to professional managers. The conflict arises if the agents pursue their own personal interests, which can be at odds with the principals' goals. For their part, agents may be more interested in maximizing their total compensation, including benefits, job security, status, and power. An example of the problems related to the separation of ownership and control in public stock companies is Raj Rajaratnam's insider trading, which resulted in his being sentenced to 11 years in prison.

How does GE exemplify the creation of a shared value creation framework?

The shared value creation framework proposes that managers maintain a dual focus on shareholder value creation and value creation for society. GE, for example, has strengthened its competitiveness by creating a profitable business with its "green" Ecomagination initiative. Ecomagination is GE's strategic initiative to provide cleaner and more efficient sources of energy, provide abundant sources of clean water anywhere in the world, and reduce emissions. Through applying strategic innovation, GE is providing solutions for some tough environmental challenges, while driving company growth at the same time. Ecomagination solutions and products allow GE to increase the perceived value it creates for its customers while lowering costs to produce and deliver the "green" products and services. Ecomagination allows GE to solve the trade-off between increasing value creation and lower costs at the same time. This in turn enhances GE's economic value creation and its competitive advantage. Moreover, Ecomagination products and services also create value for society in terms of reducing emissions and lowering energy consumption, among other benefits.

Which one of the following statements below can best be linked to the Nobel laureate Milton Friedman?

The social responsibility of a business is to increase its profits.

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? A rival software firm may imitate this approach by acquiring a similar app developer. The software firm may overpay for the app developer, poorly serving the software firm's shareholders. Because most acquisitions are profitable, there is little to worry about in this scenario. The software firm may underpay for the app developer, cheating the app developer's shareholders of profit.

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

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

Which of the following best exemplifies the relational view of competitive advantage?

The strategic alliance between company A and company B creates more value than either company individually.

By November 2008, the Dow Jones Industrial Average lost 50 percent of its value primarily because of which of the following? The subprime mortgage bubble burst. The Bernard Madoff Ponzi scheme was discovered. The unethical behavior of some CEOs. Business executives rank low on surveys about honesty

The subprime mortgage bubble burst.

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals. Whichever company is larger should acquire the smaller one and impose its management system on the acquired company. The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power. For data security reasons, both companies should remain separate and refrain from sharing information.

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

Regarding the empirical evidence connecting corporate social responsibility and firm performance, the text notes there have been a variety of studies performed to look at this question. Which ONE of the following most accurately describes what has been found? CSR has been shown to strongly cause improved firm performance. There is a positive relationship but the causality is murky. Strong firm performance has been shown to strongly cause improved CSR by the firm. Prior research has not shown a connection between CSR and firm performance

There is a positive relationship but the causality is murky.

Which of the following is a result of horizontal integration in terms of Porter's five forces model? The industry structure becomes less consolidated. There is a reduction of excess capacity in the market. The industry structure becomes potentially less profitable. There is an increase in rivalry among existing firms.

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.

Which statements about joint ventures are true?

They are the least common of the three types of strategic alliances. They involve the sharing of both explicit and tacit knowledge

Which of the following is true of acquisitions?

They can be friendly or hostile.

Which of the following is true of acquisitions? They can be friendly or hostile. They can occur only when the involved entities are of comparable size. In acquisitions, two independent companies join to form a separate third entity. Acquisitions increase the competitive intensity in an industry

They can be friendly or hostile.

Which of the following statements is true of joint ventures? They enable the exchange of both tacit and explicit knowledge. They reduce the possibilities of trust and commitment. They are characterized by single reporting lines. They cannot entail long negotiations.

They enable the exchange of both tacit and explicit knowledge.

What is a true statement about strategic alliances?

They have a high failure rate.

Which of the following is a major drawback of public stock companies, according to Michael Porter and others?

They prioritize financial performance over all else.

Which of the following is an advantage of equity alliances when compared to nonequity alliances? They are more flexible and easy to initiate and terminate. They require smaller capital investments. They produce stronger ties between partners. They are based on contracts rather than ownership.

They produce stronger ties between partners.

Which of the following statements about equity alliances is true? a. They are more common than contractual, non-equity alliances. b. They result in weak ties between the partners. c. They are based on full ownership. d. They require larger investments than non-equity alliances.

They require larger investments than non-equity alliances

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

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

If you examine various barriers to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry?

Threat of new entrants

What is the benefit of granting stock options as part of a compensation package in a public stock company?

To align incentives between shareholders and management, the board may grant stock options as part of the compensation package. This incentive mechanism gives the recipient the right to buy a company's stock at a predetermined price sometime in the future. If the company's share price rises above the negotiated strike price, which is often the price on the day when compensation is negotiated, the executive stands to reap significant gains.

Three Dimensions of Corporate Strategy

To determine boundaries, executives must decide: In what stages of the industry value chain (the transformation of raw materials into finished goods and services along distinct vertical stages) to participate. This decision determines the firm's vertical integration. What range of products and services the firm should offer. This decision determines the firm's horizontal integration or diversification. Where in the world to compete. This decision determines the firm's global strategy.

organic

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

How can top management foster ethical behavior in employees? Provide an example that you have read about or that comes from your own experience

To foster ethical behavior in employees, top management must create an organizational structure, culture, and control system that values and encourages desired behavior. Furthermore, a company's formal and informal cultures must be aligned, and executive behavior must be in sync with the formally stated vision and values. Employees will quickly see through any duplicity. Actions by executives speak louder than words in vision statements. The companies that I have worked for have fostered ethical behavior by making it clear what the firm expects from employees in terms of time off, break time, Internet use, and reimbursement of business expenses.

Who are typically assumed to be responsible for an undervalued firm's poor performance?

Top-level managers

Related and Supporting Industries

Traditional Supplier Network for Toyota

(T/F) A cost-leader is the firm most likely to survive a price war

True

(T/F) Applying the five forces model to business-level strategy allows for managers to asses the benefits and risks of both cost-leadership and differentiation strategies

True

Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make.

True

Delos Inc. sells the same sparkplugs in more than 30 countries. Delos is an example that helps to support the globalization hypothesis

True

Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings.

True

T/F: A Portfolio Company is defined as an enterprise composed of multiple corporate entities and investments. These "holdings" have usually been acquired and may have resulted from the division of a prior business.

True

T/F: Creating Shared Value places social and environmental issues at the CENTER of how businesses work.

True

T/F: In the interview with Randy Culver, he shares that an important aspect of setting the company up for a successful acquisition is having the light of day ethics because "people buy companies they trust and believe in."

True

T/F: Related diversification is more likely to generate incremental value than unrelated diversification.

True

T/F: The 5 corporate centers for portfolio companies are defined based on their degree of business integration and the type of parent company intervention.

True

T/F: The Change Curve and Tuckman's Team Development Cycle follow the same path. The Change Curve demonstrates this path at the individual level. Tuckman's Team Development Cycle shows this path at the team level.

True

T/F: The fastest way to get to the "performing" phase of Tuckman's Team Development Cycle is constant, proactive communication and building trust.

True

T/F: The risk of choosing not to participate in consolidation either as a buyer or a seller is that the organization may eventually become unattractive as a target.

True

True or false: Pay for performance allows different salaried employees to get different pay raises and other rewards.

True

When multinational enterprises enter host countries such as Saudi Arabia and Japan, the most logical option is usually to pursue a multidomestic strategy even though that strategy rarely leads to significant cost-reductions.

True

When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a consumer surplus.

True

A survey showed that while most employees were pleased with the company's advancement opportunities and merit system, they were dissatisfied with factors such as pay scale and sharing an office with someone they disliked. These results exemplify which theory of motivation?

Two-factor theory

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?

Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

which of the following is NOT one of the groups of board members contained within the board of directors?

Unrelated outsiders

Which framework can companies use to assess whether their internal resources are superior to those of competitors in the targeted area?

VRIO framework

Kroger's plan to fight hunger and waste is an example of the organization's

Values

Which component of a company's culture is the most important aspect?

Values

Factor Conditions

Vast Oil and Gas Reserves in Venezuela

Which one of the following Acts prohibits discrimination on the basis of physical or mental disabilities?

Vocational Rehabilitation Act

Strategic Alliances (Alternatives on the Make-or-Buy Continuum)

Voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services together.

Wayne Enterprises 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 Wayne Enterprises Inc.?

Wayne Enterprises uses recycled materials to create its commercially successful products.

Short Term Contracting (Alternatives on the Make-or-Buy Continuum)

When engaging in short-term contracting, a firm sends out Requests for Proposals (RFPs) to several companies which initiates competitive bidding for contracts to be awarded with a short duration, generally less than one year [contractual agreement].

Related-Constrained Diversification

When executives consider business opportunities only where they can leverage existing competencies and resources (Ex: Johnson and Johnson)

When does the market for corporate control serve as a means for governance?

When internal controls have failed

When is free cash flow a potential agency problem?

When managers decide to invest in products that are not associated with the firm's current lines of business to increase the firm's level of diversification

When are the interests of multinational corporations' shareholders best served?

When there is a variety of compensation plans for executives of foreign subsidiaries

Escalation of commitment

Which of the following decision biases is displayed by individuals who continue on a failing course of action even after it becomes clear that this may be a poor path to follow?

Transnational strategy

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?

After creating a time schedule for accomplishing tasks and goals, what is the next step in developing career readiness?

Work the plan, give yourself rewards when appropriate, and make needed adjustments.

About 20 years ago, Xx-zobam, 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, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Xx-zobam was a star that developed into a cash cow.

A ________ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A) strategic alliance B) proprietorship C) cooperative D) leveraged buyout

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? A) The VRIO framework B) The transaction-cost economics model C) The Boston Consulting Group (BCG) matrix D) The core competence matrix

Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) sole proprietorship

In a non-equity alliance, which of the following types of information would firms most likely share? A) The documented information about the material composition of a product B) A top-level manager's experience related to making strategic decisions C) A manager's knowledge related to solving non-routine problems D) The employees' entrepreneurial skills

The downside of equity alliances is: A) the amount of investment that can be involved. B) that they are not useful stepping stones toward full integration of the partner firms. C) the weaker ties and reduced trust between partners. D) that the alliances cannot be abandoned if not promising.

The process of alliance management begins with ________. A) selecting the best possible partner B) designing the alliance C) creating resource combinations that obey the VRIO criteria D) choosing an appropriate governance mechanism

The success of the Pixar-Disney strategic alliance demonstrated that: A)the two entities' complementary assets matched. B)the companies were effectively managing an unrelated diversification strategy. C)Disney was in desperate need of Pixar's graphic display systems. D)it was easier for the alliance partners to reduce the value gap created

When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) Accessing critical complementary assets B) Reducing differentiation of product and service offerings C) Procuring additional capital investments D) Increasing competitive intensity

Which of the following best illustrates an equity alliance? A) A partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc. B) A contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market C) An alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company D) A collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices

Which of the following is NOT a reason why firms enter alliances? A) To replace competitive advantage with competitive parity B) To enter new markets, either in terms of geography or products and services C) To learn new capabilities D) To strengthen competitive position

Which of the following is a disadvantage of a horizontal integration corporate strategy? A)It increases the potential for legal repercussions. B)It increases the costs associated with increasing value. C)It increases the threat of new entrants in an industry. D)It increases competitive intensity within an industry

Which of the following is an advantage of equity alliances when compared to non-equity alliances? A) They produce stronger ties between partners. B) They are based on contracts rather than ownership. C) They are more flexible and easy to initiate and terminate. D) They require smaller capital investments.

Which of the following is true of acquisitions? A) Acquisitions can be friendly or hostile. B) In acquisitions, two independent companies join to form a separate third entity. C) Acquisitions can occur only when the involved entities are of comparable size. D) Acquisitions increase the competitive intensity in an industry.

Which of the following scenarios best illustrates horizontal integration? A) Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors. B) Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. C) Regal Autos Inc. sets up its own distribution channel and retail stores. D) Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor.

____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A) Learning races B) Learning networks C) Learning matrices D) Learning effects

______ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A) Licensing agreements B) Acquisitions C) Cartels D) Equity alliances

Suppose that a small company that makes a standardized product is experiencing an increase in sales even though it has a small geographic footprint. Currently, the founder makes all of the strategic decisions but is beginning to feel overwhelmed. She has decided to pursue a cost-leadership strategy going forward. In order for the firm to achieve its goals, which of the following business-level structures should the firm adopt?

a centralized functional structure

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

a conglomerate

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

Coordination costs

a function of the number, size, and types of businesses that are linked to one another

Which of the following occurs when a targeted firm is unwillingly acquired?

a hostile takeover

Kava Botanicals, a boutique retailer that sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which type of strategic alliance? -a long-term contract -a joint venture -an equity venture -a short-term contract

a joint venture

a licensing agreement so that Veridian Dynamics can exchange codified knowledge with Supremo

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

Which of the following best qualifies as a firm's internal stakeholder?

a manager taking care of the firm's operations in a foreign market

Agency theory presents some important managerial considerations. Broadly speaking, governance mechanisms need to assure alignment of incentives between principals and agents. The text provides an example of financial institutions in the situation of profits remaining within the firm while losses are paid by the public as a description of

a moral hazard problem

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like a nonequity alliance. an equity alliance. a joint venture. a merger

a nonequity alliance

a nonequity alliance.

Which type of company is considered a unicorn?

a private start-up company valued at more than $1 billion

principal-agent problem

a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him

Geovax Inc., a biotechnology company, was established to develop an effective vaccine against a deadly virus. As such, a large investment firm formed an equity alliance with Geovax that resulted in a significant financial investment that followed a string of smaller investments so long as Geovax continued to make headway towards their vaccine. This "wait and see approach" can best be described as a strategic bet. a real-options perspective. a quick way to generate revenues. horizontal integration

a real-options perspective

a real-options perspective.

What three of the following are the primary benefits of horizontal integration? (Check all that apply.)

a reduction in competitive intensity lower costs increased differentiation

Which of the following is an example of explicit knowledge? knowing how to create surveys a research skill knowing how to assemble semiconductors a research summary

a research summary

Tyrell Corporation, 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 Tyrell Corporation and the software company best referred to as in this scenario? an acquisition a strategic alliance a leveraged buyout a proprietorship

a strategic alliance

This group really clicked. They got along well both professionally and socially. While at work they focused on work. This group is likely to experience ________ in productivity

a strong increase

Which of the following terms refers to when one firm purchases or takes over another firm?

acquisition

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n) joint venture. partnership. acquisition. alliance.

acquisition.

Strategists can grow their firms by growing organically through internal development or externally through alliances and ______.

acquisitions

What are the most expensive, complicated, and difficult to undo options used to grow a firm?

acquisitions mergers

Pavel works for a successful pharmaceutical company. Despite several years of unprecedented growth, the company wants to boost profits even more. It has taken steps to drastically raise the prices of its most widely distributed medications, which are difficult to imitate. Research into employee ethical decision making capacity indicates that Pavel will probably ___________.

act in a manner that reflects his company's organizational culture

In team based environments, the principal may have difficulty determining individual contributions by members. This can create a situation in which an opportunistic employee does little work but takes credit. This is known as ______________.

adverse selection

In team-based environments, the principal may have difficulty determining individual contributions by members. This can create a situation in which an opportunistic employee does little work but takes credit. This is known as ____

adverse selection

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

adverse selection

The hiring of a job seeker who claims to have extensive computer programming experience when his knowledge of the subject is minimal would be an example of ______.

adverse selection

Separation between firm ownership and management results in a(n) _____ relationship.

agency

The idea that a corporation is simply a collection of legal contracts is know as ___________.

agency theory

Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively?

alliance management capability

Core competencies are unique strengths possessed by a firm which

allow it to differentiate its products and services from its rivals. Consumer demand is external to the firm. An example of Netflix's core competencies is its use of proprietary algorithms to determine its customer's needs.

an acquisition

Opportunism can be

an attitude and a set of behaviors.

Bethany is writing a paper for her Management class. She already has a strong A in the class, and only needs to get a C on the paper to keep her A. As she prepares the final version of the paper, she takes special care that the paper is well-written, insightful, and error-free, something that she can be proud of. Bethany is experiencing

an intrinsic reward

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes

architectural innovation.

In public stock companies, inside directors

are appointed by shareholders to provide the board with necessary company information.

Employees who work in organizations that emphasize ethical behavior _________.

are more likely to act ethically

95. Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.

A(n) ________ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain. A)greenfield venture B)non-equity alliance C)equity alliance D)joint venture

FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had 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 airlines industry. What does this scenario best illustrate? A) Managerial capitalism B) Managerial hubris C) Managerial feasibility D) Managerial empathy

How does horizontal integration within an industry affect the surviving firms? A) By increasing the threat the surviving firms will face from new entrants B) By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers C) By strengthening the rivalry among existing firms D) By requiring the surviving firms to shift their focus from non-price to price competition

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures: A) the readiness to accept short-term sacrifices to ensure long-term awards. B) aspects of cultural fit between different firms in an alliance. C) the willingness to make available necessary resources. D) features of the financial health of the different alliance partners.

The ________ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A) real-options perspective B) relational view of competitive advantage C) non-differentiation strategy D) stakeholder strategy

Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A) Forward integration B) Horizontal integration C) Vertical integration D) Backward integration

To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) ________. A) exit strategy B) acquisitions-led growth strategy C) unrelated diversification strategy D) harvest strategy

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 standalone firm called Genuine Autos Inc. This arrangement best exemplifies a ________. A) partnership B) joint venture C) proprietorship D) non-equity alliance

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: A) enter into a licensing agreement. B) consider an outright acquisition. C) borrow via a contractual agreement. D) pursue internal development.

When does a merger between companies typically occur? A)When a target firm does not want to be acquired B)When two firms of comparable size join to form a combined entity C)When two or more firms enter a temporary vertical strategic alliance D)When large, incumbent firms buy startup companies

When large, incumbent firms buy startup companies, the transaction is generally described as a(n) ________. A) alliance B) acquisition C) partnership D) joint venture

Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A) Non-equity alliance B) Equity alliance C) Greenfield venture D) Joint venture

Which of the following is a disadvantage of equity alliances? A) They do not permit the exchange of explicit knowledge. B) They can entail significant investments. C) They can bring about a lack of commitment. D) They are reflective of weaker ties between firms.

Which of the following is a drawback of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They necessitate the sharing of rewards between the partners. C) They produce weak ties, trust, and commitment between the partners. D) They do not enable the transfer and sharing of tacit knowledge.

Which of the following is an ineffective practice in alliance management? A) Coordinating a firm's portfolio of alliances B) Focusing on developing an alliance-management capability in isolation C) Establishing knowledge-sharing routines between alliance partners D) Developing relational capabilities to manage mergers and acquisitions

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A) The need to reduce its level of horizontal integration B) The desire to gain a new capability C) The desire to pursue an unrelated diversification strategy D) The need to enter a new geographical market

Which of the following types of strategic alliances is the least common in terms of frequency? A) Mergers B) Joint ventures C) Equity alliances D) Acquisitions

Why did Yahoo enter into a strategic alliance with Microsoft? A) To share its continuously updated search technology with Microsoft B) To overcome its competitive disadvantage in comparison to Google C) To pursue an unrelated diversification strategy D) To invest its excess cash flow in Microsoft's superior technology

A CEO always works as Chair of the board of directors. a. True b. False

b. False

Invention is defined as the adoption of a similar innovation by different firms. a. True b. False

b. False

Most large, complex firms innovate through cooperative strategies or strategic alliances, but not through internal activities. a. True b. False

b. False

Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm. a. True b. False

b. False

What causes the winner's curse? a. Buying a firm with principal-agent problems b. Overpaying for an acquisition c. Buying a firm with a competitive disadvantage d. Underpaying for an acquisition

b. Overpaying for an acquisition

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growthshare matrix, the smartphone division of True Electra will be categorized under: A. question marks. B. stars. C. cash cows. D. dogs.

b. STARS

What is horizontal integration? a. The process of merging with a competitor at a different stage of the value chain b. The process of merging with a competitor at the same stage of the value chain. c. The process of acquiring a competitor at a higher stage of the value chain. d. The process of acquiring a competitor at a lower stage of the value chain

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

The downside of equity alliances is a. the weaker ties and reduced trust between partners b. the amount of investment that can be involved c. that the alliances cannot be abandoned if not promising d. that they are not useful stepping stones toward full integration of the partner firm

b. the amount of investment that can be involved

Where does the principal source of the active monitoring of large companies come from in Japan?

banks

Following the rise of institutional investors, the use of poison pills to avoid hostile takeovers has _________.

become rare

Following the rise of institutional investors, the use of poison pills to avoid hostile takeover has ______.

become rarer

Which one of the following performance appraisal methods is a combination of elements from the critical incident method and the graphic rating scale method?

behaviorally anchored rating scale

Which one of the following is a negative aspect of group norms

being part of a group has the ability to increase an individual's antisocial actions

What was the strongest influence that shaped Chick-fil-A's organizational culture?

beliefs of its founder

The shared value creation framework is a tool intended to help businesses ___

benefit all stakeholders, not just shareholders

The shared value creation framework is a tool intended to help businesses ___________.

benefit all stakeholders, not just the shareholders

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

Industry value chain

best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.

Inside directors

board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Cash awards given to employees who achieve specific performance objectives are called ______.

bonuses

In general, if a resource is highly tradable, then it should be ______ using a license or contractual agreement.

borrowed

Internal development should occur when the firm's resources are _____ to those of competitors in the targeted area.

both similar and superior

Tom Terry is the CEO of BuildIt.com but wants a physical retail presence. In order to accomplish this, Tom formed a joint venture with a major real estate tycoon who has a significant foothold in the commercial property sector. This venture will require exchanging more than just codified information; as such, Tom should expect to share his knowledge of financial markets. his firm's supply chain. both tacit and explicit knowledge. only explicit knowledge

both tacit and explicit knowledge

Research on conformity suggests that ________.

conformity is a culture-bound behavior

both tacit and explicit knowledge.

After you identify a long-term goal, what is the second step in developing career readiness?

break your long-term goals into several short-term goals

A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is called the "______ framework."

build-borrow-or-buy

build-borrow-or-buy framework.

Jennifer is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The Board of Directors for JustFixIt Inc. suggested that enter a contractual agreement with a partner. This scenario best illustrates the concept of buy-sell-or-trade framework. build-borrow-or-buy framework. the horizontal and vertical integration frameworks. the strategic alliance framework.

build-borrow-or-buy framework.

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 the local partner can better protect its proprietary know-how. building downstream complementary assets can be expensive and time-consuming. the strategic alliance will reduce the differentiation of its product and service offerings. the value gap created by the firm can be easily lowered in an alliance.

building downstream complementary assets can be expensive and time-consuming

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.

building interorganizational trust

Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success. sharing explicit knowledge building interorganizational trust a hostile takeover partner implementation

building interorganizational trust

A real option gives a firm the right to continue making investments ______.

but does not obligate the firm to do so

How can horizontal integration increase product differentiation?

by filling the empty spaces in a firm's offerings

The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector?

by having higher performance in another sector

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 did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? by facilitating excess capacity in the industry by preventing mergers from taking place by lowering competitive intensity in the industry overall by increasing the threat of entry in the industry

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

How does horizontal integration within an industry affect the surviving firms? by increasing the threat the surviving firms will face from new entrants by strengthening the rivalry among existing firms by requiring the surviving firms to shift their focus from nonprice to price competition by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

) New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first ________ in the U.S. automobile industry. A) hostile takeover B) equity alliance C) joint venture D) non-equity alliance

93. Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50 percent of the stock of any one firm.

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) all potential business risks in the new market will have to be faced alone by the foreign firm. C) some of the firm's proprietary know-how may be appropriated by the foreign partner. D) the shareholder value of the foreign partner will decline drastically.

Adidas acquired Reebok primarily to ________. A) pursue an unrelated diversification strategy B) get access to the superior technology of Reebok C) overcome its competitive disadvantage against Nike D) overcome its principal-agent problems

Aro Shoes Inc. and Mova Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Aro Shoes entered the strategic alliance to acquire the production system pioneered by Mova Shoes. Similarly, Mova Shoes agreed to the strategic alliance to study the designing process of Aro Shoes. However, Aro Shoes was more successful and faster than Mova Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) Time compression diseconomies B) Network effects C) Learning races D) Economies of scope

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of ________. A)hostile takeovers B)cost-leadership C)related-linked diversification D)unrelated diversification

In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A) To access GM's distribution system and marketing expertise B) To access GM's completely new production system C) To learn how to implement its lean manufacturing program with an American work force D) To learn and implement the just-in-time inventory system pioneered by GM

NorthStar Inc. and The Royal Group have together established The Royal Star Group of hotels. NorthStar owns 49 percent and The Royal Group has a 51 percent share in The Royal Star Group of hotels. However, the management of The Royal Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? A) Sole Proprietorship B) Non-equity alliance C) Joint venture D) Equity alliance

Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of ________. A) cartel arrangements B) equity alliances C) non-equity alliances D) joint ventures

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? A) A joint venture B) A merger C) An acquisition D) An equity alliance

The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) acquisition

What helps notions such as fairness, honesty, and reciprocity to be codified into law? A) The notions are synonymous with law. B) The notions differ to some degree in different cultures around the globe. C) The notions are universal norms. D) The notions are characteristics inherited by each person irrespective of the culture.

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: A) the strategic alliance will reduce the differentiation of its product and service offerings. B) the local partner can better protect its proprietary know-how. C) building downstream complementary assets can be expensive and time-consuming. D) the value gap created by the firm can be easily lowered in an alliance.

Which of the following best illustrates a merger between the two companies GD Inc.and VS Inc.? A)GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. B)GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against thepurchase. C)GD Inc. and VS Inc. join together to form a single new company called GDVSInc. D)GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately

Which of the following best illustrates a non-equity alliance? A) An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc. B) A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices C) A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. D) An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company

Which of the following is an advantage of non-equity alliances? A) They facilitate the sharing of tacit knowledge between the alliance partners. B) They are based on ownership rather than contracts. C) They are flexible and easy to initiate and terminate. D) They produce strong ties between alliance partners as they are permanent in nature.

Which of the following statements is NOT true of tacit knowledge? A) It is knowledge that cannot be easily codified. B) It is concerned with knowing how to do a certain task. C) It is regularly shared between partners in a non-equity alliance. D) It is acquired only through actively participating in the process.

Which of the following statements is true of explicit knowledge? A) Explicit knowledge is knowledge that cannot be codified. B) Equity knowledge is acquired only through actively participating in a process. C) Explicit knowledge is shared in non-equity alliance firms. D) Explicit knowledge is about knowing how to do a certain task.

Which of the following statements is true of strategic alliances? A) They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. B) They are always focused on joining the same value chain activities. C) They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles. D) They enable firms to achieve goals faster, but at higher costs.

With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A) To transfer its knowledge of a completely new production system B) To better understand the American work force C) To learn the lean manufacturing system pioneered by Toyota D) To get access to Toyota's distribution system and marketing expertise

When large, incumbent firms buy start-up companies the transaction is generally described as a(n) a. Joint venture b. Partnership c. Acquisition d. Alliance

c. Acquisition

Which of the following types of strategic alliances is the least common in terms of frequency? a. Mergers b. Acquisitions c. Joint ventures d. Equity alliances

c. Joint ventures

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 a. The horizontal integration activity changes the industry structure from oligolostic to monopolistically competitive b. The surviving firms will need to be protected against the increasing bargaining power of the suppliers c. The horizontal integration activity has the potential to reduce competitive intensity in an industry d. The surviving firms will need protection against the relaxed entry barriers

c. The horizontal integration activity has the potential to reduce competitive intensity in an industry

All of the following statements are correct EXCEPT: a. immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. b. shareholders of acquired firms often earn above-average returns from an acquisition. c. the majority of acquisitions increase short-term value for the acquiring firm. d. shareholders of acquiring firms typically earn returns from the transaction that are close to zero.

c. the majority of acquisitions increase short-term value for the acquiring firm.

The defense strategy _____ is dilution of the target firm's stock, making it more costly for an acquiring firm to continue purchasing the target's shares; employee stock option plans (ESOPs), recapitalization, issuance of additional debt, and share buybacks are actions associated with this strategy.

capital structure change

In an economic context, strategy for producers is primarily about

capturing the economic value created as much as possible.

A firm might want to use a strategic alliance to ______.

change the industry structure

forward vertical integration

changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain.

One of the key characteristics of a leveraged buyout (LBO) is that it _____________.

changes the ownership structure of a company from public to private.

Corporate governance is a system of _____

checks and balances

Which one of the following suggestions will help reduce the effect of social loafing in groups

clearly identify individual responsibilities and efforts in the group outcome

When Bernard Kroger began to innovate in his grocery stores, what type of innovation did he use?

closed innovation

co-opetition

High-profile accounting scandals and the global financial crisis are exampled of __________.

companies and industries that did not conform to business ethics

High-profile accounting scandals and the global financial crisis are examples of ______.

companies and industries that did not conform to business ethics

Which of the following is primarily a value driver?

complements

Corporate strategy

comprises the decisions that senior management makes and the goal-directed actions it takes in the quest for competitive advantage in several industries and markets simultaneously.3 It provides answers to the key question of where to compete.

Jennifer was just named the CEO of a pen company called National Pens Inc. She immediately changed the name to "Jenn's Pens." When asked why she made this change by the board of directors, who showed research that there was no correlation between success and CEP names, she responded by saying, "my previous company had the name of their CEO in the title, and they were very successful." This fallacy on Jenifer's part reveals her

confirmation bias.

When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, InMode Ltd., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has InMode Ltd. adopted in this scenario?

consolidation strategy

Dodd-Frank includes provisions related to the categories of

consumer protection, systemic risk oversight, executive compensation, and capital requirements for banks.

According to agency theory, which of the following managerial functions can be used to avoid adverse selection and moral hazard? (Check all that apply.)

control organization

Co-opetition

cooperation by competitors to achieve a strategic objective

The mechanism used to guide a company toward meeting its strategic goals within the bounds of the law is known as ______.

corporate governance

All Foods is the parent company of several chain restaurants offering a variety of cuisines. The top management at All Foods has decided to enter the frozen foods industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?

corporate strategy

When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment.

corporate venture capital

When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment. a. incumbent b. corporate venture capital c. limited entrepreneurial d. Einstein-type

corporate venture capital

According to agency theory,

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

In order to reconcile economic and social needs within the shared value creation network, managers need to focus on ______. (Check all that apply.)

creating new regional clusters and business centers making products affordable for the poorest socioeconomic groups in order to improve standards of living expanding value chains to include NGOs and other organizations committed to social goals

Vehement Capital Partners wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, Vehement Capital Partners invested $100 million in the project. This investment made by Vehement Capital Partners will result in a

credible commitment.

A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of ______.

critical complementary assets

Marketing, manufacturing, and after-sale service are examples of ______.

critical complementary assets

Strato Engineering, a technology product company, formed a team to develop the next generation of the company's model CVF-D. The team is composed of employees from various functional areas. This is a ________ team

cross-functional

A(n) ________ is best described as a partnership in which at least one partner takes partial ownership in the other partner. A) non-equity alliance B) acquisition C) joint venture D) equity alliance

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) ________. A) joint venture B) greenfield venture C) acquisition D) non-equity alliance

Equity alliances are less common than non-equity alliances because they: A) produce weaker ties between partners. B) depend on contractual agreements. C) fail to facilitate the transfer of tacit knowledge. D) often require larger investments.

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A) By preventing mergers from taking place B) By facilitating excess capacity in the industry C) By increasing the threat of entry in the industry D) By lowering competitive intensity in the industry overall

In a strategic alliance, the firm that learns faster: A) has the incentive to invest further in the alliance. B) has the tendency to lose its competitive advantage. C) has the tendency to move up a learning curve. D) has the incentive to reduce its knowledge sharing.

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A) PureSource Pharma will increase its cost of distribution. B) PureSource Pharma will reduce the size of its sales force. C) PureSource Pharma will diminish its economic value creation. D) PureSource Pharma will lower its costs through economies of scale.

The main reason behind Google's decision to acquire the Israeli startup company Waze for $1 billion was to: A) share its capabilities with Waze. B) gain access to technology that is alien to it. C) support startup companies with venture capital. D) preempt its competitors from buying Waze.

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of: A) experience-curve effects. B) resource ambiguity. C) time compression diseconomies. D) principal-agent problems.

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: A) the product information documented in Tesla's database. B) the lean manufacturing process pioneered by Tesla. C) the safety measures followed in Tesla, recorded in its user manuals. D) the entrepreneurial spirit in Tesla.

What did Microsoft do to gain a foothold in the online search and advertising market dominated by Google? A) It sold part of its equity to Yahoo. B) It acquired Yahoo. C) It outsourced its non-core business activities to Yahoo. D) It entered into a strategic alliance with Yahoo.

When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) ________. A) proprietorship B) non-equity alliance C) equity alliance D) joint venture

When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement? A) When the resource in question is highly tradable B) After it has been established that the firm's internal resources are sufficient to build C) Before the strategist has considered borrowing the necessary resources through integrated strategic alliances D) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

Which of the following is an advantage of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They can be easily initiated and terminated. C) They require the lowest amount of investment relative to the other alliance types. D) They create strong ties, trust, and commitment between the partners.

Which of the following statements is true of joint ventures? A) They are characterized by single reporting lines. B) They cannot entail long negotiations. C) They reduce the possibilities of trust and commitment. D) They enable the exchange of both tacit and explicit knowledge.

Evening Star Inc. and The Luxur Group have together established The Luxur Star Group of hotels. Evening Star owns 49% and the Luxur Group has a 51% 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 alliances type does this best illustrate? a. Sole proprietorship b. Non-equity alliance c. Equity alliance d. Joint venture

d. Joint venture

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of a. Time compression diseconomies b. Experience-curve effects c. Resource ambiguity d. Principal-agent problems

d. Principal-agent problems

Which of the following statements is true of strategic alliances? a. They are always focused on joining the same value chain activities b. They enable firms to achieve goals faster, but at higher costs. c. They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. d. They are most beneficial when they join resources and knowledge in a combination that obeys the VRIA principles.

d. They are most beneficial when they join resources and knowledge in a combination that obeys the VRIA principles.

Delegation by one party of _____ results in an agency relationship.

decision-making responsibility to a second party

When Pfizer and Wyeth merged, they reduced the size of their combined sales force while also increasing the number of drugs they could promote. This is an example of which source of value creation for M&As?

decreased costs

Causal ambiguity

describes a situation in which the cause and effect of a phenomenon are not readily apparent.

A firm's resource-allocation process (RAP)

determines the way it allocates its resources and can be critical in shaping its realized strategy. Emergent strategies can result from a firm's resource-allocation process (RAP).

Maria and Tom both serve as SBU managers of their divisions. They have both been asked by the CEO to generate two different courses of action for a new product launch. This strategic decision-making technique can be described as

dialectic inquiry.

Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr8t Food adopted in this scenario?

differentiation

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing perfect competition. differentiation. oligarchy. natural monopoly.

differentiation.

Ontomedia 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 Ontomedia experiencing in this scenario?

diversification discount

AstraZeneca's acquisition of Cambridge Antibody Technology in 2006 allowed AstraZeneca to enter new research areas, after stopping work on several of its own medicines. This is an example of an opportunity for AstraZeneca to:

diversify its R&D (Research & Development) risks.

In a ________ structure the parent corporation typically acts as an external overseer to coordinate and control the various divisions and provide financial, legal, or other such support services

divisional

In a ________ structure the parent corporation typically acts as an external overseer to coordinate and control the various divisions and provide financial, legal, or other such support services.

divisional

Pete E' Gee sell's Big Dog Choppers, a special type of motorcycle. His business generates roughly 80 percent of his revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Pete E' Gee would be classified as a ________ firm.

dominate business

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

easy to imitate.

The shared value creation framework encourages managers to focus on which of the following needs? (Check all that apply.)

economic social

The amount of polyethanal that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment and is considered a legal offense. Consequently, PrismPaints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures polyethanal-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is Prism Paints Corp. primarily compromising in this scenario?

economic responsibilities toward its shareholders

Companies generally decide to expand globally to increase their

economic value creation.

Food Tiger Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against Food Tiger's low prices. Thus, Food Tiger has a competitive advantage due to its

economies of scale.

If directors were aware of or should have been aware of Jian Liu's activities, they would have been in violation of their

fiduciary responsibilities.

Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology.

economies of scope

multidomestic strategy

emphasis on local, niche interests in designs indicates the company is following a strategy type that responds to high pressure for local responsiveness and low pressure for cost reductions.

The model of motivation called equity theory is based on which of the following ideas?

employees want to see fairness in how they are rewarded for task performance

Which of the following is an example of an application of agency theory?

employment contracts

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they

enter into the market in large numbers, creating a herding effect.

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

entrepreneur.

A partnership in which at least one partner takes partial ownership in the other is a(n) ______.

equity alliance

equity alliance.

A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n) nonequity alliance. equity alliance. joint venture. capital venture.

equity alliance.

______ are partnerships in which at least one partner takes partial ownership in the other partner. a. Equity alliances b. Long-term contracts c. Strategic subsidiaries d. Committed complements

equity alliances

What are the three mechanisms that alliances can be governed by? (Check all that apply.)

equity alliances non-equity alliances joint ventures

What are the three mechanisms that alliances can be governed by? (select multiple) - downstream alliance - upstream alliance - equity alliances - joint ventures - non-equity alliances

equity alliances; joint ventures; non-equity alliances

Sam, owner of Sam's Hand Sanitizer Inc., is in the middle of the strategy formulation stage. He has already allocated a substantial amount of money that covered his employees' salaries from the prior year (sunk costs) but has failed to see any positive outcomes. Given the money he has already spent, he feels as if he needs to recover those costs and pushes forward even though the outcome seems dim. This best illustrates the concept of

escalating commitment.

The idea of corporate social responsibility (CSR) suggests that a firm's obligations should ______.

exceed the traditional imperative to increase profits

The persons responsible for forming corporate-level strategy are the ___. a. shareholders b. middle managers c. executives d. consultants

executives

What theory asserts that motivation is essentially a decision about how much effort to exert to get what you want in a particular situation?

expectancy

Jerry is the proud owner of American BBQ Eateries LLC. They currently operate in the southeast and have recently entered into a nonequity alliance with Big Bills BBQ Grills Inc., with a promise of sharing codified information via a licensing agreement. Which of the following best represents this level of sharing knowledge? core competency knowledge strategic alliance knowledge tacit knowledge explicit knowledge

explicit knowledge

Non-equity alliances tend to share ______, which allows the firms to understand a certain process or product.

explicit knowledge

Maria wants to pursue an international strategy but is concerned that foreign markets aren't ready for her products and services. You recommend that she engage in ________, which would be contract based and would limit risk and exposure of her investments

exporting

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

exporting goods.

When Carhartt allowed Edwin and Faeh to sell their apparel in Europe, they were expanding globally through

exporting.

Companies that transact in the open market incur ______. a. staffing costs b. internal transaction costs c. external transaction costs d. dividends

external transaction costs

Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as __

externalities

The loss of customer trust because of security problems are ________ that created ________.

externalities; internal costs

Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger? Integrate the acquired company as fully as possible, merging staffs and locations, so that all employees have as similar an on-the-job experience as possible. If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company. Cut prices at the acquired company but not the acquiring company so that the acquisition covers all consumer price points. Raise consumer prices at the acquiring company and the acquired company to reflect the fact that the market is now less competitive.

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

Leadership is very important to effective teams. In most cases, effective team leaders act as _____

facilitators

Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice ______. (Check all that apply.)

fails to take into account the idea of corporate social responsibility conforms to the traditional notion of shareholder capitalism

What do stakeholders want to above all else?

fair treatment

A company that wants to enter a new geographic market within China or Saudi Arabia should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity's business rather than weakening it through competition.

false

Alexi was a manager at Inquiry Inc. Instead of working full-time on Inquiry's projects, she used Inquiry's tools, employees, computers, and other resources to work on a research project that she hopes might help her start her own firm. This is an example of adverse selection.

false

Although Disney acquired Pixar through a hostile takeover, the merger has proven extremely profitable for both entities. True False

false

Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.

false

Executive compensation is an important element of corporate governance. Research has found that the rate of executive pay to average employee pay has been relatively stable over the last couple of decades.

false

Firms tend to share only explicit knowledge in an equity alliance.

false

Firms tend to share only explicit knowledge in an equity alliance. True False

false

In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases.

false

In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases. True False

false

In recent years strategic alliances have declined because of increasing government regulation. True False

false

It can be difficult for shareholders of publicly traded companies to determine how much money those companies are making or losing because these companies use different accounting firms, and each accounting firm follows different rules.

false

It is up to shareholders to make certain that the financial statements that their firms release are correct and not misleading.

false

Managers who are eager to forge business alliances often forget that the expected benefits of the partnership must represent only a small percentage of its monetary and time-related costs. True False

false

One of the most challenging aspects of principal—agent problems is that firms have almost no defenses against them.

false

Research indicates that most corporate ethics problems are caused by a few "bad apples" rather than an unethical culture.

false

True or false: Any action taken by a manager that is within the bounds of the law is, by definition, an ethical action.

false

True or false: In most cases, mergers and acquisitions create competitive advantage.

false

When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners.

false

When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners. True False

false

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to imitate the actions of its competitors like Apple and Facebook. solve its principal-agent problems. fill gaps in its competency lineup. expand through unrelated diversification.

fill gaps in its competency lineup

Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ______, leading to scandals and economic crises.

financial performance

Economist Michael Porter and many others argue that the value of public stock companies is too narrowly defined in terms of ________, leading to scandals and economic crises.

financial performance

What is the modern way of designing jobs?

fitting jobs to people

According to the traditional view, managers could not-and should not-directly supervise more than ________ subordinates.

five or six

An advantage of using a non-equity alliance to govern a strategic alliance is its ______.

flexibility and ease of initiation

Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should

focus on adding unique features to her product that customers will value.

In highly ________ organizations, there are explicit job descriptions, numerous organizational rules, and clearly defined procedures covering work processes

formalized

Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy.

forward vertical integration

Kurtis loves Benicio's Burritos and wants to open a branch in his hometown. Benicio's Burritos grants Kurtis the right to use its trademark and name, and Kurtis agrees to follow Benicio's Burritos guidelines. This is an example of Blank______. a. licensing b. franchising c. equity alliance d. short-term contracts

franchising

In Earl's department at Pencilchicken, Inc., employees get money based on how much the department has been able to save in costs. This is an example of a ------ compensation plan.

gainsharing

The primary purpose of the board of directors is ______

general strategic oversight and guidance

The primary purpose of the board of directors is _________.

general strategic oversight and guidance

Rangreen Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing?

geographic diversification strategy

Departmentalization based on ________ groups jobs on the basis of territory or physical location

geography

When rewarding an employee for a behavior, you should ______.

give rewards as soon as possible

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

globalization.

A _____ is a lump-sum payment of cash that is given to one or more top-level managers when the firm is acquired in a takeover bid.

golden parachute

The ________ method of performance appraisal allows the evaluator to rate employees on an incremental scale.

graphic rating skill

A diverse board of directors is less likely to fall victim to _________.

groupthink

Intel's Celeron chip and Atom chip are initiatives to

guard the company against disruptive innovation by protecting the low end of the market.

Although Dynatrace Holdings still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Dynatrace Holdings adopted in this scenario?

harvest strategy

The principal-agent problem surfaces when the agent, hired by the principal(s) to run the business

has different goals than the principal and fails to act in the principal's interests.

A work group ________.

has no need or opportunity to engage in collective work that requires joint effor

Open Innovation

has permeable boundaries that allow for innovation to flow out from the company to others or into the company from others.

a work team

has shared leadership roles

A(n) _____ is an investment fund that can pursue many different investment strategies, such as taking long and short positions, using arbitrage, and buying and selling undervalued securities for the purpose of maximizing investors' returns.

hedge fund

Horizontal integration can ______. a. help a firm improve its strategic position in an industry b. lower the cost of production through decreased economies of scope c. decrease the geographic scope of a firm

help a firm improve its strategic position in an industry

Condax Autos Inc. merged with its competitor NOW Autos Inc. This allowed Condax Autos to use its technological competencies along with NOW 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? supply-chain technological horizontal perfect

horizontal

When two competitors merge, leading to industry consolidation, they are engaging in ______. a. backward integration b. vertical integration c. forward diversification d. horizontal integration

horizontal integration

A _____ is an acquisition of a target company by an acquiring firm that is accomplished "not by coming to an agreement with the target company's management but by going directly to the company's shareholders or fighting to replace management in order to get the acquisition approved."

hostile takeover

If a company is poorly managed, its stock price may fall low enough for the firm to become a target for a(n) ______.

hostile takeover

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a

hostile takeover.

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a hostile takeover. friendly takeover. joint venture. strategic alliance.

hostile takover

A firm must decide whether to build, borrow, or buy to answer the question of ______.

how it will achieve growth

A firm must decide whether to build, borrow, or buy to answer the question of ______. a. when to start growth b. who must initiate growth c. why it must grow d. how it will achieve growth

how it will achieve growth

The economic or protective potential of employee experience, actions, and knowledge is referred to as ______.

human capital

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to

identify stakeholders' interests and claims.

What is the first step in developing career readiness?

identify your most important long-term goal

Under agency theory, a manager should seek to align ______ between principals and agents to minimize opportunism.

incentives

Under agency theory, a manager should seek to align __________ between principals and agents to minimize opportunism.

incentives

When Bryan is offered a chance to help direct the efforts of some employees assigned to his work group, he sees this new assignment as a(n) ________.

increase in his responsibility

Which of the following are among the reasons firms need to grow? (select multiple) a. to increase profits b. to decrease market power c. to increase costs d. to motivate management

increase profits; motivate management

The acquisition of PeopleSoft enabled Oracle to offer its customers expertise in human resource management systems (PeopleSoft's core competency) in addition to database management systems (Oracle's core competency). This is an example of which source of value creation of M&As?

increased differentiation

Which of the following are benefits of a horizontal integration? (select multiple) - increased rivalry - increased differentiation - integration failure - reduced competition

increased differentiation; reduced competition

Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on

increasing the perceived value created for customers, which allows it to charge a premium price.

Assessment centers are best used to select ________.

individuals for management positions

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

industry convergence

industry-specific forces

______ is a situation in which one party has more knowledge than another due to the possession of private knowledge. a. Incomplete contracting b. The principal-agent problem c. Information asymmetry d. Transaction costs economics

information asymmetry

The board of directors had an important role in Luckin Coffee, but it claimed to be unaware of any problems. If true, this is an example of

information asymmetry. where the company officers know more than the board.

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.

Last year, Diana's boss promised her a big bonus if she met her goals. At the end of the year, after Diana had exceeded her goals, she found her bonus was very small. In the future, Diana's ----- will probably be ------.

instrumentality; low

The ________ of conflict management argues that some conflict is absolutely necessary for effective organizational performance

interactionist view

The ________ of conflict management argues that some conflict is absolutely necessary for effective organizational performance.

interactionist view

Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.)

internal development acquisition of new resources strategic alliances

Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.) - internal development - acquisition of new resources - elimination of product costs - strategic alliances

internal development; acquisition of new resources; strategic alliances

In regard to the public stock company, limited liability means that __________.

investors are not responsible for any debts incurred by the company and are only at risk of losing the invested capital.

Licensing

is a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property such as patents.

An artifact

is a physical sign of the company's culture, such as store layout, uniforms, hours, etc.

functional structure

is an organizational structure that groups employees into distinct functional areas based on domain expertise.

The effectiveness of the balanced scorecard

is contingent upon the skills of the managers using it, the metrics chosen, and asking the four key questions.

An M-form

is structured with distinct strategic business units that operate independently, using their own unique structure. These SBUs can maintain flexibility, as evidenced by Zappos.

Firms that can employ and establish _________________, are more likely to protect their competitive advantage from being copied and/or eroding away.

isolating mechanisms

As a rule of thumb, if a firm's ROIC is greater than its cost of capital

it generates value; if it is less than the cost of capital, the firm destroys value.

A firm should consider using mergers and acquisitions only when ______.

it is important to be extremely close to the resource partner in order to understand underlying information

How does horizontal integration affect Porter's Five Forces for the surviving firms? (select multiple) - It increases the threat of entry. - It weakens bargaining power vis-à-vis buyers. - It reduces rivalry among existing firms. - It reduces the threat of entry. - It increases rivalry among existing firms.

it reduces rivalry among existing firms; it reduces the threat of entry

What type of entry into the Japanese market did KFC use?

joint venture

A reason for a country's development of advanced and specialized factors of human capital is often its

lack of natural resources.

Which of the following is a common drawback of a nonequity alliance?

lack of trust between partners

Which of the following is a common drawback of a nonequity alliance? lack of trust between partners difficulty initiating the contract difficulty terminating the contract lack of flexibility for the partners

lack of trust between partners

In small firms, managers often own a _____ percentage of the firm, which means there is a _____ amount of separation between ownership and managerial control.

large; small

Joan needs to eliminate some employees for a short while. She and her managers identify those employees who are not meeting performance expectations and explain that this termination is temporary but they are encouraged to seek other positions elsewhere. How is Jane trying to reduce the size of the workforce here?

layoffs

After initially selling original Carhartt clothing, Edwin and Faeh were given the rights to create their own line. This type of globalization arrangement is known as

licensing.

Donald owns shares of Meat and Bone Steakhouse, a food and beverages company. The company's financial situation takes a turn for the worse and ends up in severe debt. Despite owning shares of Meat and Bone Steakhouse, Donald is not responsible for bringing more money into the company to get it out of its debt. Which characteristic of public stock companies does this scenario best exemplify?

limited liability for investors

Travis owns shares of Lobster Krown Inc., a food and beverages company. The company's financial situation takes a turn for the worse and ends up in severe debt. Despite owning shares of Lobster Krown, Travis is not responsible for bringing more money into the company to get it out of its debt. Which characteristic of public stock companies does this scenario best exemplify?

limited liability for investors

Walmart sells live animals (snakes, eels, toads, etc.) for food preparation in China whereas IKEA sells kimchi refrigerators and metal chopsticks in South Korea. These examples illustrate the need for ________ which often requires the competing firm to tailor their products and services to meet the needs of the market in which they are competing.

local responsiveness

When a firm is facing high pressure for local responsiveness and low pressure for cost-reductions, the firm is likely to adopt a(n) ________ strategy according to the integration-responsiveness framework.

localization

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.

Which of the following are types of strategic alliances? (select multiple) - long-term contracts - equity alliances - joint ventures - mergers - parent-subsidiary relationship

long-term contracts; equity alliances; joint ventures

As the competitive forces increase in an industry, profit decreases due to

lower bargaining power for the competing firm.

What are sources of value creation in a horizontal integration strategy? (Check all that apply.)

lower costs reduction in competitive intensity

One way to overcome the principal-agent problem is to ______. a. offer managers communities of knowledge b. make managers owners through stock options c. establish coordination and flexibility d. specify information symmetries

make managers owners through stock options

In Fasehatice'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 corporatelevel strategy. providing technical expertise and knowledge needed for the specific technical area in an alliance. providing alliance training and development, as well as diagnostic tools. serving as an alliance process resource and business integrator between the two alliance partners.

making sure that an alliance fits within the firm's existing alliance portfolio and corporatelevel strategy.

Scientific ______ is the process of reducing the number of tasks a worker performs.

management

Donware 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 Sleds by Gogozoom LLC This company produced bobsleds, but its sales had slowed. The managers of Donware convinced themselves that they were able to manage the business of Sleds by Gogozoom LLC more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleds by Gogozoom LLC's bobsleds plummeted. Which of the following terms is often used to describe this scenario? winner's curse managerial hubris winner's disadvantage interdepartmental apathy

managerial hubris

Across the globe, telecom companies that anticipated the redefinition of their relevant markets are emerging as the global consolidators. This is an example of consolidation due to:

market integration across geographies.

________ is a type of technology that centers on large-batch production and requires moderate levels of complexity and sophistication.

mass production

To be successful, an incentive compensation plan must be ______.

measurable

Large organizations are more ________

mechanistic

In stable and simple environments, ________.

mechanistic designs are most effective

A(n) ______ is when two firms agree to join and create a combined entity, and a(n) ______ is when one firm buys or takes over another firm.

merger; acquisition

Pay for performance, basing pay on one's results, is also known as ______ pay.

merit

The main goal of a poison pill is to ______.

minimize the threat of a hostile takeover

The main goal of a poison pill is to __________.

minimize the threat of a hostile takeover.

exporting

mode of entering a foreign market allows for the lowest level of control

The use of reinforcement theory to change human behavior is called behavior ______.

modification

A situation in which one party has an incentive to shirk their responsibility because the costs will fall to the other party is known as ______.

moral hazard

Christopher works for Ocean Media Inc., a large corporation. His work requires him to travel extensively and, as a result, he spends much time working remotely. Taking advantage of the situation, Christopher often works on personal projects instead of company projects. Ocean Media has difficulty checking on Christopher's work because he has no supervision in many of the places where he travels. This scenario exemplifies a(n)

moral hazard.

When examining the core competence-market matrix, the most challenging diversification strategy occurs when firms attempt to combine ________ with ________. If done successfully, the firm could have the potential for "mega-opportunities" that may lead to competitive advantage.

new core competencies, new markets

A partnership that is based on contracts between companies is referred to as a(n) _____. a. non-equity alliance b. allowance alliance c. wholly owned subsidiary d. diversification

non-equity alliance

A partnership that is based on contracts between companies is referred to as a(n) ______.

non-equity alliance

The most common type of alliance is a(n) ______.

non-equity alliance

The health condition that is most costly for employers is ________

obesity

The ________ view of conflict management argues that conflicts must be avoided as it indicates a problem within the group

obstructionist traditional

The primary difference between outside and inside members of the board of directors is that ______.

outside directors are not employees of the firms, whereas inside directors are

According to research, a board of directors performs better if:

outside directors own significant equity in the firm.

Adidas acquired Reebok primarily to overcome its competitive disadvantage against Nike. get access to the superior technology of Reebok. overcome its principal-agent problems. pursue an unrelated diversification strategy.

overcome its competitive disadvantage against Nike

What causes the winner's curse?

overpaying for an acquisition

What causes the winner's curse? buying a firm with principal-agent problems overpaying for an acquisition buying a firm with a competitive disadvantage underpaying for an acquisition

overpaying for an acquisition

________, which captures the cultural fit between different firms, is one key element needed when selecting an alliance partner. Partner compatibility Partner commitment Joint ventures Partner competency

partner compatibility

Although the three tasks of alliance management capability often occur at the same time, in general what is the first phase of alliance management?

partner selection and alliance formation

When Monopar Therapeutics released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of Monopar Therapeutics' intellectual property rights. Thus, the drug is protected by a

patent.

Chips & Motherboards Inc., a leading hard drive manufacturer, recently filed for bankruptcy. While most of Chips & Motherboards Inc.'s competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards Inc. invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards Inc. was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?

path dependence

Blackzim Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?

pay-as-you-go

Executive compensation does NOT accomplish its objective as a governance mechanism by:

penalties for inadequate firm performance.

Which of the following steps in human resource management helps retain competent and high-performing employees?

performing management

Contingency factors refer to the degree to which individuals want ______.

personal and psychological development

Rosa is a senior manager at Veridian Dynamics, a motorcycle manufacturer. Veridian Dynamicshas entered an equity alliance with Parker Industries, a moped manufacturer. "Don't worry, Rosa," her counterpart at Parker Industries tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set." What else should Rosa request from Parker Industries? personnel exchanges to share tacit knowledge a gradual change from an equity alliance to a nonequity alliance to show greater commitment nothing, because the information transfer described is complete and appropriate a licensing agreement so that Veridian Dynamics can exchange codified knowledge with Supremo

personnel exchanges to share tacit knowledge

A pay-for-performance plan in which employees are paid according to their productivity is referred to as ______.

piece rate

Merilee is a seamstress in a garment factory, and she is paid $10 for each skirt she produces. What compensation plan does this describe?

piece rate

The subprime mortgage crisis of the early 2000's is an example of ______.

poor corporate governance

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. share its capabilities with Waze. support start-up companies with venture capital. gain access to technology that is alien to it.

preempt its competitors from buying Waze

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.

Corporate governance addresses the ______ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firm's best interests in mind.

principal-agent

Corporate governance addresses the _________ problem, which underscores the risk of delegating responsibility and control to individuals who may not have the firms best interest in mind.

principal-agent

Which of the following is one of the problems that corporate governance seeks to address?

principal-agent problem

The managers at Statholdings Mobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of time compression diseconomies. experience-curve effects. principal-agent problems. resource ambiguity

principal-agent problems.

Which one of the following Acts gives employees the legal right to examine personnel files and letters of reference?

privacy act

Zoom was identified as a unicorn in the case. A unicorn is a

private company worth $1 billion or more

Which perspectives on motivation are concerned with the thought progression that leads to people deciding how to act?

process perspectives

In Joan Woodward's study of the relationship between technology and structure, the structure that was the most technically complex was ________.

process production

Joan Woodward divided firms into three distinct technologies that had increasing levels of complexity and sophistication: unit production, mass production, and ________.

process production

The distribution to employees of a percentage of the company's profits is known as ______.

profit sharing

In __________, the stockholders are the legal owners of the company who delegate decision-making authority to professional managers.

public stock companies

Activist pension funds are _____ in nature, while activist hedge funds are _____.

reactive; proactive

When a company makes incremental investments as part of a larger investment and takes the time to analyze the information gained following each incremental investment, the company is taking a ______. a. tradable position b. non-equity approach c. real-options perspective d. co-opetition perspective

real-options perspective

Piper Inc. is a large cosmetics company that made an initial small investment in a start-up company, Oscorp, which was developing an organic face lotion. This gave Piper controlling interests in the start-up company. However, Oscorp soon began to have financial difficulties because of principal-agent problems. As a result, Piper 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.

Piper Inc. is a large cosmetics company that made an initial small investment in a start-up company, Oscorp, which was developing an organic face lotion. This gave Piper controlling interests in the start-up company. However, Oscorp soon began to have financial difficulties because of principalagent problems. As a result, Piper 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 break-even analysis. partial joint venture. credible commitment. real-options perspective

real-options perspective.

A ________ includes both positive and negative aspects about the job and the company

realistic job preview

The process of alliance management begins with selecting the best possible partner. choosing an appropriate governance mechanism. designing the alliance. creating resource combinations that obey the VRIO criteria.

selecting the best possible partner

_______ involves predicting which applicants will be successful if hired

selection

The theory of motivation that asserts that people are driven to try to grow and attain fulfillment, with their behavior and well-being influenced by the three innate needs of competence, autonomy, and relatedness, is known as the ______ theory.

self-determination

A ________ system rewards employees for the job competencies they demonstrate.

skill-based pay

Susan is the founder of the restaurant chain Right and Fresh. 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. Susan's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Susan?

social entrepreneur

A lot is riding on the success of this project. All nine members will share in the rewards. But Ted just doesn't have time to complete his assignment so he rationalizes that no one outside the group will know what he did or did not do anyway. Ted is engaged in ________.

social loafing

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

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

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that the foreign firm will need to make larger investments when compared to entering the new market on its own. some of the firm's proprietary know-how may be appropriated by the foreign partner. all potential business risks in the new market will have to be faced alone by the foreign firm. the shareholder value of the foreign partner will decline drastically

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

The ________ determines the number of levels and managers in an organization.

span of control

______ are unique assets with high opportunity cost. a. Diversified strategies b. Specialized assets c. Equity alliances d. Horizontally integrated assets

specialized assets

A _____ is a contract between the target firm and the potential acquirer specifying that the acquirer will not purchase additional shares of the target firm for a specified period of time in exchange for a fee paid by the target firm.

standstill agreement

________ occurs when a supervisor earns less than his or her subordinates.

status incongruence

The right to buy a company's stock at a predetermined price sometime in the future is known as a(n) ______.

stock option

Ownership concentration is determined by the number of:

stockholders and total percentage of shares they own.

All of the following are signs of Chick-fil-A's organizational values except its

store logo.

During the ________ stage of the group development process, a relatively clear hierarchy of leadership and agreement on the group's direction emerge

storming

In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage.

strategic

In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage. a. a partnership b. a merger c. tradable d. strategic

strategic

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.

strategic alliance

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible government partnership that may lead to lobbying. strategic alliance with another firm already established in those markets. hostile takeover with a firm operating in the United States. marketing strategy that strengthens the international value chain

strategic alliance with another firm already established in those markets

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible

strategic alliance with another firm already established in those markets.

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

strategic alliance.

Accounting, human resources, and research and development are examples of

support activities that add value indirectly.

Online retailer eBuy had been drastically losing market share to its competitors. The management hired a reputed consulting firm to advise the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its poor customer service, including slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its

support activities.

Which of the following is a disadvantage of a horizontal integration corporate strategy? It increases competitive intensity within an industry. It increases the potential for legal repercussions. It increases the costs associated with increasing value. It increases the threat of new entrants in an industry.

t increases the potential for legal repercussions

Equity alliances allow for the sharing of ______, which involves information that cannot be codified for completing tasks.

tacit knowledge

Which type of knowledge cannot be codified and can only be gained through active participation in the task?

tacit knowledge

Which type of knowledge cannot be codified and can only be gained through active participation in the task? a. explicit knowledge b. perceptual knowledge c. strategic knowledge d. tacit knowledge

tacit knowledge

______ is a way of orchestrating value activities in which a firm is backwardly or forwardly integrated and relies on outside-market firms for supplies or distribution. a. Vertical integration b. Horizontal integration c. Strategic outsourcing d. Taper integration

taper integration

Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as

taper integration.

________ conflict relates to the content and goals of the work

task relationship

In the case of functional departmentalization, jobs are grouped according to ________

tasks

Which one of the following is a type of specific training provided by organizations?

team building skills

A ________ structure is one in which the entire organization is made up of work teams that do the organization's work.

team project

Hedge funds have traditionally avoided _____ firms because they change _____, and, as such, their future success is difficult to forecast.

technology; rapidly

The partners in non-equity alliances can have weak ties because such alliances are often ______ in nature, which can cause lack of trust and commitment.

temporary

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because the U.S. population was growing slowly and becoming more health conscious. its strategic position in the U.S. market was well protected through high entry barriers. this would help the company gain access to large cocoa plantations in China. Hershey's main strategic focus was on product and market diversification and not on the domestic market.

the U.S. population was growing slowly and becoming more health conscious.

The downside of equity alliances is the weaker ties and reduced trust between partners. the amount of investment that can be involved. that the alliances cannot be abandoned if not promising. that they are not useful stepping-stones toward full integration of the partner firms.

the amount of investment that can be involved.

A functional structure that is centralized and hierarchical is

the best type of structure when a firm is pursuing a cost-leadership strategy and makes a standardized product.

Shareholder monitoring is usually accomplished through:

the board of directors.

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group to which the firm belongs

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

the cost of maintaining a production unit

Your to-do list for achieving short-term goals should identify the ______.

the daily tasks you need to complete

Which of the following reasons motivated Facebook to acquire Instagram, a photo and videosharing social media site, for $1 billion? the desire to gain a new capability the need to enter a new geographical market the need to reduce its level of horizontal integration the desire to pursue an unrelated diversification strategy

the desire to gain a new capability

In a nonequity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

In a nonequity alliance, which of the following types of information would firms most likely share? a manager's knowledge related to solving nonroutine problems a top-level manager's experience related to making strategic decisions the documented information about the material composition of a product the employees' entrepreneurial skills

the documented information about the material composition of a product

Which one of the following would be considered a factor most directly influencing the human resource process?

the economy

An executive can legally earn a significant profit from stock options if ______.

the firm performs well and the actual price per share exceeds the negotiated strike price

Group cohesiveness is most likely to produce strong increases in productivity when ________

the group's goals align with the organization's goals

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.

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 changes the industry structure from oligopolistic to monopolistically competitive. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. the horizontal integration activity has the potential to reduce competitive intensity in an industry. the surviving firms will need protection against the relaxed entry barriers.

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

The Mexican Federal Labor Law includes controls on ________.

the outsourcing of jobs to other countries

What is a major disadvantage of organizing economic activity within firms? a. enforcement of contracts b. transaction-specific investments c. the principal-agent problem d. search costs

the principal-agent problem

If stockholders were upset that Eric Yuan allowed security problems to surface because he was focused on other things, the situation could be considered an example of

the principal-agent problem.

What is horizontal integration?

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

What is horizontal integration? the process of merging with a competitor at a different stage of the value chain the process of merging with a competitor at the same stage of the value chain the process of acquiring a competitor at a higher stage of the value chain the process of acquiring a competitor at a lower stage of the value chain

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

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech start-up 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. co-opetition. explicit knowledge. the stakeholder strategy

the real-options perspective.

Which of the following states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries?

the relational view of competitive advantage

A firm should use an equity alliance, a joint venture, or an outright acquisition in order to gain use of a resource when ______.

the resource is not easily traded

The type of structure that best supports a firm with low organizational complexity is

the simple structure.

Diversification premium

the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

There is a greater trend for boards of directors to become involved in:

the strategic decision-making process.

A disadvantage of a short-term contract as an alternative on the make-or-buy continuum is that ______. a. the supplying firm has little reason to perform transaction-specific investments b. the supplying firm has a shorter planning period than it has for individual transactions c. the buying firm can get a lower price for the work because of the competitive bidding process d. the supplying firm has a longer planning period in comparison to individual market transactions

the supplying firm has little reason to perform transaction-specific

Horizontal integration is a good option if ______.

the target firm will have more value when combined with the acquiring firm

There are several major limitations of employing the balance scorecard framework; which of the following below is not one of those limitations?

the type of marketing and HR functions used to employ the framework

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently

Which of the following is the best explanation of pension funds, according to this statement: Pension funds are critical drivers of growth and economic activity in the United States because:

they are one of the only significant sources of long-term, patient capital.

Why might a firm create a joint venture when entering a new geographic market?

to access local expertise to adhere to local law to access local contacts

What is the main goal of corporate venture capital investments?

to create real options in terms of gaining access to new technologies

Which of the following are reasons why firms enter into strategic alliances? (select multiple) - to enter new markets - to decrease economies of scale - to increase outsourcing - to learn new capabilities - to strengthen their competitive position

to enter new markets; to learn new capabilities; to strengthen their competitive position

Why do incumbent companies enter into strategic alliances with startups?

to hedge against uncertainty

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? to pursue an unrelated-options perspective without disrupting existing market economics to make small-scale investments in ventures poised to disrupt existing market economics to invest their excess cash flow in the superior technology of the biotech start-ups to share their continuously updated research technology with the biotech start-ups

to make small-scale investments in ventures poised to disrupt existing market economics

What is the fundamental goal of business in the United States?

to maximize shareholder wealth

What are common reasons a firm might pursue a merger? (Check all that apply.)

to overcome competitive disadvantage to address principal-agent problems to gain superior acquisition and integration capability

Why does Facebook acquire startups?

to preempt rivals

Which are the three main reasons firms make acquisitions? (Check all that apply.)

to preempt rivals to gain access to new distribution channels and markets to gain access to a new capability or competency

Which of the following are reasons to pursue horizontal integration as a corporate strategy?

to provide such benefits as complementary products in their offering to lower costs to enhance their economic value creation

Which of the following is the term for the costs associated with an economic exchange? a. economies of scale b. economies of scope c. core competencies d. PESTEL costs e. diseconomies costs f. transaction costs

transaction costs

Unlike short-term contracts, long-term contracts encourage firms to make ______ investments. a. transaction-specific b. umbrella c. transaction-non-specific d. integrated alternative

transaction-specific

Macmillan Toys Inc. is looking to expand internationally and wishes to develop a new product line that is highly localized while keeping their cost structure below that of their rivals. Macmillan Toys Inc. has been successful with implementing a blue ocean strategy in their main strategic business units and as such wishes to pursue a ________ strategy for their international operations.

transnational

Corporate codes of conduct go beyond what the law requires, imposing higher standards of honesty and fairness.

true

Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards. a. true b. false

true

Gary is a senior manager at a large, publicly traded corporation. He has access to insider information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks.

true

Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings.

true

Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings. True False

true

If a privately held company has a history of legal and ethical problems, those problems can prevent a successful initial public offering (IPO) from taking place.

true

If two large movie theater chains decide to merge, the result is likely a horizontal integration that creates a more favorable industry structure by decreasing competition.

true

If two large movie theater chains decide to merge, the result is likely a horizontal integration that creates a more favorable industry structure by decreasing competition. True False

true

It can be riskier to own parts of the supply chain than to rely on external supply chains. a. true b. false

true

Ruth owns and runs her own firm. She also serves on the boards of several companies. Although she does not work for these companies, she attends board meetings, analyzes information, and tries to act in the best interests of their shareholders. Ruth is an example of an outside director.

true

True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.

true

As firms grow, there is increasing complexity and the structure

typically moves from simple to functional to multidivisional to manage the needed changes.

A conglomerate fits which type of corporate diversification model? a. single business b. related diversification c. unrelated diversification d. dominant business

unrelated diversification

Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take? Turn down the acquisition offer and prepare to resist a hostile takeover. Attempt a friendly merger and use managerial hubris to improve results at Openlane. Welcome the acquisition and use knowledge transfer to impart Conecom Hardware's management practices. Do nothing; the two companies cannot combine without Conecom Hardware's explicit consent.

urn down the acquisition offer and prepare to resist a hostile takeover.

closed innovation

utilizing closed innovation (keeping all the innovation within the company).

A ________ selection device is characterized by a proven relationship between the selection device and some relevant job selection criterion

valid

The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings.

value; cost

Amazon's explosive success is largely due to which of the following? (select multiple) a. information asymmetry b. vertical integration c. single business focus d. diversification

vertical integration; diversification

The SEC argued that by NOT disclosing the risky nature of the mortgages in the Abacus CDO, Goldman Sachs _________.

violated his fiduciary duty

One characteristic of the matrix structure is that it ________.

violates the principle of unity of command

One of the major differences between inside directors and outside directors of a company is that outside directors are more likely to

watch out for the interests of the shareholders of the company.

The relationship between CEO pay and job performance has been shown to be _____

weak

The relationship between CEO pay and job performance has been shown to be __________.

weak

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

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

Which of the following features about a buyer indicates that the buyer has high bargaining power?

when the buyer operates in an industry where products are undifferentiated

When does a merger between companies typically occur? when two firms of comparable size join to form a combined entity when large, incumbent firms buy start-up companies when a target firm does not want to be acquired when two or more firms enter a temporary vertical strategic alliance

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

Porter's National Diamond framework is helpful in understanding

why high-performing firms in some industries are country-specific.

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 also reshape capitalism and its relationship to society.

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.

winner's curse

In the early 20 th century, automobiles were made one at a time by craftsmen who could perform every operation necessary to build the car. Henry Ford decided to limit the number of tasks each worker performed so each person could become expert in his position. With this practice, Ford introduced ________.

work specialization

One survey found that about half of U.S. adults would be willing to take a 10% pay cut if it meant ______.

working at a job they found meaningful

What are the four characteristics of a public stock company that make it an attractive corporate form? (Check all that apply.)

~transferability of investor interests ~legal personality ~separation of ownership and control ~limited liability for investors

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