Strategic Management Exam 2

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

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A) It is leveraging existing core competencies to improve current market position B) It is building new core competencies to protect and extend its current market position C) It is redeploying and recombining existing core competencies to compete in markets of the future D) It is targeting the chasm between the early adopter and early majority market segment

B

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A) it helped HP pursue a taper integration strategy B) it enabled HP to compete head on with Cisco's videoconferencing solution C) it resulted in depreciation of HP's shareholder value D) it failed because HP lacked the expertise in selecting and integrating technology acquisitions

B

How will an increase in coordinated economic and political integration between countries affect the world economy? A) The world's market economies will become self-sufficient and independent B) There will be gains in social welfare and living standards across the globe C) The cost of labor will further decline in emerging economies D) There will be a movement away from global-collaboration networks among multinational enterprises

B

If a strategic business unit is recognized as a cash cow, it is advisable to: A) harvest the business B) invest into the business to hold its current position C) divest the business due to its low market share D) maintain it until it turns into a dog

B

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

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

Investments in specialized assets tend to incur high opportunity costs because the A) assets can be profitably used for multiple purposes B) threat of one of the partners pursuing his or her self-interest is high C) social costs associated with these assets are high D) firms can avoid backward integration by investing in these assets

B

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 growth-share matrix, the smartphone division of True Electra will be categorized under: A) question marks B) stars C) cash cows D) dogs

B

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 toL A) the lean manufacturing process pioneered by tesla B) the entrepreneurial spirit in tesla C) the safety measures followed in tesla, recorded in its user manuals D) the product information documented in tesla's database

B

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

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

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

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

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A) inability to implement its trademark focused-differentiation strategy in the German market B) significant differences between its US personnel policies and Germany's culture C) Germany's unfamiliarity with retail discount powerhouses D) Metro's hostile takeover of Walmart in Germany

B

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to: A) move from unrelated diversification to related-constrained diversification B) integrate different strategic positions, pursued by different strategic business units C) pursue a focused differentiation strategy over a focused cost-leadership strategy D) depend on a single product market to generate most of its revenues

B

____ are best described as contractual alliances in which the participants regularly exchange codified knowledge A) cartels B) licensing agreement C) equity alliances D) acquisitions

B

A firm following a multidomestic strategy: A) is highly efficient B) lacks local responsiveness C) faces a greater risk of intellectual property appropriation D) requires exposing explicit knowledge because products are manufactured locally

C

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

DS & Co. is following a related-linked diversification strategy, and GreenWing Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A) GreenWing Inc. generates 70% of its revenues from its primary business, while DS & Co. generates only 10% of its revenues from its primary business B) GreenWing Inc. pursues a backward diversification strategy, while DS & Co. pursues a forward diversification strategy C) DS & Co. will share fewer common competencies and resources between its various businesses when compared to GreenWing Inc. D) DS & Co. pursues a differentiation strategy, and GreenWing Inc. pursues a cost leadership strategy, to gain a competitive advantage

C

Diversification premium is a situation in which: A) customers have to pay premium prices on products manufactured by firms pursing unrelated diversification due to the lack of economies of scope B) the overall value creation of highly diversified firms is more than the sum of the value created by individual business units C) the stock price of related-diversification firms is valued at greater than the sum of their individual business units D) shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale

C

For which of the following types of industries is a multidomestic strategy most common? A) machine-tool industries B) genetic industries C) food industries D) capital goods industries

C

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

How does a conglomerate benefit from following an unrelated diversification strategy? A) The conglomerate can solely depend on its primary business activity for a major portion of its revenues B) The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses C) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies D) The conglomerate can limit the learning and experience curve effects it faces

C

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

In the New United Motor Manufacturing, Inc. joint venture, why did Toyota enter into a strategic alliance with 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

It is necessary for government authorities such as the FTC and 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

Some multinational enterprises attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a ____. A) international strategy B) multidomestic strategy C) global-standardization strategy D) localization strategy

C

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company? A) taper integration strategy B) differentiation strategy C) related diversification strategy D) cost-leadership strategy

C

Which of the following is not included within the types of strategic alliances? A) joint ventures B) franchising C) acquisitions D) licensing

C

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode? A) they are easy to initiate and terminate B) they require low amounts of investments in terms of capital C) they reduce a firm's exposure to loss of reputation D) they are based on contracts rather than ownership

C

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 non-equity alliance firms D) equity knowledge is acquired only through actively participating in a process

C

Which of the following statements is true with regard to international trade between countries? A) greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies B) colony-colonizer relationships have a strong negative effect on bilateral trade between countries C) wealthy countries engage in relatively more cross-border trade than poorer ones D) political integrations decrease the expected trade intensity between two countries

C

White Leo Motors Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM? A) conglomerate B) subsidiary C) dominant-business firm D) single-business firm

C

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A) has the same wealth and per capita income as Zeda B) has a very profitable economy and where people speak a different language C) people speak English and have a low standard of living D) located close to Zeda and is easily accessible by road

C

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 superios to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A) the core competence matrix B) the BCG matrix C) the transaction-cost economics model D) the VRIO framework

D

Apple and Nike have their own outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of ____. A) monopsony B) geographic diversification C) crowdsourcing D) taper integration

D

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-a-vis suppliers and buyers

D

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

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

India has been able to carve out a competitive advantage in business process outsourcing primarily because: A) it has emerged as a manufacturing powerhouse B) of an efficient infrastructure and high labor costs C) it has an abundance of uneducated workers who are highly trainable D) of an abundance of well-educated, English-speaking young people

D

MotorCult Inc. is an automobile company whose core competency lies in manufacturing petrol and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car. In this scenario, MotorCult is primarily: A) leveraging new core competencies to improve current market position B) redeploying existing core competencies to compete in future markets C) unlearning existing core competencies to create and compete in markets of the future D) building new core competencies to protect and extend current market position

D

NorthStar Inc. and The Royal Group have together established The Royal star Group of hotels. NorthStar owns 49% and The Royal Group has a 51% 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) equity alliance D) joint venture

D

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

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of: A) food processed in Fernsland B) movies and TV shows produced in United Nerumbia C) iron ore extracted in Fernsland D) luxury items manufactured in United Nerumbia

D

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

When should mergers and acquisitions 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) before the strategist has considered the necessary resources through integrated strategic alliances C) after it has been established that the firm's internal resources are sufficient to build D) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

D

Which of the following best illustrates a merge 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

Which of the following is a drawback of pursuing a multidomestic strategy? A) the strategy allows for the lowest possible local responsiveness B) the strategy lowers the differentiation of a firm's product and service offerings C) the strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy D) the strategy is costly and inefficient because it requires the duplication of key business function across several countries

D

Which of the following is part of Geert Hofstede's cultural dimensions? A) locus of control B) self-efficacy C) span of control D) power distance

D

Which of the following statements is true of transaction costs? A) When the costs of pursuing an activity in-house are more than the costs of transacting for that activity in the market, then the concerned firm should vertically integrate B) When companies transact in the open market, they incur internal transaction costs C) Transaction costs exclusively consist of external costs associated with economic exchanges D) Transaction costs are necessary to explain and predict the boundaries of a firm

D

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

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

Each stage of the vertical value chain typically represents a distinct ____ in which a number of different firms are competing. A) industry B) functional department C) economy D) customer segment

A

GM entered China in 1997 through a joint venture with SAIC. Which of the following factors best contributes to the fact that the Chinese market already accounts for 25% of GM's total revenues? A) Chinese workers cost only a fraction of what US workers do B) The company operates a larger number of assembly plants in China than the US C) The China operation sells more vehicles while employing twice the number of employees D) GM's China operation has never been cost-competitive

A

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies? A) by using internal capital markets as a source of value creation B) by adding more unrelated businesses into its corporate portfolio C) by increasing its coordination and influence costs D) by investing in businesses under the question mark quadrant of the BCG matrix

A

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, Roache 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

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

The main reason behind Google's decision to acquire the Israeli startup company Waze for $1 billion was to A) preempt its competitors from buying Waze B) share its capabilities with Waze C) support startup companies with venture capital D) gain access to technology that is alien to it

A

The process of alliance management begins with ____. A) selecting the best possible partner B) choosing an appropriate governance mechanism C) designing the alliance D) creating resource combinations that obey the VRIO criteria

A

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using ____. A) related-constrained diversification B) related-linked diversification C) strategic outsourcing D) offshore outsourcing

A

Which of the following best illustrates site specificity? A) Equipment necessary for mining bauxite and aluminum smelting B) Bottling machinery to manufacture bottles with trademarked shapes C) Investment made in human capital to master procedures of a specific organization D) Investment made to train employees to operate computers

A

Which of the following factors is the most important determinant of economic distance? A) the wealth and per capita income of consumers B) the ethnicity and religion of consumers C) the presence of legal institutions in a country D) the topography of a country

A

Which of the following statements is true of taper integration? A) It is the most integrated alternative to performing an activity within one's own corporate family B) It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities C) It exposes in-house suppliers and distributors to market competition to make performance comparisons possible D) It does not rely on outside-market firms for its suppliers

A

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic US market. What is the reason behind this strategic difference? A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company B) Chick-fil-A has a larger customer base and number of outlets in the US market than its competitor, KFC C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy

A

____ 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) join ventures D) loan sharks

A

____ are best described as situation 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

____, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another. A) coordination costs B) fixed costs C) agency costs D) network costs

A