Test 4
Which of the following proves that GE's board of directors is significantly independent?
16 of the 17 board directors are from outside the organization.
Postrupe Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes 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 Postrupe's board to achieve board independence?
7
Which of the following types of groups is most susceptible to groupthink?
A cohesive group
Which of the following statements is true of corporate strategy?
A corporate strategy must be able to create synergies across business units that are quite different.
Which of the following strategies best illustrates a generic business strategy?
A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing
Why must managers use a mechanistic structure to implement a cost-leadership strategy?
A mechanistic structure offers a centralized structure with well-defined lines of authority.
Which of the following best defines duality in a board of directors?
A person holds both the role of CEO and chairperson of the board.
Why did W.L. Gore reorganize itself into a functional structure from a simple structure?
A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.
Which of the following statements about an organization's culture is NOT true?
A strong monitoring and supervision mechanism is needed to enforce the culture.
_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.
Adverse selection
Which of the following is true of W.L. Gore & Associates, which has a lattice organizational form?
All employees are empowered to speak to all other employees in the organization.
Orange Synergy Inc. is a company that manufactures a variety of products that run on solar power. The company wants to ensure that solar technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Orange Synergy?
All nations around the globe should have access to a sustainable energy source.
Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies?
Ambidextrous
W. L. Gore & Associates is the inventor of path-breaking new products such as breathable GORE-TEX fabrics, Glide dental floss, and Elixir guitar strings. Which of the following would be most likely to hinder its intention of fostering employee satisfaction, retention, and creativity?
An extremely formalized organizational structure
Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?
Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.
Why do shareholders of public companies need to appoint a board of directors to represent their interests?
Because of the separation of ownership and control
Which of the following do NOT serve as additional external-governance mechanisms?
Board of Directors
Which of the following is an important internal corporate-governance mechanism?
Board of Directors
Which of the following is regarded as the most internal of control mechanisms?
Business ethics
Rehman is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Rehman most likely to agree?
Businesses can use their resources to create profit as long as they do so within the rules of the game.
According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the _____.
CEO of the company
_____ refers to the degree to which decision making is concentrated at the top of the organization.
Centralization
Which of the following is true of business ethics
Certain notions such as fairness, honesty, and reciprocity are universal norms.
_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.
Corporate governance
Which of the following is NOT true of corporate governance in public stock companies?
Corporate governance seeks to create a separation between ownership and control.
Carrvour Inc. is a company that manufactures steel, cement, cars, and consumer electronics under a single brand. The top management at Carrvour has decided to enter the banking and insurance industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?
Corporate strategy
The CEO of True West Products Inc. (TWC) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWC banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?
Corporate strategy
Which of the following statements is true of customer-oriented visions?
Customer-oriented vision statements are not the same as listening to your customer.
Which of the following functions do the general managers in strategic business units primarily perform?
Design generic business strategies based on guidelines received from corporate headquarters
Why does Michael Porter recommend expanding the customer base of an organization in terms of the Shared Value creation framework?
Doing so could yield significant business opportunities that could improve the standard of living of the poor.
The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database.
EDGAR
Which of the following is an implication for the strategist in the context of corporate governance and a company's success?
Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.
The production head at the canned juice unit of True Foods Inc. would frequently stay back after office hours and experiment with new fruit juice flavors though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of fruit juices, cherry-melon and melon-mint. After rigorous test marketing, which proved that the market would accept the new drinks, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate?
Emergent strategy
During an assessment of employees and leaders in a company, Ethan Browne was categorized as a Level-5 manager in the Level-5 leadership pyramid. Which of the following can be inferred from this information?
Ethan is a top management executive in the company.
Which of the following perspectives best supports the Shared Value creation framework?
Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.
Which of the following terms or phrases best characterizes Zappos' organizational structure?
Extremely flat
Flight Stream Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Flight Stream for eight years but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?
Flight Stream Inc. has a flat organizational structure.
Which of the following features helps match a cost leadership strategy to a functional structure?
Focus on economies of scale
Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank?
Frank is an outside director on Lofloy's board of directors.
Frappe operates as a strategic business unit (SBU) under More or Less Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that:
Frappe is led by its own CEO (or equivalent general manager).
Which of the following organizational structures matches best with an international strategy?
Functional
Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions?
Functional managers are much closer to the final products, services, and customers than corporate-or business-level managers.
The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate?
Functional strategy
_____ are primarily responsible for decisions and actions within their respective departments like finance, human resources, marketing, and production in a strategic business unit.
Funtional managers
Blue Bird Products Inc. (BBP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate?
Funtional strategy
Which of the following facts proves that GE's board is fairly diverse compared to other Fortune 500 companies?
GE's board is composed of 28 percent women, compared to less than 16 percent for the others.
Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions?
GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.
Leila is a graduate student pursuing a course in international business. Presented with the case of HP's "soap opera," Leila wonders whether it was the right decision to ask the CEO of HP, Mark Hurd, to step down after he was accused of sexual harassment. Having a strong inclination toward Michael Porter's idea of value creation, Leila is most likely to conclude that:
HP was right in asking Mark to step down because it has a greater obligation toward society.
Which of the following is a feature of an organic organization?
High span of control
To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate?
How an organization accommodates strategy implementation through a flexible organizational structure
Which of the following statements is true of top-down strategic planning?
In this process, the formulation of strategy is separate from implementation.
The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Based on this, which of the following is a mission of PepsiCo?
Including healthy choices in its lineup
_____ are 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.
Inside directors
After carefully assessing the market potential for hybrid cars, it was decided at the corporate headquarters of Unidawn Autos Inc. that the company would be launching a hybrid version of all its car models within the next two years. This would mean that each strategic business unit under the company would be involving in its own research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate?
Intended strategy
What best describes transferability of investor ownership in a public stock company?
Investors are allowed to trade shares of stocks.
Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy?
It allows a cost leader to upgrade core competencies in manufacturing and logistics.
Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?
It allows a high level of integration.
Which of the following is an advantage offered by a functional structure?
It allows for a higher degree of specialization and deeper domain expertise.
Why does a functional structure rely on a flat organizational structure?
It allows for efficient bottom-up and top-down communication.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?
It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
Why does Zappos offer its new recruits $2,000 to quit at the end of the first week of their job?
It believes that individuals who choose to stay on will fit in with the Zappos culture.
Which of the following is a disadvantage of a functional strategy?
It cannot effectively address a higher level of diversification.
In which of the following ways does Zappos achieve organizational control?
It enforces that each group member's compensation depends in part on the group's overall productivity.
Which of the following statements best describes groupthink?
It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.
Which of the following statements is true of organizational culture?
It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.
What was Goldman Sachs' rebuttal to SEC's claim that it defrauded investors?
It is up to the clients to assess the risks involved in any investments.
Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?
It knew that Paulson had bundled high-risk mortgages into the collateralized debt obligation.
What most likely happens when a firm optimizes its organizational structure to its current situation?
It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.
What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?
It reduces the trust of shareholders in the organization as a vehicle for value creation.
Which of the following is true of a functional structure?
It relies on a relatively flat organizational structure.
Why is the optimal organizational structure a multidivisional structure?
Its focus is on driving down costs.
Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization?
Its job descriptions are very descriptive.
What was one of the reasons for Jerry Yang's failure at Yahoo?
Jerry's preference for obtaining consensus among his managers led to bickering and infighting.
Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company?
Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.
Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario'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?
Legal personality
Which of the following is a characteristic of a public stock company?
Legal personality allows a firm's continuation beyond the founder or the founder's family.
Nathan is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Nathan is in _____ of the Level-5 leadership pyramid.
Level 2
Gerald has been an employee with GeoFuture Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Gerald has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Gerald has reached so far?
Level 4
Richard is a manager. His colleagues and subordinates look up to him as a man who always does the right things. Along with other skills, his ability to effectively organize and deploy resources like manpower, material, and money has been appreciated by his seniors. According to the Level-5 leadership pyramid, which of the following levels would be the immediate next step for Richard?
Level 4
According to the Level-5 leadership pyramid, a manager turns into an executive who is capable of building lasting greatness into the organization through a combination of will power and humility when he or she reaches _____.
Level 5
Which of the following managers in the Level-5 leadership pyramid are most capable of leading their organizations into great success by guiding the organizations toward building a sustainable competitive advantage?
Level 5
Ramadin is the CEO of Brownback Consulting Inc. Ramadin's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Brownback Consulting. What does this scenario best exemplify?
Leveraged buyout
According to Michael Porter, which of the following is a problem with many publicly traded companies?
Many publicly traded companies have defined value creation too narrowly in terms of financial performance.
Which of the following occurrences was NOT an event that facilitated HP's sordid "soap opera"?
Mark Hurd, newly appointed CEO, oversaw large-scale layoffs and a pay cut for all remaining employees as he reorganized the company.
Which of the following is an important external corporate-governance mechanism?
Market for corporate control
Cup N Cone Inc., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Marvin Grey, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Marvin Grey as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true?
Marvin Grey has a wide span of control.
Which of the following best exemplifies the use of input controls?
McDonald's use of standard operating procedures
Which of the following real-world scenarios best exemplifies formalization?
McDonald's use of standard operating procedures across the world
Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup?
Mechanistic
_____ organizations are characterized by a high degree of specialization and formalization, and tall hierarchies that rely on centralized decision making.
Mechanistic
What was Leo Apotheker's role in the downfall of HP's market value?
Mr. Apotheker was instrumental in acquiring the overvalued British software company Autonomy.
Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use?
Multidvisional
If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy?
No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues.
_____ define appropriate employee attitudes and behaviors.
Norms
Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal?
Once the firm starts growing and attracting more customers she is likely to feel overloaded.
_____ organizations have a low degree of specialization and formalization as well as a flat organizational structure.
Organic
Which of the following types of organizations best helps match a differentiation strategy to a functional structure?
Organic organization
_____ describes the collectively shared values and norms of an organization's members.
Organizational culture
Which of the following statements is true of strategy in an organization?
Organizational structure must follow strategy in order for firms to achieve superior performance.
_____ are best described as the ethical standards and norms that govern the behavior of individuals within a firm.
Organizational values
_____ are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals.
Outside directors
Which of the following functions did HP's board of directors fail at following the unexpected departure of Mark Hurd?
Overseeing the company's CEO succession plan
The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Identify the phrase that represents the vision of PepsiCo as described by Ms. Nooyi.
Performance with a Purpose
Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?
Practicing effective corporate governance
Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry?
Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs
Which of the following is an unintended side-effect of a high degree of specialization in an organization?
Reduced employee satisfaction due to repetition of tasks
How are the two approaches namely strategic planning and scenario planning different from strategy-as-planned-emergence approach?
Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy.
Which of the following is a top-down approach to the development of strategy that involves asking "what if" questions to anticipate plausible futures?
Scenario planning
Which of the following statements accurately brings out the difference between top-down strategic planning and scenario planning?
Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach.
All public companies listed on the U.S. stock exchanges must file a number of financial statements with the _____.
Securities and Exchange Commission (SEC)
Who appoints the board of directors in a public stock company?
Shareholders
Jamiro Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability?
Shareholders of Jamiro are responsible to the company only for the capital they have invested.
Which of the following statements best supports the separation of ownership and control in publicly traded companies?
Shareholders own stocks but do not run the company.
What does "limited liability for investors" imply in a public stock company?
Shareholders who provide the risk capital are liable only to the capital specifically invested.
In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store?
She used an emergent strategy.
Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?
Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.
____ describes the degree to which a task is divided into separate jobs.
Specialization
Which of the following statements is true of strategic initiatives?
Strategic initiatives can be the result of a response to external trends or come from internal sources.
Why does strategy implementation often require changes within an organization?
Strategy implementation transforms strategy into actions and business models.
In a large company, who is most responsible for devising the corporate strategy?
The CEO of the company
GE's board has only one inside director, Jeffrey Immelt, 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?
The CEO possesses invaluable inside information that can help chair the board effectively.
Which of the following is a major issue at the forefront of CEO compensation in recent years?
The absolute size of the CEO pay package compared with the pay of the average employee
A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?
The bank knows that the customer will be unable to pay the loan if the interest rate rises.
Which of the following best illustrates a strategic business unit (SBU)?
The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food
Which of the following statements best supports the view that GE's ecomagination strategy is in line with the Shared Value creation framework?
The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?
The expectation that the agent will act in the principal's best interest
What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?
The firm's culture can turn from a core competency into a core rigidity.
How does W.L. Gore exemplify founder imprinting?
The four core values articulated by Bill Gore guide the company and its associates to this day.
Who among the following is responsible for making business strategies in a large conglomerate?
The general managers of individual business units
Which of the following statements is true about the use of functional structures with various business strategies?
The goal of a differentiation strategy is to create a competitive advantage by controlling costs.
Which of the following methods of developing a strategy best illustrates scenario planning?
The managers at Vion Autos Inc. formulated a strategy to tackle any increase in the prices of aluminum sheets in the future.
Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business?
The nonsustainable debt levels incurred by sovereign governments to fund social programs
What helps notions such as fairness, honesty, and reciprocity to be codified into law?
The notions are universal norms.
Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm, Telbok Inc.?
The owner of another company buys all the outstanding shares of Telbok.
Which of the following strategies best illustrates a functional strategy?
The production manager at the apparel division of Style Culture Co. has decided that the department will hire contract workers for three months to meet the temporary demand.
Which of the following is the source of the principal-agent problem in publicly traded companies?
The separation of ownership and control
Why are controls like budgets and operating procedures that McDonald's implements known as input controls?
They are considered before employees make any decisions.
What are poison pills?
They are defensive provisions that kick in should a buyer reach a certain level of share ownership.
Which of the following statements is true of shareholders in a public stock company?
They are granted a charter of incorporation by the state and legally own company stock.
Which of the following is NOT true about the members of the board of directors in a public stock company?
They are not responsible to shareholders.
Which of the following did management at Zappos do to reduce the level of formalization in their organization?
They avoided asking their customer service reps in call centers to follow a detailed script.
Which of the following is true of the codes of conduct of an organization?
They detail how the organization expects an employee to behave and to represent the company in business dealings.
Which of the following statements about product-oriented visions is true?
They tend to force managers to take a myopic view of the landscape.
Which of the following best explains why a board of directors may grant stock options as part of a compensation package?
To align incentives between shareholders and management
Cuisine Pro Inc. is a company that manufactures consumer electronics like refrigerators, washing machines, and dishwashers. Which of the following best illustrates a product-oriented vision for Cuisine Pro?
To be the pioneering manufacturer of home and kitchen appliances
Which of the following is a customer-oriented vision?
To enable people throughout the globe to identify their capabilities
Which of the following is true of the process of organizing for competitive advantage?
To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.
_____ is best described as a rational process in which executives at a company's headquarters take primary responsibility to program future success of the company they lead.
Top-down strategic planning
Roman owns shares in a company called Copnay Telecom Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Roman wants to proactively cut his losses and therefore sells his shares. Jeremy, a trading enthusiast, buys shares in Copnay Telecom because he 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?
Transferability of investor ownership
Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?
Unrealized strategy
Which of the following is true of the board of directors in a public stock company?
Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
Which of the following statements about W.L. Gore & Associates best supports the fact that it is organized in an informal and decentralized manner?
W.L. Gore & Associates refers to its employees as associates rather than employees.
W.L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate?
W.L. Gore is using a multidivisional structure.
Which of the following best describes a Level-5 manager in the Level-5 leadership pyramid?
Walter is the CEO of Red Autos Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.
Which of the following is an assumption that top-down strategic planning rests on?
We can predict the future from the past.
True Help is a non-profit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission?
We help the homeless gain and sustain financial independence by providing employment opportunities.
When do employees fail to adopt the organizational values of a firm?
When the top managers in the firm are merely paying lip service to the firm's stated values
Saul is a manager at Holden Apparels Inc. and is friends with the company's CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months. Are Saul's actions unethical? Why?
Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.
W.L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has:
a decentralized structure.
At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of _____.
adverse selection
Johan 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 startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan's team lead realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies _____.
adverse selection
In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as _____.
agents
Gannett Company integrated certain important functions of USA Today.com with USA Today, while keeping other functions independent. To support this integration, the president of USA Today shifted compensation incentives for both senior teams to accomplish joint goals rather than to focus solely on each business unit's performance. This scenario best exemplifies a(n) _____.
ambidextrous organization
To be effective, firms need to:
back up their visions with strategic commitments that are costly and difficult to reverse.
The _____ is the centerpiece of corporate governance and is composed of inside and outside members.
board of directors
Organizational values help individuals make choices that are:
both ethical and effective in advancing a company's goals.
Scenario planning typically begins with managers:
brainstorming to identify multiple plausible futures.
T & R Autos Inc. is a large conglomerate that operates in 12 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a _____.
business strategy
The regional head for First Electronics Inc. in New Dalvia has decided to sell the company's products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at New Dalvia will be considered as a _____.
business strategy
White Leo Autos manufactures and markets four different cars, Leo Sport, Leo Prestige, Leo Spark, and Leo Ease. These four product variants are operated as individual business units. While the product leaders of Leo Sport, Leo Prestige, and Leo Spark have adopted a differentiation strategy to attract the niche market, the product leader of Leo Ease follows a cost-leadership strategy to suit the mass market. This decision of the product leader of Leo Ease can be ideally categorized as a _____.
business strategy
Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre 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:
can be stopped by implementing performance incentives and strict control mechanisms.
In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the _____.
chief executive officer
Elc Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, Television and Computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as _____.
co-opetition
According to the agency theory, _____.
conflicts that arise in corporations should be addressed in the legal realm
GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies _____.
core rigidity
The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations began to appear in the medical community, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its _____.
core values
Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals.
corporate executives
Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a _____.
corporate strategy
One of the ways to foster ethical behavior in employees is to:
create a control system that encourages desired values.
The first step in the strategic management process is to:
define a firm's vision, mission, and values.
A(n) _____ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed.
dominant strategic plan
The relationship between strategy and structure that directly impacts a firm's performance is _____.
dynamic
Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) _____.
emergent strategy
To support the rise of emergent strategies, an organization should:
empower lower-level employees to take up autonomous actions.
Top-down strategic planning works best when the:
environment does not change much.
Organizational values are the _____ that govern the behavior of individuals within a firm or organization.
ethical standards and norms
Rast Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies _____.
exploitation
McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of _____.
formalization
To implement specific business strategies, general managers of strategic business units rely on:
functional managers
A typical college of business (or school of management) has several areas such as management, marketing, finance, accounting, MIS, and so on. This is an example of a(n) _____ structure.
funtional
Strategies developed at the departmental level, such as the accounting human resource, production, and marketing departments, within a strategic business unit are referred to as _____.
funtional straetgies
A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure.
global matrix
A functional structure is recommended when a firm:
has a low level of diversification.
Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?
heir culture reflects complex relationships with their employees, customers, and suppliers.
As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to:
how to implement business strategy.
The board of directors of a public stock company consists of:
individuals who formally represent the firm's shareholders and oversee the work of executives.
The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by _____.
information asymmetry
Adverse selection in a public stock company occurs when:
information asymmetry increases the likelihood of selecting inferior alternatives.
The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the:
informational advantage of the lower-level employees.
Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through _____.
input controls
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.
Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly developed economies. One way firms are grappling with this issue is by:
introducing results-only-work-environments to tap intrinsic motivations.
Hashim is a board member at Kluster Motors Inc. He is also a senior executive of the firm. On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics. According to this scenario, Hashim _____.
is an inside director of Kluster Motors
Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena:
is likely to provide the board with valuable inside information.
McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's:
is mechanistic in nature.
A company's strategic business unit:
is responsible for its own profit and loss.
Organizational culture can be the basis of a firm's competitive advantage if _____.
it is valuable, rare, and difficult to imitate
The day-to-day operations of a publicly traded company are conducted by:
its managers and lower-level employees.
Strategic commitments are actions that are:
long-term oriented.
According to the Level-5 leadership pyramid, a manager in Level 1 typically:
makes productive contributions through motivation, talent, knowledge, and skills.
An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure.
matrix
Walmart is an example of a(n) _____ organization.
mechanistic
In principal-agent relationships, _____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts.
moral hazard
Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and Rajat Gupta himself is an example of _____.
moral hazard
When a firm diversifies into different product lines and geographies, a _____ structure is preferred.
multidivisional
Which of the following global strategies best matches with a multidivisional structure?
multidomestic
Unrealized strategy is when parts of a firm's intended strategy is:
nonfunctional due to unexpected events.
Ethics is:
not synonymous with law.
Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and _____.
obeys the VRIO principles
Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of _____.
on-the-job consumption
An organization is characterized as having a flexible division of labor, distributed decision-making, and generalized knowledge of how to accomplish strategic goals valued. This organization is most likely _____ in nature.
organic
Fast Call Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, Fast Call has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, Fast Call Inc. is most likely an organization that is _____.
organic
If a firm pursues only a differentiation strategy, it is most likely a(n) _____ organization.
organic
To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly _____.
organic
Plow Inc. is a greeting card manufacturing company. Plow's market dominance exists primarily because of the innovative designs of its greeting cards when compared to those of its competitors. In this scenario, Plow Inc.'s managers must ideally rely on a functional structure that resembles a(n) _____.
organic organization
Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos.
organizational culture
A positive relationship between vision statements and firm performance is more likely to exist when:
organizational structures are aligned with the firm's vision statement.
According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to:
organize resources effectively to accomplish predetermined goals.
Teddiez Inc. is a company that manufactures and sells stuffed toys. It sources its materials from another country to keep costs low. A sales personnel in one of its retail stores noticed that there was increasing concern regarding the potential toxicity of the materials in the dolls. In response, she found an economical, organic, and non-toxic cloth filling that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the:
planned emergence approach.
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) _____.
principal
Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) _____.
principal-agent problem
Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that:
pursue a differentiation strategy at the business level.
Strategic flexibility is achieved when managers:
respond to reality changes by activating alternate dominant plans or modifying the old plan.
The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well-prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing _____ as the approach to the development of strategy.
scenario planning
Creating economic value for shareholders while also creating social value is known as creating _____.
shared value
According to the perspective of shareholder capitalism, _____.
shareholders in public stock companies have the most legitimate claim on profits
Florian just graduated from law school and wants to start his own law firm. It is best for Florian to use a _____ organizational structure.
simple
While working a night job at a call center, Neville creates an app called FastServe, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on FastServe. He creates a startup called TYOP and hires three people to help him improve FastServe and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure.
simple
A high degree of formalization in an organization is most likely to _____.
slow down decision-making
Employees learn about an organization's culture through the process of _____.
socialization
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) _____.
stock option
Red Million Inc. is a large company that sells a variety of products such as apparel, jewelry, canned foods, consumer electronics, and automobiles. Apart from this, the company also has a strong presence in the service industry through its chain of hotels, fast food restaurants, and amusement parks. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Red Million can be referred to as _____.
strategic business units
A _____ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
strategic initiative
A traditional top-down strategic planning process typically begins with:
strategic leaders adjusting a company's vision and mission based on environmental analysis.
As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customer's well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward the society. In this scenario, Juana has demonstrated _____.
strategic leadership
Strategic thinking is different from strategic planning in that:
strategic thinking includes all types of information sources while strategic planning does not.
A(n) _____ is best described as a standalone division of a larger conglomerate, with its own profit-and-loss responsibility.
strtegic business unit
A firm's _____ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.
structure
Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n):
tall hierarchical structure.
Unplanned strategic initiatives taken by the _____ within an organization will be referred to as an emergent strategy.
team leads of project teams in the organization
The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after _____.
the Hippocratic oath in medicine
The conflict in a principal-agent relationship arises when:
the goals of the principals and agents are not aligned with each other.
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:
the largest but poorest socioeconomic group can yield significant business opportunities.
An intended strategy is best described as:
the outcome of a rational and structured, top-down strategic plan.
Organizational design is:
the process of creating, implementing, and modifying the structure of an organization.
John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies _____.
the strong relationship between executive compensation and company performance
The critics of top-down strategic planning and scenario planning argue that:
these approaches do not allow for the necessary strategic thinking.
In a public stock company, senior executives, such as the CEO, face agency problems when:
they delegate authority of strategic business units to general managers.
Outside directors are more likely to watch out for the interests of shareholders of their firm because:
they have more independence than inside directors.
Visionary companies are able to outperform their competitors because:
they provide more aspirational visions.
Poison pills have become rare because:
they retard an effective function of equity markets.
A company that is using extrinsic motivation as an output control mechanism will most likely:
threaten to lay off employees if they do not achieve targets.
Zappos established its unique organizational culture:
through explicitly stated values that are connected to its reward system.
When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) _____.
unrealized strategy
The _____ is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives.
upper-echelons theory
The most important yet least visible element of organizational culture is _____.
values
As a part of strategy formulation, corporate strategy concerns questions relating to:
where to compete.
