BADAM Final Ch 7-9

What is outsourcing? is it good or bad?

A company may deploy outsourcing to improve its competitive position in an industry. It may outsource one or more of its own value creation functions and contract with another company to perform that activity on its behalf. A company has to identify their distinctive competencies and protect these vital functions and competences by performing them internally. The remaining noncore functional activities are then reviewed to see whether they can be performed more efficiently and effectively by specialist companies. The relationships between the company and its subcontractors are then structured by a competitive bidding process; subcontractors compete for company's business for a specified price and length of time Virtual Corporation: A company that outsources mot of its functional activities and focuses on one or a few core value chain functions

Which of the following is NOT a true statement?

A firm should consider outsourcing only its core activities

Which of the following entry strategies should be used when speed is an important consideration

Acquisition

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies

Acquisitions

Which of the following is NOT one of the criteria for evaluating potential acquisition candidates

Age

Which of the following is NOT an explanation for the relatively high failure rate of internal new ventures?

All of these - Entering on too small a scale - Not allowing new ventures ample time to turn a profit - Trying to establish too many new ventures simultaneously - Poor commercialization of the new product

Which of the following statements about approaches to implementing and managing change is incorrect?

All of these statements are correct - top-down change is faster than bottom-up change - an advantage of bottom-up change is involving managers at all levels to reveal problems - bottom-up change requires participation and keeping people informed - top-down change is driven by a strong CEO and top management team

___ are based on the establishment of a comprehensive system of rules and procedures to direct the actions or behavior of divisions

Behavior Controls

Which of the following is NOT one of the company levels where strategic control systems measure performance?

Board of Directors

What did our guest speaker, Dr. Jeanne Almaraz, have to say?

Change: -People tend to be very resistant to change (it scares them and makes them nervous because they are unaware of what the change means for their future) Reasons for Change - Growth - Competition - Technology - Legislation/Certification - Recession - Communication Communicate what the change is Communicate why the change is Communicate how it will affect employees

When a company is analyzed as a portfolio of core competences, corporate development is oriented toward all of the following except

Decreasing obstacles to chang

___ is not one of the options a company has when choosing which industry to compete in

Developing the portfolio of businesses that creates the highest level of returns and growth opportunities

___ refers to the process of entering new industries , distinct from a company's core industry

Diversification

The choices that a company has for exiting a business area include all of the following except

Diversification discount - divestment - harvest - liquidation

Name and explain the exit strategies that firms use to get out of an industry

Divestment: involves selling a business unit to the highest bidder. 3 types of buyers: independent investors (spinoff), other companies and the management of the unit to be divested Harvest Strategy: involves halting investment in a unit in order to maximize short-to medium term cash flow from that unit. Once it becomes apparent that the unit is pursing a harvest strategy, the morale of the unit's employees as well s the confidence of the unit's customers and suppliers sink very quickly Liquidation strategy: involves shutting down the operations of a business unit. A pure liquidation strategy is the least attractive to all pursue because it requires that the company write off its investment in a business

Acquisitions take longer to be executed than an internal new venture

False

Business processes are the responsibility of one specific function in the organization

False

Differentiation and integration are the two design concepts that govern how a structure will work

False

Managers seldom have trouble determining that something is going wrong in their organization

False

Competition for resources is one of the advantages of the multi-divisional structure

False Multidivisional Structure - each distinct product line or business unit is place in its own self-contained unit or division - the office of corporate headquarter staff is created to monitor divisional activities and exercise financial control over each division - each division has a profit center that makes it easy for corporate headquarters to monitor and evaluate each division - cost of operating is very high compared to a functional structure Advantages: - enhanced corporate financial control - enhanced strategic control -Growth - Stronger Pursuit of Internal Efficiency Disadvantages: - Establishing the Divisional- Corporate Authority Relationship - Distortion of Information - competition for resources - transfer pricing - focus on short-term research and development - high operating costs

The second step in implementing strategic change is for strategic managers to recognize the need for change - to see that there is a gap between desire company performance and actual performance

False First Step: Determining the need for change Second Step: Determining the obstacles to change Third Step: Managing Change Fourth Step: Evaluating change

Horizontal integration is the process of acquiring or merging with companies up and or down the supply chain

False Horizontal Integration: acquiring or merging with industry competitors to achieve the competitive advantages that come with large size

Vertical integration is a corporate-level strategy that involves a company's entering new industries to increase its short-run profitability

False Increase its long-run

A virtual corporation outsource all o its functional activities

False Outsources MOST

Span of Control is the means by which a company seeks to coordinate people and functions to accomplish organizational tasks

False Span of Control: The number of subordinates a manager directly manages

In a multidivisional structure, which form of control is used to compare the relative performances of different divisions?

Financial Control

The characteristics of an effective control system include all of the following except

Formal target setting - flexibilty - accurate information - supplying managers with information in a timely manner

When an intermediate manufacturer moves into final assembly it is pursuing

Forward vertical integration when a company pursues a strategy of vertical integration, it expands its operations either backward into industries that produce inputs for its core products or forward into industries that use, distribute or sell its products

____ involves halting investment in a unit in order to maximize short- to - medium term cash flow from that unit

Harvest strategy

Adam's boss tells him that their company is pursuing a strategy of horizontal integration. Which of the following should ADam expect?

His company will buy one of its rivals

Which of the following is not a rationale for restructuring?

Increased product differentiation

Which of the following is NOT one of the advantages of functional structure?

Increasing specialization and productivity of workers functional structures: arrange and group people on the basis of their common expertise and experience or because they use the same resources Advantages - people in the same department can learn from one another and become better - monitor each other to make sure that all are perfoming their taskes efficient - give managers greater of organizational activiites

Obstacles to change can be found at four levels in the organization _____

Individual, organizational, divisional, corporate

___ refers to the manner in which the top executives of a company manage it business units, divisions and functions

Internal governance

Which of the following seems to be a major determinant of a new venture's success?

Large-scale entry into the target industry designed to build market share, even when such entry involves significant short-term losses

___ involves shutting down the operations of a business unit

Liquidation

Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?

Lower operating costs as a result of economies of scale

Which structure uses self-contained divisions to perform all value creation functions to gain competitive advantage

Multidivisional

Transfer pricing is used most commonly in a

Multidivisional structure

The major disadvantages of vertical integration include all of the following except

Mutual Dependence - increasing cost - trying company to old, obsolescent, high-cost technology - reducing profits

Bill Gates' deliberate cultivation of values that encourage subordinates to perform in innovative and creative ways is an example of

Organizational culture

Which form of control was transmitted by Walt Disney?

Output control

Which of the following is not a potential benefit of outsourcing?

Reducing the need for horizontal integration

A hospital examines its process closely and then changes them to become more patient-centered. Among the changes are new ways of doing tasks and new groupings of workers. This is an example of

Reengineering

___ is the process whereby, in their effort to boost company performance, managers focus not on the company's functional activities but on the business processes underlying its value creation operations

Reengineering

Safeguards against opportunism or cheating by alliance partner include all of the following excpet

Reengineering the organization - walling off and protecting sensitive technologies from partners - establishing contractual safeguards to guard against being exploited - promising in advance to swap important proprietary skills - extracting a significant credible commitment from the partner in advance

___ refers to the process of companies divesting themselves of diversified activities and downsizing in order to concentrate on fewer businesses

Restructuring

Designing an effective control system includes all of the following excpet

Selecting financial controls that are objective - establishing standards and targets against which performance is to be measured - creating measuring and monitoring systems that indicate whether the standards and targets are being reached - comparing actual performance against established targets - initiating corrective action when it is determined that the standard and targets are not being achieved

The main drawbacks to joint-venture arrangements include all of the following excpet

Selecting partners carefully

A key to making a strategic alliance work is

Selecting the right partner

Organizational culture includes all of the following except

Stock Price - norms - values - socialization

Microsoft and Toshiba pooled resources to develop embedded microprocessors that can perform a variety of entertainment functions in an automobile. this is an example of

Strategic Alliance

Means of guarding against the failure of an internal venture include all the following except

Strategic alliances

What is a multidivisional organizational structure? When is it used?

The multidivisional structure possesses two main advantages over functional structure, innovations that let a company grow and diversify yet overcome problems that stem from loss of control. First, each distinct product line or business unit is placed in its own self-contained unit or division with all support functions Second, the office of corporate headquarters staff is created to monitor divisional activities and exercise financial control over each of the divisions. This staff contains corporate managers who oversee the activities of divisional and functional managers and it constitutes an additional level in the organizational hierarchy. Hence, there is a higher level of vertical differentiation in a multidivisional structure than in functional structure

A company's level of integration is the extent to which it seeks to coordinate its value creation activities and make them interdependent

True

A diversified company is one that operates in two or more industries to find ways to increase its long-run profitability

True

A joint venture is a formal type of strategic alliance in which tow companies jointly create a new, separate company to enter a new business area

True

A specialized asset is a value creation tool that is designed to perform a specific set of activities and whose value creation potential is significantly lower in its next best use

True

According to Hamel and Prahalad, a core competence is a central value creation capability of a company that is a core skill

True

Although internal managers may have the most experience or knowledge about a company's operations, they may lack perspective because they are too close to the situation

True

Behavior control is a system of control based on the establishment of a comprehensive system of rules and procedures to direct the actions or behavior of divisions, functions and individuals

True

By acquiring an established enterprise a company can circumvent most entry barriers

True

Control systems range from those directed at measuring outputs to those that measure behaviors or actions

True

Evidence suggests that the most important criterion for evaluating a venture during its first four to five years is market share

True

Horizontal integration is the process of acquiring or merging with industry competitors in an effort to achieve the competitive advantages that come with large size or scale

True

Internal new ventures involve creating the value-chain functions necessary to start a new business from scratch

True

Managers use corporate-level strategy to identify which industries a company should compete in to maximize long-run profitability

True

Mattel hires dozen of small asian firms to make the plastic Barbie dolls and metal Hot Wheels cars that are its primary products. Mattel is using outsourcing to manager its manufacturing function

True

One of the benefits of horizontal integration is that it lowers operating costs

True

Organizational design is the process through which managers select the combination of organization structure and control systems that they believe will enable the company to create and sustain a competitive advantage

True

Organizational design means selecting the combination of organizational structure and control systems that lets a company pursue its strategy most effectively

True

Outsourcing promotes a company's competitive advantage when the company enters into long-term relationships or alliances with its partners

True

Product bundling is a strategy of offering customers the opportunity to by a complete range of products at a single combined price

True

Related diversification is the strategy of operating a business unit in a new industry that is related to a company's existing business units through some commonality in their value chains

True

Research suggests that the top managers of companies who are successful at creating value through superior governance seem to make a number of similar kinds of strategic decisions

True

Strategic change is the movement of a company away from its present state toward one desired future state to increase its competitive advantage

True

Strategic control systems are the formal target-setting, measurement and feedback systems that enable strategic managers to evaluate whether a company is implementing its strategy successfully

True

Tall structures lead to information distortion when data are being sent either up or down the hierarchy

True

The advantage of bottom-up change is that it removes some of the obstacles to change by including them in the strategic plan

True

The basic tool of strategy implementation is organizational design

True

The divisional structure allows which division to adopt the structure that best suits its needs

True

The larger and more complex the organization, the harder it is to implement change because inertia is likely to be more pervasive

True

The principal concern of corporate-level strategy is to identify the industry or industries a company should participate in to maximize its long-run profitability

True

The span of control is defined as the number of subordinates a manager directly manages

True

Reengineering is a process in which managers focus on business processes underlying the value-creation process

True Reengineering and TQM are highly interrelated and complementary

The success of a strategic alliance includes all of the following except

a supply partner with valuable low-cost manufacturing knowledge - partner selection - alliance structure - alliance management

Each organizational function needs to develop a distinctive competency in a value creation activity in order to increase

all of these - innovation - efficiency - quality - customer responsiveness

Output controls include all of the following except

budget goals - divisional goals - functional goals - individual goals

When decision-making responsibilities are decentralized benefits include all of the following except

easier coordination of the organizational activities needs to pursue a company's strategies - lower managerial cost form flattened hierarchy - increase motivation and accountability - reduced information overload

A Divestment ____

entails selling a unit to another company, a group of independent investors or the management of that unit

Return on Investment (ROI) a measure of profitability determined by dividing net income by invested capital is a tool used for

financial control

To best meet the needs of it customer, a nationwide home supply company, such as home depot, should adopt a ____ structure

geographical

Standardization is employed to squeeze out costs in manufacturing. Standardization may be achieved through standardization of

inputs, conversion activities and outputs

Attaining a credible commitment from a potential parter

is a way to safeguard against the opportunism of cheating

Antitrust regulation

is concerned with companies' abuse of their market power to raise prices for consumers above the level that would exist in more competitive situations

A company should pursue unrelated diversification instead of related diversification when

its core skills are highly specialized and have few applications outside core business

Companies invest in specialize assets because these assets allow them to _____ of value creation and/or to better differentiate their products from those of competitors

lower the costs

Tall organizational structures are characterized by

many levels of management and a relatively narrow span of control

The success of strategic alliance includes all of the following except

none of these (all of these?) - partner integration - the way the alliance is managed - alliance structure

Beliefs and ideas about what kinds of goals members of an organization should pursue and what kinds or standards of behavior employees should use to achieve these goals constitute

organizational values

The objective of bidding strategy is to

reduce the price that a company must pay for acquisition candidate guidelines for successful acquisition: - screening - bidding strategy - integration

Diversification based on transferring competencies

requires the existence of significant commonalities between one or more of the value-creation functions

Organizational culture is the product of ___ provided by an organization's founder and top managers

strategic leadership

The wo main innovations in a multidivisional structure (over a functional or product structure) are

the organization of business units into one or more divisions and the placement of corporate-level positions to oversee the activities and financial control over each division

Creating Value through diversification includes all of the following excpet

vertical integration - permitting superior internal governance - transferring competences among businesses - realizing economies of scope