Business Policy & Strategy Final
Siobhan, the chief financial officer at an office furniture manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors?
"It will be much more difficult to protect our intellectual property if we build factories overseas."
Restructuring
process of reorganizing and divesting business units and activities to refocus a company to leverage its core competencies more fully.
Diversification
what range of products and services should the company offer.
Geographic scope
where should the company compete geographically in terms of regional, national, or international markets.
Strategic leaders must determine corporate strategy along three dimension, what are they?
-vertical integration -diversification -geographic scope
Taper integration
A way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution.
Iselectrics, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Iselectrics's European sales?
Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels.
Which of the following statements is true about managing alliance-related tasks?
Alliance-management capability is based on three alliance-related tasks.
American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern?
Arrange for the alliance to be managed at the corporate level.
Backward integration
Backward integration is moving ownership of activities upstream to the originating inputs of the value chain.
Globex Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Omni Consumer Products, a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?
Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries.
economic arbitrage.
Companies from wealthy countries trade with companies from poor countries to benefit from economic arbitrage, which is the exploitation of differences in the cost of labor, capital, or more industry-specific inputs.
Bayside Inc., a reputed brand for fine art supplies, is implementing an international strategy. Cyberdyne Corp., a maker of mini-computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario?
Cyberdyne Corp. focuses more on cost-reductions when compared to Bayside Inc.
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.
Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test?
Firms can apply the VRIO framework for the second test.
unrelated diversification strategy.
Firms that pursue unrelated diversification are often unable to create additional value. They experience a diversification discount: The stock price of such highly diversified firms is valued at less than the sum of their individual business units.
Tom is the inventor of a personal fitness tracking device, and he is in the process of hiring employees after receiving investment funding. When considering how to structure his company, he should
First establish a strategy and let that be him guide.
DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently.
Focus on research and development as a form of nonprice competition.
forward vertical integration
Forward vertical integration involves moving ownership of activities closer to the end customer.
Greg is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders?
He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price.
________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model.
Horizontal integration; structure-conduct-performance
related-linked strategy
If executives consider new business activities that share only a limited number of linkages, the firm is using related-linked diversification.
Why does a functional structure rely on a flat organizational structure?
It allows for efficient bottom-up and top-down communication.
Paper Street Soap Company, a cosmetics 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 Jennifer Watson, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Jennifer Watson 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?
Jennifer Watson has a wide span of control.
Jim is the CEO of a financial services firm. What action should Jim take to be sure the firm avoids moral hazards?
Jim should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Los Pollos Hermanos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. The firm's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's?
Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.
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
Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy?
M-Form with centralized decision-making power (cooperative multidivisional)
Oceanic, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Macmillan, an air-conditioner manufacturer, faces intense pressure from its home market. Rent a Swag, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Oceanic invest?
Macmillan, because firms that face stiff competition at home tend to do better abroad
managerial hubris
Managers of the acquiring company convince themselves that they are able to manage the business of the target company more effectively and, therefore, create additional shareholder value. This justification is often used for an unrelated diversification strategy.
Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them?
Many owners, managers, and business analysts believe they are essential to survive in an industry.
Sean was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically?
Observe executives at the company, and see whether they model ethical behavior and demand it of others.
Sarah, 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 Sarah?
Once the firm starts growing and attracting more customers she is likely to feel overloaded.
Two leading home appliance companies, Globex Inc. and Pug Tech, are in competition for market share. In their quest for exciting new products, Globex employs an open innovation model, while Pug Tech pursues a closed innovation model. Which of the following statements is most likely true?
Pug Tech will protect its intellectual property with patents and trade secrets.
Rantouch is one of the largest tax-preparation firms in the United States. It wants to acquire Doncon , a smaller rival. After the merger, Rantouch will be one of the two largest income-tax preparers in the U.S. market. What should Rantouch include in its acquisition plans?
Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.
Raul is the Chief Operating Officer (COO) of Black Mesa Inc., a firm that produces handcrafted kitchen tables for both the residential and commercial markets. Jose believes that his domestic market is saturated and now wishes to go global. Which of the following below would serve as an advantage for Raul if he chose to pursue international markets?
Raul could gain access to cheaper raw materials in a foreign country, thus lowering the cost of his input factors.
The core competency of Newex Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is
Redeploying and recombining existing core competencies to compete in future markets.
Carla recently became a board member of a firm that has a history of reckless actions by senior employees. Which task would be appropriate for Carla to undertake to help safeguard the company's financial health?
Request and review a copy of the firm's risk assessment plan, if such a plan exists.
Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take?
Seek an alliance with a company or companies that will complete the value chain.
Laura owns and runs Cyberdyne Systems Corp., a private start-up company with a current value of $1.3 billion. Cyberdyne Systems Corp.is interested in going public to fund future growth. Which action should Laura take before Cyberdyne Systems Corp.'s initial public offering?
She should investigate Cyberdyne Systems Corp.'s existing or potential problems with ethics or the law, if such problems exist.
Globalization
a process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.
Organic structures
Tend to be correlated with the following: a fluid and flexible information flow among employees in both horizontal and vertical directions; faster decision making; and higher employee motivation, retention, satisfaction, and creativity. Organic organizations also typically exhibit a higher rate of entrepreneurial behaviors and innovation.
single-business firm
characterized by a low level of diversification, if any, because it derives more than 95 percent of its revenues from one business.
A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?
The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
Paul is a manager at Macmillan Toys Inc. and is friends with the company's CEO. This privilege gives Paul the information that Macmillan Toys is in the midst of talks to take over a leading rival. Paul buys stocks of Macmillan Toys with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of Macmillan Toys depreciate in the following months. Are Paul's actions unethical? Why or why not?
Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome.
International strategy
a strategy in which a company sells the same products or services in both domestic and foreign markets.
Managers at Umbrella Corporation, a firm in East Asia, want to make their company a global leader in business process outsourcing (BPO). What should the Umbrella managers look for as they decide where to locate their BPO facilities?
an abundance of well-educated English speakers
Multinational enterprises (MNEs) pursuing a multidomestic strategy
attempt to maximize local responsiveness, hoping that local consumers will perceive their products or services as local ones.
multidomestic strategy
attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies.
Fang and Bone Corp. is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, Fang and Bone Corp. should
be prepared to restructure as the landscape changes.
John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his
corporate level strategy.
Jordan is president of a medium-sized bank. What can he do to lessen the chance of employees or board members taking part in insider trading?
create a strict code of ethics and explain that inside traders will be fired
centralization
decision power resides at the top) and relies on a tall hierarchy (many levels of supervision
Hooli, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so?
dedication to a cost-leadership business strategy
formalization
each job documented in minute detail; detailed instructions to each of its franchisees
high degree of specialization
employees are assigned specific tasks such as food prep, cook, cashier
Aperture Science relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Aperture Science should
give employees a "free day" every two weeks to pursue ideas for new educational toys.
Colony-colonizer relationships
have a strong positive effect on bilateral trade between countries.
Vertical integration
in what stages of the industry value chain should the company participate.
Martha received a tip from a close friend who is an executive manager of a publicly traded company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of
information asymmetry.
Delos Inc. is an apparel manufacturer. The management at Delos Inc. 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.
Sterling Cooper Footware and NERV Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Sterling Cooper Footware entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footware. However, Sterling Cooper Footware was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate?
learning races
Aldorria and Estoccia are 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
luxury items manufactured in Aldorria.
What are the three alliance-related tasks?
nonequity contractual agreement, equity alliances, or joint venture.
Many financial service firms, IT firms, and health care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm.
offshore outsourcing
A payroll company in the nation of Osterlich is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion?
one that used to have a colonizer or colonized relationship with Osterlich
E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp 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, E Corp Inc. is most likely an organization that is
organic.
Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?
purchasing competitors
Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors for roughly $3 billion. This strategic move allowed InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of
restructuring.
Shelia is a graduate student pursuing a course in business. Presented with the case of a company's unethical behavior, Shelia wonders if the company's board of directors should ask the CEO to step down. Having a strong belief in Michael Porter's idea of value creation, Shelia is most likely to conclude that company's board of directors
should ask the CEO to step down because it has a greater obligation toward society.
Firms evaluate the relevance of internal resources in two ways:
they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. For the second test, firms should apply the VRIO framework.
Johnathan owns shares in a company called Delos Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Johnathan wants to proactively cut his losses and therefore sells his shares. Mary, a trading enthusiast, buys shares in Delos Inc. Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?
transferability of investor ownership