Exam 2

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A primary reason for a firm to pursue an acquisition is to a. avoid increased government regulation. b. achieve greater market power. c. exit a hyper-competitive market. d. achieve greater financial returns in the short run.

Which of the following is NOT a result of over-diversification? a. Executives do not have a rich understanding of all of the firm's business units. b. Managers emphasize strategic controls rather than financial controls. c. Firms use acquisition as a substitute for innovation. d. Managers become short-term in their orientation.

A friendly acquisition a. raises the price that has to be paid for a firm. b. enhances the complementarity of the two firms' assets. c. facilitates the integration of the acquired and acquiring firms. d. allows joint ventures to be developed.

____ typically result(s) in the acquiring firm being able to prevent valuable human resources in the acquired firm from leaving. a. Financial slack b. Private synergy c. Friendly acquisitions d. High compensation

After a leveraged buyout, ____ typically occur(s). a. selling of assets b. further rounds of acquisitions c. due diligence d. private synergy

64. In the competitive form of the multidivisional structure, the focus of headquarters is on all the following EXCEPT a. integration. b. performance appraisal. c. resource allocation. d. long range planning.

65. Implementing the multidomestic strategy requires decentralization a. to facilitate the tailoring of products to the demand in local markets. b. to develop economies of scale. c. in order to achieve economies of scope. d. to reduce bureaucracy and speed up decision-making.

66. In the balanced scorecard framework, ____ controls are used to assess the organization's success in creating a climate that supports change and innovation. a. learning and growth b. financial c. operational d. innovational

66. Value creation through internal innovation originates with a. an entrepreneurial mind-set. b. cross-product development teams. c. shared values and entrepreneurial leadership. d. innovation.

67. Blixin Concrete Products, an established firm, is seeking a technologically-advanced partner for a strategic alliance. If the potential partner is a new entrepreneurial venture, the main benefit the Blixin Concrete can offer is probably a. investment capital. b. management expertise. c. research and development competencies. d. social networks.

1. The ability to attract and manage ____ may be the most important skill a strategic leader must have. a. human capital b. financial resources c. responses to competitors' actions d. investment strategies

11. A heterogeneous top management team is composed of individuals with a. different functional backgrounds, experience, and education. b. similar commitments to the organization's core ideology and culture. c. a high level of education and industry expertise. d. long tenure in the organization who have held various functional positions.

13. Andermeyer Jewelers has been in existence since the 1870s. It specializes in high-end jewelry using both colored precious stones and diamonds. Generations of wealthy families have patronized Andermeyer. Andermeyer has been owned and managed by the Andermeyer family since its founding, and has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the ____ structure. a. simple b. functional c. matrix d. network

13. The more heterogeneous the top management team, the a. more difficult it will be for the team to implement strategies. b. more likely it is that the team will be cohesive. c. less innovative the team's decisions will tend to be. d. less diverse the team membership will be.

15. In most cases, the focus strategy is best managed using a ____ structure. a. simple b. functional c. multidivisional d. vertical

16. An organization's ____ is composed of the key individuals who are responsible for selecting and implementing the firm's strategies. a. top management team b. board of directors c. keiretsu d. governance circle

16. Innovation by imitation damages the existing product's competitive advantage by reducing its a. rarity. b. target market. c. intrinsic worth. d. usefulness to the consumer.

21. Christina is evaluating Maximum Brands as an investment opportunity. She is very concerned about future financial performance by Maximum Brands. Christina does not believe that the CEO can act as a steward. Christina will probably be most concerned if a. there is CEO duality. b. many of the members of the board of directors are outsiders. c. the positions of chairman of the board and CEO are held by different persons. d. there is an independent board leadership structure.

21. The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits? a. aligning the corporate structure with the demands of global expansion b. more accurate monitoring of the performance of each business c. facilitation of comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance

22. Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience a. coordination and control problems. b. bureaucratic inefficiencies. c. excessive competition among division managers. d. limited communication among functional specialists.

68. Which of the following is NOT one of the four perspectives in the balanced scorecard framework? a. entrepreneurial b. financial c. customer d. learning and growth

22. Knowledge must be transferred to others in the firm to enhance the entrepreneurial competence of the firm. This requires that a. the receiving party have adequate absorptive capacity to learn. b. the communication process be highly intensive. c. the knowledge be broken into the smallest comprehensible units. d. training consultants be involved in every step of transference.

25. Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO? a. Internal hiring results in an increased level of innovation. b. Insiders are familiar with the firm's products, markets, technologies, and operating procedures. c. Use of the internal labor market reduces turnover among existing employees. d. Insiders are more familiar with a firm's operating procedures.

26. The CEO/chairman of PharmaPacifica was recently killed in an airplane crash. This tragedy has thrown PharmaPacifica into turmoil as there is no one in the organization qualified to step into the former CEO's shoes. This is an example of a. a failure of succession management. b. managerial hubris. c. the risk inherent in CEO duality. d. excessive reliance on the internal managerial labor market.

27. ____ is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification

28. As the organizational environment becomes more complex, heterogeneous, and ambiguous, firms need to a. create more heterogeneous top management teams. b. focus on their core customer base. c. implement transformational leadership. d. emphasize the training and development of internal managerial talent.

29. When the top management team is homogeneous and a new CEO is selected from inside the firm, it is a. unlikely that the current strategy will change. b. likely that product innovation will continue. c. likely there will be a change in strategy. d. unlikely the new CEO will have a long tenure.

3. Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

31. Panera Bread has innovated to improve the quality of its distribution system, to improve the quality of its bread dough, and to introduce new menu items. These are examples of a. incremental innovation. b. invention. c. imitation. d. the use of social capital.

31. Wal-Mart's effective strategy/structure configuration is a. cost leadership/functional. b. differentiation/functional. c. related-constrained/multidivisional. d. related-linked/multidivisional.

35. A successful ____ innovation will be less risky but less profitable than a successful ____ innovation. a. incremental, radical b. radical, incremental c. alliance-generated, acquisition-generated d. acquisition-generated, alliance-generated

36. The firm of Bergeron has existed for hundreds of years, having made exquisite clocks and watches. In its advertising it refers to clocks the firm made for such past royalty as Marie Antoinette and the Czars of Russia. Employees are constantly reminded of the firm's rich history and its long tradition of excellence of design and execution. Bergeron is motivating its employees through its a. core ideology. b. envisioned future. c. organizational culture. d. business strategy.

37. The integrated cost leadership/differentiation strategy is difficult to implement mostly because a. different primary and support activities are emphasized when using cost leadership and differentiation strategies. b. this strategic approach demands more flexibility than most firms can manage. c. the dual reporting relationships required for this strategy slow organizational decision-making. d. the cost leadership strategy requires less structured job roles than does the differentiation strategy.

38. ____ involves internally developed incremental and radical innovations that result from deliberate efforts. a. Internal corporate venturing b. Autonomous strategic behaviors c. Bottom-up strategic behaviors d. Product championing

4. Pet Care Companion Connection (PCCC) is an organization that trains persons with mild to moderate mental disabilities to care for pets in a pet boarding facility. This organization has been successful in providing a quality service for pet owners and a supportive training environment for their trainees. The tuition charged to trainees is only somewhat higher than the fee which day-care providers would charge for these individuals. Graduates of the program are qualified for employment by commercial kennels. PCCC is an example of a. taking advantage of a need in the marketplace. b. creative destruction of existing services for pet boarding. c. institutionalized entrepreneurship. d. internal corporate venturing.

4. The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE? a. Amos should consider adopting the multidivisional structure. b. Mr. Ball has insufficient power to change the structure of the organization. c. Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes. d. These businesses are too disparate to coordinate within one corporate structure.

7. Entrepreneurship is the process by which individuals or groups identify and pursue ____ without being immediately constrained by the ____ they currently control. a. opportunities; resources b. opportunities; core competencies c. threats; resources d. threats; core competencies

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT a. large debt and increased financial risk. b. failure to invest in R&D. c. risk-averse management. d. inefficient operations.

41. Billy Kroghmen is the son of a very prominent Fortune 500 CEO. Billy has had troubles. He failed out of multiple colleges, universities, and correspondence schools. He finally received his undergraduate degree from a university with only a post office box for an address. He then enrolled in the school's combined graduate accounting and law school programs, graduating with honor with degrees in both areas. After graduation, he twice failed both the CPA and bar exams, managing to set record low scores on the ethics portions of both. Despite these academic setbacks, Billy's career now seems to be thriving. He has been appointed to a number of "blue ribbon" government committees, is on the board of directors of two corporations and one prestigious not-for-profit organization. In at least one instance, a donor credited Billy with the idea for making a large contribution to the not-for-profit. Widespread speculation is that his career advancement is based largely on social relationships through friends and family. We would classify Billy as ____ on ____ capital, and ____ on ____ capital. a. high; social; low; human b. high; human; high; social c. high; human; low; social d. none of these are correct.

41. One of the distinguishing differences between the two sources of internal corporate venturing (autonomous strategic behavior and induced strategic behavior) is whether the innovation process a. is encouraged through a bottom-up or top-down process. b. is encouraged by a product champion or an entrepreneur external to the organization. c. relies on internal structure or existing strategy to encourage innovation. d. is in a large or small organization.

43. The idea that it is "vital to sell the ideas to others in the organization so that innovations will be commercialized" is the rationale behind the use of a. product champions. b. joint ventures. c. strategic leadership. d. cross-functional teams.

48. The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____. a. cooperative; economies of scope b. competitive; cost efficiencies c. functional; sensitivity to cultural diversity d. SBU; quick response to local customer needs

49. To be successful, an autonomous process for developing new products relies on a. the diffusion of tacit knowledge. b. the acquisition of innovative firms. c. strategic alliances with other firms. d. internal corporate venturing.

49. When a corporation pursues a related-constrained diversification strategy, financial controls may not add value to strategy implementation efforts since it is difficult to a. use them without reducing cooperation among divisional managers. b. transfer capital between units. c. maintain an arms-length relationship between headquarters and the divisions. d. identify which objective criteria to monitor.

5. A firm's ____ specifies the work to be done and how to do it. a. structure b. controls c. culture d. strategy

5. Isidore Security Services is a national provider of guard and security services for businesses. It has been in business for over 90 years, having been founded by one of Teddy Roosevelt's Rough Riders (Isidore O'Malley). Lately it has been losing clients to more aggressive and innovative firms offering remote security monitoring systems instead of a guard-based approach. The board of directors of Isidore Security Services is concerned that this downward trend may threaten the existence of this venerable firm and the jobs of its employees. a. This is an example of an established firm neglecting the opportunity-seeking aspect of strategic entrepreneurship. b. This example shows the dysfunctional aspects of unrestricted entrepreneurialism. c. This is an example of the lack of human capital hampering internal innovation. d. Isidore Security Services is suffering from the "novelty effect" wherein new firms are more attractive to clients/customers merely because they are new and not because they add value.

56. Organizational controls provide a. the parameters within which strategies are to be implemented. b. goals and objectives that must be achieved. c. information on action steps to be taken to implement the corporate strategy. d. managers with guidelines on how to treat employees.

57. When used effectively, cross-functional teams will often bring about a. faster product development processes. b. an increased need for additional information. c. conflicting information about the business environment. d. future cooperative alliances.

59. Actions that effective strategic leaders can take to develop an ethical organizational culture include all of the following EXCEPT a. relying on the fundamental goodness of individuals. b. using reward systems that recognize acts of courage. c. communicating goals that describe the firm's ethical standards. d. creating a work environment where individuals are treated with dignity.

59. Cross-functional teams are useful in developing and commercializing new products because each team member brings his or her special competencies to the project. Each team member brings his/her point of view from his/his experience and background. On the other hand, these ____ may cause barriers to effective communication among team members. a. independent frames of reference b. entrepreneurial mind-sets c. professional rivalries d. politicized points of view

62. The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all-important at Transector. Transector probably uses the ____ structure. a. competitive form of the multidivisional b. SBU form of the multidivisional c. worldwide geographic area d. distributed strategic network

62. ____ provide information about the results of past actions, but do not communicate the drivers of the firm's future performance. a. Financial controls b. Accounting information systems c. Policies and procedures d. Strategic feedback systems

63. The premise of the balanced scorecard is that firms jeopardize future performance possibilities when they a. overemphasize financial controls and neglect strategic controls. b. overemphasize strategic control and neglect financial controls. c. overemphasize strategic and financial controls and neglect ethical controls. d. neglect short-term controls of all kinds in favor of long-term strategic controls.

7. Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.

73. Unilever is changing from a multidomestic strategy to a transnational strategy. In order to implement this change, Unilever must move to the ____ organizational structure. a. combination b. worldwide product divisional c. worldwide geographic area d. strategic business unit multidivisional

73. ____ is(are) critical in order for a firm to gain access to complementary resources from partners in a cooperative alliance. a. Social capital b. Shared values c. An entrepreneurial mind-set d. Compatible organizational cultures

74. A large, but declining, city in the Midwest is trying to lure businesses to relocate there and to encourage local entrepreneurs to start new businesses. In order to do this, the city has changed its tax laws and regulations concerning business creation and operations. This is an example of a. institutional entrepreneurship. b. autonomous strategic behavior. c. induced strategic behavior. d. corporate entrepreneurship.

79. Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to a. make the partners' true loyalties and intentions unclear. b. make the role of the strategic center firms more critical to alliance success. c. distribute the alliances along several segments of the airline industry value chain. d. be most effective when the alliances are with airlines headquartered in different nations.

80. Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with whom Toyota has contracts for services. This results in the suppliers and the Toyota (the strategic center firm) being more a. interdependent. b. rivalrous. c. creative. d. complementary.

81. After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to a. reduce transaction costs. b. increase negotiating leverage with suppliers. c. become less dependent on its suppliers. d. move toward horizontal alliances with its suppliers.

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product instead of a strategy of developing new products in-house. All of the following arguments are correct EXCEPT a. The acquisition of Taylor should be primarily for defensive rather than strategic reasons. b. Research suggests that acquisition strategies are a common means of avoiding risky internal ventures. c. The outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product development process. d. Acquisitions could become a substitute for innovation within your firm.

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

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to __________ than other firms and that government ownership of those firms leads to __________ for the acquisition. a. pay a higher premium; overpayment b. pay a lower premium; overpayment c. pay a lower premium; underpayment d. pay a higher premium; underpayment

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

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

Archibald Smith has moved from an upper-middle management job at Chromatic Array, Inc., to a similar position with Pixilair Corporation. The gap between CEO pay and the pay of other top executives at Chromatic was significantly larger than at Pixilair. What difference can Archibald expect? a. The working relationships among the top management team will be more collabora-tive at Pixilair than at Chromatic. b. The focus of Chromatic's board of directors will have been more on the creation of shareholder wealth than Pixilair's focus. c. The rating of Pixilair by Institutional Shareholders Services will be less favorable than Chromatic's rating. d. Pixilair will be more vulnerable to hostile takeover than Chromatic.

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

During the recent financial crisis, M&A activity ______ whereas in 2011, M&A activity __________. a. declined; increased b. declined; declined c. increased; increased d. increased; declined

Failing to ____________ appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated. a. downsize b. spin-off c. downscope d. buyout

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

Horizontal, vertical, and related acquisitions to build market power a. are likely to undergo regulatory review and analysis by financial markets. b. are rarely permitted to occur across international borders. c. typically involve a firm purchasing one of its suppliers or distributors. d. concentrate on capturing value at more than one stage in the value chain.

____ are unsecured obligations that are not tied to specific assets for collateral. a. Bearer bonds b. No-load stocks c. Penny stocks d. Junk bonds

Internal product development is often viewed as a. carrying a high risk of failure. b. the only reliable method of generating new products for the firm. c. a quicker method of product launch than acquisition of another firm. d. critical to the success of biotech and pharmaceutical firms.

Research has shown that the more ____, the greater is the probability that an acquisition will be successful. a. related the acquired and acquiring firms are b. diverse the resulting portfolio of competencies c. disparate the corporate cultures d. involved investment banking firms are in the due diligence process

Research shows that about ____ percent of mergers and acquisitions are successful. a. 20 b. 40 c. 60 d. 80

Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a (an) ____________________ a. vertical acquisition. b. unrelated acquisition. c. horizontal acquisition. d. merger of equals.

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

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms a. with insufficient diversification. b. having too much debt. c. being unable to achieve synergy. d. growing too large.

The repurchase at a premium of shares of stock that have been acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the com-pany for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

The strategy of Citigroup under CEO Sanford Weill was to create a "financial supermarket" where customers shop for a variety of financial services within the same company. This strategy was executed via a series of acquisitions but ultimately failed. This situation was the result of a. Citigroup's managers focusing too much on acquisitions at the expense of managing their existing businesses. b. key managers leaving from the acquired firms which left the firms with inferior management talent. c. the firm becoming too vertically integrated. d. the firm becoming too focused on its core businesses.

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

Thomas is an upper-middle level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to ____ controls. a. bureaucratic b. strategic c. tactical d. organic

Typically, in a failed acquisition, the organization will a. restructure. b. go into bankruptcy. c. focus on building private synergy. d. increase integration.

Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

Which of the following is NOT one of the three main restructuring strategies? a. realigning b. downsizing c. downscoping d. leveraged buyouts

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

Without effective due diligence the a. acquiring firm is likely to overpay for an acquisition. b. firm may miss its opportunity to buy a well-matched company. c. acquisition may deteriorate into a hostile takeover, reducing the value creating potential of the action. d. firm may be unable to act quickly and decisively in purchasing the target firm.

cellphones, iPods, and other devices to tell time. A company that specializes in selling inexpensive watches to this age group may wish to consider ____ in order to develop new products other than watches. a. unrelated diversification. b. backward integration. c. forward integration. d. horizontal acquisitions.

10. Since it replaces existing products and methods of production, entrepreneurship is a process of a. harnessing the human potential. b. creative destruction. c. creation of opportunity. d. exploitation of innovation.

11. GreenBox, a company that recycles paper products to make cardboard cartons, has introduced a new product that resists damage by moisture. GreenBox can expect that a. this innovation will resist competitors' attempts to imitate it. b. its investors will react positively to the introduction of the new product because of the potential for higher returns. c. its investors will react negatively because of the risk and cost entailed in introducing a new product. d. this will be recognized in the industry as a radical innovation.

14. Typically, an organization using a simple structure would be a. large. b. small. c. of any size if the firm is privately held. d. a family-owned-and-managed firm of any size.

17. Normally, the more involved a board of directors is in shaping the firm's strategic direction, the a. more balanced the organization is. b. higher the corporation's performance is. c. more rapidly executive decisions can be make. d. more difficult it becomes to make effective executive decisions.

18. Leslie is a newly-graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a ____ structure. a. simple b. functional c. multidivisional

2. Since its innovations in Internet retailing, Amazon has implemented several innovations, especially in processes and approaches to marketing its products. Its most recent innovation, the Amazon Kindle, is described in the chapter Opening Case. Which of the following methods of generating innovations described in the chapter would the Kindle illustrate? a. Innovation through international joint venture. b. Internal innovation. c. Innovation through cooperative strategies. d. Innovation through acquisitions.

23. An example of the external labor market is the situation where a. an assessment center operated by an external consulting firm evaluates company managers for promotion potential. b. a new vice president of marketing is hired from a competitor. c. the senior vice president of finance is promoted to CEO. d. a vice president of human resources is sent to a university executive MBA program for professional development.

24. Research shows that internationally diversified firms tend to be ____ than domestic-only firms. a. less profitable b. more innovative c. less technologically advanced d. more likely to have an individualistic culture

27. Monahegan Plasma Company is facing a performance downturn and realizes that a major rethinking of its strategy is in order. Under these circumstances, Monahegan Plasma would benefit from a a. internal CEO with short tenure. b. external CEO with a heterogeneous top management team. c. dual CEO/chairperson with a homogenous top management team. d. CEO with long tenure who has a strong sense of hubris.

27. Research suggests that _________ is needed to encourage entrepreneurial behavior. a. individualism rather than collectivism b. a balance between individualism and cooperative behavior c. collectivism rather than individualism d. limited autonomy and incentives

28. AgroPharm is searching for a top-level executive. AgroPharm has marketed its products only to U.S. farmers and agribusinesses in the past. Now, the company plans to expand operations to Mexico and Central America in the next two years. To maximize the chances of success it is critical that the new executive a. be of Hispanic descent. b. have international experience. c. possess an advanced degree in animal science. d. have a background in managing agribusiness firms.

28. ____ is the degree to which decision making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification

29. To successfully implement a cost leadership strategy, there is a need for a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.

3. According to the discussion about succession plans for CEOs in the chapter Opening Case, all of the following are correct EXCEPT a. A survey of boards found that 40 percent of firms had no succession plan. b. Apple has a succession plan for CEO Steve Jobs and anticipates an easy transition to a new CEO. c. The identification of Ellen Kullman as a potential CEO at DuPont illustrates a successful succession plan. d. In a survey of boards, more than 50 percent of directors rated their firms as ineffective at succession planning.

30. Successfully creating innovations through internal means requires a. a highly individualistic culture. b. significant spending on R&D. c. acquisitions of innovative firms. d. venture capital.

30. The recent choice of Ursula Burns (chapter Strategic Focus) as CEO of Xerox is an example of internal succession as Burns was previously a senior manager and president at Xerox. Which effect on strategy does this model of succession suggest? a. Strategic change. b. Stable strategy or stable strategy with innovation. c. Ambiguous: possible change in top management team and strategy. d. Strategic change with innovation.

31. Which of the following factors most encourages stability in a firm's strategy? a. A new CEO hired from outside the firm but within the industry. b. Internal CEO succession and a homogeneous top management team. c. External CEO succession and a heterogeneous top management team. d. A new CEO hired from outside the industry.

32. Firms seeking to compete on the basis of cost leadership particularly need support from the ____ and ____ functions. a. finance, accounting b. manufacturing, process R&D c. product R&D, marketing d. management information, finance

34. QuadroVax is investing heavily in research and development on new methods of vaccine development that would speed up the creation of vaccines for newly emerging viruses and to get these vaccines to the market rapidly. QuadroVax's shareholders can expect a. immediate wealth creation. b. a long wait for an uncertain payoff. c. a long wait for a high probability payoff. d. a large payoff in the short-term with rapidly decreasing wealth generation in the longer run.

Compared to internal product development, acquisitions allow a. immediate access to innovations in mature product markets. b. more accurate prediction of return on investment. c. slower market entry. d. more effective use of company core competencies.

35. Which of the following is a TRUE statement about organizational structures for implementing business-level strategies? a. A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles. b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions. c. An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision-making, and vertical coordination. d. A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

36. Successful implementation of the differentiation strategy requires a structure that a. has specialized jobs. b. decentralizes decision-making. c. focuses on the finance function. d. is dominated by the operations function.

37. The development of the original personal computer (PC) was a(n) ____ innovation at the time, whereas adding a different kind of whitening agent to a soap detergent in an example of a(n) ____ innovation. a. incremental; radical b. radical; incremental c. concentric; radical d. radical; concentric

38. The ____ structure is the most appropriate structure for implementing the integrated cost leadership /differentiation strategy. a. simple b. functional c. multidivisional d. strategic business unit

39. Omicron Artificial Intelligence has a core competency of being able to respond quickly to competitors' actions and to opportunities in the marketplace. This is an example of competitive a. agility. b. speed. c. flexibility. d. responsiveness.

40. Which of the following is NOT a variation of the multidivisional structure? a. competitive form b. regional form c. cooperative form d. strategic business unit form

44. A negative effect of acquiring other firms for the purpose of innovation is a. innovations cannot be transferred between organizations. b. the effect it can have on the firm's own ability to produce innovations. c. innovations may not actually be present in the firm after the purchase is completed. d. the acquired firm's employees usually leave.

45. Charles is a customer service representative for a home improvement store. He has creative ideas about how to increase customer satisfaction. Charles's talents will be most likely to be used in a firm that a. uses the induced strategic behavior form of internal corporate venturing. b. uses the autonomous strategic behavior form of internal corporate venturing. c. makes significant investment in research and development. d. focuses on an acquisition strategy for gaining innovative ideas.

45. The effective development and management of the firm's ____ may be its only sustainable competitive advantage. a. capital base b. human capital c. technology d. organizational culture

48. ____ capital increases cooperation among individuals inside and outside the firm. a. Human b. Social c. Visionary d. Cultural

51. Induced strategic behavior as a form of internal innovation is a(an) ____ process. a. bottom-up b. top-down c. free-flowing d. external

51. Which of the following is NOT one of the five dimensions thought to characterize an employee's entrepreneurial mindset? a. autonomy b. reactivity c. risk taking d. innovativeness

52. Nokia and Intel have specific goals in the development of new products to support their strategies. Intel has had a strategic interest in the smartphone market, and Nokia is trying to overcome Apple's lead in this market with the iPhone. This is an example of a. managerial hubris. b. induced strategic behavior. c. incremental innovation. d. an innovation "born global."

53. A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems and the top administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the organizational ____ structure. a. network b. strategic business unit multidivisional c. functional d. matrix

53. Through the work of cross-functional teams, product development stages are grouped into ____ processes. a. short-term and long-term b. parallel or overlapping c. serially ordered d. complementary

54. Informal (often invisible) processes are best supported through ____ organizational structures. a. vertical b. horizontal c. functionally-oriented d. multidivisional

56. In an SBU structure, ____ is/are evaluated using strategic controls, whereas ____ is/are evaluated using financial controls. a. each SBU, divisions within the SBUs b. divisions within the SBUs, each SBU c. managers of the SBUs, headquarters staff d. headquarters staff, managers of the SBUs

6. The board of directors for TundraPro, Inc., is searching for a new CEO. The firm is in need of new direction after suffering several years of declining performance and increasingly demoralized management and employees. The board has decided it needs a CEO who can be a transformational leader. To this specific end, the board needs to identify applicants who have a. high levels of honesty, trustworthiness, and integrity. b. high emotional intelligence. c. excellent analytical skills. d. low tolerance for ambiguity.

60. The fewest integrative devices are used in the ____ structure. a. simple b. competitive multidivisional c. SBU d. network

61. A firm that frequently acquires and divests other firms is most likely to use the ____ structure. a. matrix b. competitive multidivisional c. hybrid combination d. horizontal complementary strategic alliance

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners a. resisted selling at any price. b. sold the company to the larger brewer. c. designed a poison pill to discourage a takeover. d. looked for smaller brewers to acquire instead of selling to the larger brewer.

63. Megaline, Inc., follows the competitive form of the multidivisional structure. It has five divisions. One division has not met the rate-of-return goals for the past year. One division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office is making decisions about where to allocate capital in the next year. Which scenario is the MOST likely? a. The poorest performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year. b. The highest performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year. c. The average performing divisions which met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements. d. All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.

67. A multidomestic strategy would be associated with a. high levels of coordination. b. low levels of formalization. c. many integrative mechanisms. d. interdependent divisions.

68. Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the ____ strategy. a. network b. multidomestic c. global d. transnational

69. According to the chapter Strategic Focus, all of the following are leadership actions of Mike Duke, the new CEO of Wal-Mart EXCEPT a. Emphasizing high standards of excellence for the company's resources and people. b. A greater emphasis on domestic markets and less emphasis on international markets especially given the failures of Wal-Mart in Germany and Korea. c. Increase the speed and enlarge Wal-Mart's commitment to sustainability. d. Go back to Wal-Mart's roots with a primary focus on providing value at the lowest possible price.

70. Why have large pharmaceutical companies been forming alliances with biotechnology companies? a. to evade legislative restrictions on drug research in the U.S. b. to develop new products and bring them to market c. because both firms had declining profitability and needed cash infusions from other firms d. in order to gain absorptive capacity

72. The need for the organization to combine local responsiveness and efficiency is most critical in a ____ strategy. a. multidomestic b. transnational c. global d. focus

75. The fastest growing group of entrepreneurs in the U.S. are a. Baby Boomers leaving corporate jobs. b. women. c. recent immigrants. d. ethnic minorities.

76. It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.

78. McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(an): a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.

8. All of the following are external environmental sources that affect managerial discretion EXCEPT a. industry structure. b. corporate culture. c. market growth rate. d. potential for product differentiation.

A primary objective of corporate governance is to a. determine and control the strategic direction of an organization, so that the top ex-ecutives are focused on maximizing corporate profits. b. ensure that the interests of top-level managers are aligned with the interests of shareholders. c. lobby legislators to pass laws that are aligned with the organization's interests. d. resolve conflicts among corporate employees.

A(an) ____ occurs when one firm buys a controlling, or 100% interest, in another firm. a. merger b. acquisition c. spin-off d. restructuring

According to the Chapter 7 Opening Case, the difference between Facebook's acquisition approach and the approaches of Microsoft and Google is that a. Facebook tends to acquire earlier-stage companies whereas Microsoft and Google tend to acquire later-stage companies. b. None of Facebook's acquisitions have survived as independent companies whereas those of Microsoft and Google have continued to operate as subsidiaries. c. Facebook's approach is to acquire earlier-stage companies whereas Microsoft and Google tend to acquire later-stage companies. d. Microsoft's and Google's acquisitions have all been friendly whereas Facebook's have all been hostile.

All of the following were results of Citigroup's acquisition strategy EXCEPT (Chapter 7 Strategic Focus) a. overly diversified b. a much smaller, though global, business financial service firm c. too large d. lacking in synergy

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

An investor is analyzing two firms in the same industry. She is looking for long term performance from her investment. Both firms are basically identical except one firm is involved in substantial downsizing and the other firm is undertaking aggressive downscoping. The investor should invest in the a. downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. b. downscoping firm because of reduced debt costs and the emphasis on strategic controls derived from focusing on the firm's core businesses. c. downsizing firm because it will be making decisions based on tactical strategies. d. downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.

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

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

Compared with downsizing, ____ has (have) a more positive effect on firm performance. a. reconfiguring b. downscoping c. leveraged buyouts d. acquisitions

Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors. b. shareholders and managers. c. the board of directors and managers. d. none of the these.

Currently, the rationale for making an acquisition includes each of the following EXCEPT a. To increase market power. b. To decrease taxes paid by shareholders. c. To overcome entry barriers. d. To increase diversification.

Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for a. market discipline. b. innovation. c. risk analysis. d. international diversification.

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

In a merger a. one firm buys controlling interest in another firm. b. two firms agree to integrate their operations on a relatively coequal basis. c. two firms combine to create a third separate entity. d. one firm breaks into two firms.

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

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

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

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

Managers in the U.S. receive ____ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

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

Market power is derived primarily from the a. core competencies of the firm. b. size of a firm and its resources and capabilities. c. quality of a firm's top management team. d. depth of a firm's strategy.

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

Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.

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

SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a/an a. vertical acquisition of a firm that uses technical translation products. b. acquisition of a highly related firm in the technical translation market. c. cross-border merger, preferably with an Indian or Chinese company. d. strategy of internally developing the technical translation products needed to compete in this market.

32. Panera Bread develops and produces its own dough-based products, but it works with manufacturing partners to create new soups. Panera Bread is therefore a. increasing its costs and reducing its potential to succeed. b. engaged in internal corporate venturing. c. pursuing innovation through both internal and cooperative strategies. d. not an innovative company.

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

The March 2011 announcement that AT&T was acquiring T-Mobile USA from Deutsche Telekom is a _________ acquisition and is intended to _________ . a. vertical; increase diversification b. horizontal; increase market power c. vertical; overcome entry barriers d. related; increase speed to market

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

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

The chapter Opening Case indicates that many CEOs earn more than ____times the amount re-ceived by their firm's lowest-paid employee. a. 10 b. 100 c. 300 d. 1000

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b. it is difficult and time intensive for companies to develop products that differ from their current product line. c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.

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

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

The presence of barriers to entry in a particular market will generally make acquisitions ____ as an entry strategy. a. less likely b. more likely c. prohibitive d. illegal

The term "leverage" in leveraged buyouts refers to the a. firm's increased concentration on the firm's core competencies. b. amount of new debt incurred in buying the firm. c. fact that the employees are purchasing the firm for which they work. d. process of removing the firm's stock from public trading.

The use of high levels of debt in acquisitions has contributed to a. the increase in above-average returns earned by acquiring firms. b. an increased risk of bankruptcy for acquiring firms. c. the confidence of the stock market in firms issuing junk bonds. d. an increase in investments that have long-term payoffs.

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to ____ by making an acquisition. a. increase new product speed to market b. broaden its competitive scope c. increase its economies of scale d. overcome entry barriers

When executives have ownership positions or stock options with their employing firm, they are a. going to actively defend their firm from takeover attempts. b. likely to gain financially if their employing firm is taken over by another. c. pressure the board of directors to reprice their stock options. d. likely to be terminated by the acquiring firm even in a friendly takeover.

When managers become overly focused on making acquisitions, it is a. because the skills of top executives are better used in making acquisitions than they are in daily organization operations. b. because of the thrill of selecting, chasing and seizing a target. c. due to pressure from major stakeholders to diversify the firm. d. because acquisitions are a quick way to improve the financial standing of the firm.

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

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

33. Firms seeking to differentiate particularly need support from the ____ and ____ functions. a. finance, accounting b. engineering, operations c. product R&D, marketing d. management information, finance

34. Determining the strategic direction for the firm refers to developing a. a balanced scorecard. b. a tactical response to threats and opportunities. c. a specific image and character. d. competitive agility and speed.

10. Financial controls are most important in the ____ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary

10. The top management team is composed of the a. heterogeneous group of advisors selected by the CEO. b. CEO and chairperson of the board. c. key managers who are responsible for selecting and implementing a firm's strategy. d. officers listed in a firm's annual report and the board of directors.

11. ____ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units. a. Strategic b. Managerial c. Financial d. Environmental

12. Innovation creates a(an) a. opportunity for a new product or process. b. new product or process. c. commercial product. d. idea for potential exploitation.

13. The primary goal of innovation is to a. promote social well being. b. increase the number of jobs. c. create wealth. d. support national economies.

14. The three types of innovative activity include all of the following EXCEPT a. invention. b. imitation. c. implementation. d. innovation.

14. Which of the following is NOT associated with heterogeneous top management teams? a. higher firm performance b. innovation and strategic change c. diminished debate among top managers d. better strategic decisions

15. Products developed through ____ are often offered at lower prices without as many features than products developed through ____. a. innovation, imitation b. imitation, invention c. imitation, innovation d. innovation, invention

17. Commercialization of ideas is more difficult than idea creation as suggested by the fact that ____ percent of R&D occurs in large firms, yet the same firms produce fewer than ____ percent of patents. a. 50; 50 b. 50; 80 c. 80; 50 d. 80; 80

17. Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership. b. differentiation. c. related constrained diversification strategy. d. single or dominant business corporate strategy.

18. A CEO gains power from all of the following circumstances EXCEPT a. when many of the outside directors are appointed by the CEO. b. when the CEO is also the chairman of the board. c. when tenure of the top management team is shorter than the tenure of the board. d. the fact that inside board members report to the CEO.

18. ____ are individuals, acting independently or as part of an organization, who see an opportunity and then take risks to develop an innovation to exploit it. a. Leaders b. Innovators c. Entrepreneurs d. Transformative leaders

19. Entrepreneurs tend to have all the following characteristics EXCEPT a. willing to take responsibility for projects. b. passionate. c. prefer certainly about projects. d. optimistic.

20. Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure? a. increasing diversification b. coordination and control issues c. need for knowledge-sharing among specialists d. greater amounts of data and information to process

20. Which of the statements about CEO duality is FALSE? a. CEO duality is associated with high CEO power. b. CEO duality has been blamed for slow response to change by the organization. c. CEO duality is relatively rare in the U.S. except in large Fortune 500 firms. d. If the CEO acts a steward, CEO duality facilitates effective decisions and actions.

21. If the firm's current employees are well-trained in their jobs, but also have other knowledge, skills, and abilities, these employees have a. social capital. b. entrepreneurial capabilities. c. high absorptive capacity to learn. d. intellectual slack.

23. The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to a. an emerging professional management philosophy. b. the increasing demand by consumers for both quality and low-price. c. coordination and control problems. d. a shift toward the global economy.

24. A CEO's breadth of knowledge base is constrained by a. his or her relationship with the board of directors. b. whether he or she is also the chairperson of the board of directors. c. his or her long tenure with the firm. d. the level of social capital in the firm.

24. Some experts consider the ____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional

25. The level of entrepreneurial activity in a nation is ____ the nation's level of economic development. a. negatively related to b. independent of c. positively related to d. weakly related to

26. ____ is one of the reasons for the differences in rates of entrepreneurship among different countries. a. Climate b. Competitiveness c. Culture d. Constitution

29. Which of the following is true? For firms to be entrepreneurial, they require a culture with a. an emphasis on individualism in Western nations and an emphasis on collectivism in Eastern nations. b. an exceptionally high level of collectivism. c. a balance of individualism and collectivism. d. an exceptionally high level of individualism.

34. Typically, a successful firm pursuing a differentiation strategy will a. have a very hierarchical structure. b. require a structure which is very formal. c. use cross-functional development teams. d. develop free-standing business units.

36. Innovations that involve significant technological breakthroughs and create new knowledge a. build incrementally on the firm's existing technologies and knowledge. b. are the most common type of innovation. c. involve substantial uncertainty and risk. d. typically have clear market opportunities.

37. GE performed exceptionally well under Jack Welch, the former CEO of GE. Jeffery Immelt, the new CEO, has made changes to the firm's corporate-level strategy and structure. His changes have been made even more difficult because GE is experiencing performance problems partly the result of the difficult economic climate. Immelt can expect a. a smooth transition to the new organizational strategy because of the organizational slack generated by Jack Welch. b. to replace the entire top management team because once individuals commit to a core ideology and an envisioned future, they are unlikely to change. c. some resistance by organizational stakeholders who are accustomed to Jack Welch and the high performance which he brought to GE. d. that he will inherit the "iconic aura" surrounding Jack Welch, which will give him credibility with GE's stakeholders.

38. Exploiting and developing core competencies is part of the key strategic leadership action "Effectively Managing the Firm's Resource Portfolio." Which of the following is most important for developing and using core competencies? a. extensive financial assets. b. transformational leadership. c. high-quality human capital. d. an ethical organizational culture.

39. Internal corporate venturing does NOT involve a. autonomous strategic behavior. b. induced strategic behavior. c. strategic alliances. d. product champions.

4. The primary responsibility for effective strategic leadership of the organization rests with the a. board of directors. b. top management team. c. CEO. d. stakeholders.

40. WayWard Products has a deliberate strategy to encourage internal innovations. It has established processes to support autonomous strategic behavior as well as induced strategic behavior. WayWard Products is involved in a. entrepreneurial incubation. b. creative destruction. c. internal corporate venturing. d. cooperative innovation strategies.

44. Faced with declining enrollment and increased competition from not-for-profit organizations offering inexpensive art courses for new hobbyists, the for-profit Delta Academy of Art has steadfastly stayed true to its mission of offering high-quality classical art instruction for both beginners and advanced artists at high tuition. Delta has been noted for the excellence of its artistic training for decades. This is an example of a. competitive agility. b. lack of an envisioned future. c. competence becoming a liability. d. failure to have a clear core ideology.

45. Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance? a. Functional structure b. Cooperative M-Form c. SBU Form d. Competitive M-Form

46. The chapter Strategic Focus about competitiveness and innovation notes all of the following EXCEPT a. Firms in the U.S. have focused too much on producing short-term returns leading to an emphasis on incremental innovations. b. The U.S. is in danger of losing its lead in science and technology. c. Future technological breakthroughs in medical science, drugs, and information technology are likely to come from U.S. firms. d. In 2009, the U.S. continued to be ranked as the most competitive nation.

46. To successfully implement a firm's strategy, the workforce must be viewed as a a. variable cost. b. depreciating asset. c. resource to be maximized. d. renewable asset.

50. A firm pursuing a related-constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards based on division financial performance. d. temporary teams or task forces formed around specific projects.

50. Induced strategic behavior is a process that fosters product innovations that a. are likely to change a firm's strategic intent and mission. b. will lead to greater financial returns. c. are aligned closely with current strategy and structure. d. will come to market in a short period of time.

51. Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy? a. competitive form with related constrained strategy b. cooperative form with unrelated strategy c. SBU form with related linked strategy d. competitive form with related linked strategy

52. Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules a. use integrative mechanisms to share core competencies among themselves. b. compete with one another in Olympia's internal capital markets. c. are not necessarily related to one another in terms of products or markets. d. are network member firms while Olympia is the strategic center firms.

53. The CEO of Icon Image Associates wishes to radically change the corporate culture of the firm. She knows that she must convince others at Icon Image of the necessity for the culture change and gain their active support. The CEO knows that the key players in energizing the culture change and fostering alignment with the new strategic vision are a. the members of the board of directors. b. top management team members. c. middle managers. d. rank-and-file employees.

55. A major barrier to the use of cross-functional teams is a. excessive individualism of creative people. b. lack of communication skills of technical people. c. independent frames of reference of team members. d. lack of social capital by team members.

55. Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible? a. cooperative structure; no bonus due to failure to meet divisional target. b. competitive structure; no bonus due to failure to meet divisional target. c. cooperative structure; a bonus for increasing organizational performance. d. competitive structure; a bonus for increasing organizational performance.

55. Shaping and reinforcing a new organizational culture requires all of the following EXCEPT a. effective communication. b. effective performance appraisals. c. adherence to the firm's traditional core values. d. an appropriate reward system.

57. In the ____ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets. a. functional b. cooperative c. competitive d. SBU

58. In the ____ multidivisional structure there is complete independence among the firm's divisions. a. cooperative b. matrix c. competitive d. SBU

59. A firm pursuing an unrelated diversification strategy will utilize a ____ structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional

61. The ____ is a framework firms can use to verify that they have established both strategic and financial controls to assess their performance. a. managerial model b. holistic control system c. balanced scorecard d. internal auditing system

61. The dimensions on which functional departments can vary include all the following EXCEPT ____ orientation. a. time b. customer c. technological d. interpersonal

62. The competition for resources among those representing different organizational functions within a firm often leads to a. erosion of social capital. b. heightened communication. c. organizational politics. d. empowerment of organizational members.

63. The firm's culture promotes unity of purpose for cross-functional work teams through a. a collectivist structure. b. an entrepreneurial mind-set. c. shared values. d. resource allocation.

64. Four perspectives are integrated to form the balanced scorecard framework. The financial perspective focuses on the view of the firm by the a. customer. b. employee. c. shareholder. d. general society.

65. PracticalSolutions is a small firm providing employee assistance programs for companies with troubled employees. PracticalSolutions frequently partners with other consulting firms to provide creative solutions for companies with personnel problems. This history of partnering has developed ____ capital for PracticalSolutions. a. intellectual b. institutional c. social d. technological

65. Strategic control focuses on the ________ of strategic actions whereas financial controls focus on the _____ of strategic actions. a. revenues; costs b. long-term financial outcomes; short-term financial performance c. content; outcomes d. outcomes; content

66. A worldwide geographic area structure is an organizational form in which a. multiple alliances across the globe link complementary businesses. b. standardized products are offered across country markets. c. national interests dominate and management adapts to local or cultural differences. d. responsiveness to local demand is combined with economies of scale.

67. Criteria for reevaluating internal business processes using the balanced scorecard include all of the following EXCEPT a. asset utilization improvements. b. improvements in employee morale. c. increases in employee skills. d. changes in turnover rates.

69. The main risk in a strategic alliance is that a. the alliance will not result in a successful innovation. b. critical employees will be hired away by the strategic partner. c. one partner will use the other partner's knowledge and use it to enhance its own competitive abilities. d. the partners will lose control over their internal processes.

7. Which of the following is NOT a factor that determines the amount of a manager's decision discretion? a. characteristics of the manager b. characteristics of the organization c. cohesiveness of the board of directors d. the external environmental

70. One of the primary disadvantages of the global strategy and worldwide product divisional structure is that a. it is difficult to achieve economies of scale. b. the firm must develop centers to offer after-sales service to customers. c. it is difficult to respond effectively to local market needs and preferences. d. achieving economies of scale with this strategy/structure combination is nearly impossible.

71. According to the chapter Strategic Focus, entrepreneurs are identifying ways to use social networking sites such as Facebook for business purposes. All of the following are examples of these business purposes EXCEPT a. Identification of new and different markets for existing and new product ideas. b. To identify potential new employees. c. Provision of venture capital to new entrepreneurial firms. d. To provide access to new ideas and information that can be useful to solving problems and making strategic decisions.

75. Which of the following is NOT a preliminary task of the strategic center firm in a strategic network? a. strategic outsourcing b. encouraging friendly rivalry among network members c. allocating internal capital d. supporting development of new core competencies

8. ____ exist(s) when there is a need in the market that can be satisfied by new goods or services. a. Potentiality b. Market readiness c. Entrepreneurial opportunities d. Critical core competencies

9. A characteristic of the manager that may affect managerial discretion is his/her a. amount of industry experience. b. level of education. c. tolerance for ambiguity. d. length of tenure.

A leveraged buyout refers to a. a firm restructuring itself by selling off unrelated units of the company's portfolio. b. a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background. c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. d. an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity.

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

According to the Chapter 7 Opening Case, the difference between Google's and Microsoft's acquisition approaches is that a. Microsoft tends to acquire earlier-stage companies whereas Google tends to acquire later-stage companies. b. None of Google's acquisitions have survived as independent companies whereas Microsoft's have continued to operate as subsidiaries. c. Google's approach is to acquire earlier-stage companies whereas Microsoft tends to acquire later-stage companies. d. Google's acquisitions have all been friendly whereas Microsoft's have all been hostile.

According to the Chapter 7 Strategic Focus, what was the reason for Citigroup's restructuring? a. to create a "financial supermarket." b. to acquire Discover Financial Services. c. to focus on core areas of banking and meet new stricter regulatory requirements. d. to link together the banking and insurance businesses.

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

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

All of the following are correct about the chapter Strategic Focus on fraud and corporate gov-ernance failure at Satyam Computer Services Ltd. EXCEPT a. Satyam's stock price suffered a significant decline. b. The CEO was involved in overstating company revenues and profits. c. The CEO was never held responsible for his unethical actions. d. The CEO was a recipient of the Golden Peacock Award for Corporate Governance.

All of the following statements are correct EXCEPT a. immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. b. shareholders of acquired firms often earn above-average returns from an acquisition. c. the majority of acquisitions increase long-term value for the acquiring firm. d. shareholders of acquiring firms typically earn returns from the transaction that are close to zero.

Because acquisitions may become a substitute for innovation, Teva Pharmaceutical's acquisition of Cephalon should be driven by ___________ rather than _________________. a. defensive reasons (to gain sales revenue in the short run); strategic reasons (cost and revenue strategies) b. both strategic and defensive reasons; either one or the other c. strategic reasons; defensive reasons d. avoiding internal R&D expenditures; developing innovation capabilities

Caterpillar's payment of a 32% premium for the acquisition of Bucyrus in 2011 and subsequent need to issue more stock illustrates the acquisition problem of a. integration difficulties. b. inability to achieve synergy. c. large or extraordinary debt. d. managers overly focused on acquisitions.

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

Due diligence includes all of the following activities EXCEPT assessing a. differences in firm cultures. b. tax consequences of the acquisition. c. the level of private synergy between the two firms. d. financing for intended transaction.

Evidence suggests that firms using acquisitions as a substitute for internally developed innovations a. are able to offset the loss of research and development competencies by competencies in other areas. b. extend their time-to-market for new product launches. c. eventually encounter performance problems. d. can leverage their core competencies across a broader range of products.

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

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

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

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

Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50% of the stock of any one firm.

Magma, Inc., acquired Vulcan, Inc., three years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will a. go public through an IPO. b. review the due diligence information collected before the acquisition. c. restructure. d. review its tactical-level strategies.

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

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately _______ percent of innovations are imitated within four years after patents are obtained. a. five b. ten c. sixty d. twenty

Private synergy a. occurs in most related acquisitions and allows firms to see increased returns. b. is frequently achieved in conglomerates. c. is not easy for competitors to understand and imitate. d. is assessed by managers during the due diligence process.

Research suggests that firms with ____ perform better, especially when collaboration among top management team members is important. a. greater emphasis on stock options b. larger proportion of insiders on the board of directors c. smaller pay gap between the CEO and other top executives d. benchmarking used for top executive pay

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

Some research findings have shown that acquisitions typically ____ for shareholders in the acquiring firm. a. result in above-average returns b. provide approximately average returns c. result in returns near zero d. take some time to achieve private synergy, but eventually result in above-average returns

The ____ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions. a. pre-acquisition negotiations b. pre-acquisition due diligence c. post-acquisition integration d. post-acquisition restructuring

The expenses incurred by firms trying to create synergy through acquisition are called ____ costs. a. differentiation b. diversification c. transaction d. interaction

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

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

There are few true mergers because a. few firms have complementary resources. b. integration problems are more severe than in outright acquisitions. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(an) a. stealth raid. b. adversarial acquisition. c. takeover or unfriendly acquisition. d. leveraged buyout.

Which of the following is FALSE about corporate governance in China? a. The Chinese governance system has been moving towards the Western model in recent years. b. The compensation of top executives of Chinese companies is closely related to pri-or and current financial performance of the firm. c. The state is becoming far less dominant in determining the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more vola-tility in those values over time.

Which of the following statements is FALSE? a. Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios. b. Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm. c. Private synergy is easy for competitors to understand and imitate. d. Private synergy is more likely when the two firms in an acquisition have complementary assets.

___________ may be necessary because acquisitions create a situation in which the newly formed form has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management. a. Management buyout b. Leveraged buyout c. Downsizing d. Downscoping

33. The number of patents held by an organization is a rough guide to the a. effective use of organizational politics. b. future success of an initial public offering. c. amount of venture capital a firm will be able to attract. d. level of innovation in a firm.

12. Alfred Chandler found that firms grow in a predictable pattern, and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory? a. functional b. simple c. vertically integrated d. multidivisional

12. Executive headhunters have approached Charles about taking the position of senior vice president of marketing for a well-known company. Although this company has been highly successful since 1995, Charles has heard persistent rumors of overly aggressive marketing tactics, questionable reporting of sales data, and an atmosphere of intolerance of criticism. The CEO is a powerful and charismatic individual, who built the company from a small regional firm to an international powerhouse in only a decade. The other top managers have been hand-picked by the CEO, as have a number of the members of the board of directors. The salary for this position is very high and includes generous stock options. It would be a major step up in Charles' career and would position him to move to CEO of another company in the future. Charles has prided himself on his high moral values and is viewed as an exceptionally ethical person by his peers. What should Charles do? a. Charles should take the job because he can effect real change in the culture of the organization, and take advantage of the personal financial and career opportunities. b. Charles should realize that personal moral values and the realities of the corporate world differ in both quality and degree. Consequently, he can take a job in an ethically borderline company without tainting his personal moral standing. c. Charles should not rely on rumors to dissuade him from making an advantageous career decision. d. Charles should not take the job because the culture of the organization is set by the CEO and other top managers. He would have little influence on the organizational culture as one of many top managers.

15. Recently, Sony selected Sir Howard Stringer as CEO. Sir Howard is not Japanese and he was not a Sony employee before his selection. Which of the following statements is FALSE? a. Sony's top management team will be more heterogeneous with the addition of Sir Howard. b. Sir Howard will have a broader perspective of the firm and its competitive environment than would a Sony insider. c. If Sony's top management team is homogeneous, Sir Howard's future impact on Sony's strategy is ambiguous. d. The decision-making process on Sony's top management team will be smoother and faster with the addition of Sir Howard.

16. The benefits of a simple structure include all of the following EXCEPT a. ease of coordination within the organization. b. no need for sophisticated information systems. c. active involvement by the owner-manager. d. specialists can develop deep expertise.

19. CEO duality refers to a. firms where there is both a president and a CEO. b. CEOs who sit on the board of directors of other firms. c. CEOs who hold office in more than one company. d. the situation where the CEO is also chairperson of the board of directors.

19. One disadvantage of the functional structure is that a. career paths and professional development are limited. b. dual reporting relationships blur lines of authority. c. the CEO cannot coordinate and control the efforts of functional level employees. d. communication is difficult among organizational functions.

2. As noted in the chapter Opening Case, the average tenure of CEOs has ___________ in recent years. a. been limited to a three year term in most corporations b. remained about the same c. become longer d. become shorter

2. Which of the following is TRUE? a. Organizations tend to change structure too frequently, which erodes their competitive advantage. b. Large organizations can retain a simple structure as long as they have a focus strategy. c. Flexibility in structure is more important than stability. d. Strategy has a more important influence on structure than structure has on strategy.

20. Roland has developed and patented an inexpensive and organic way to enhance the fertility of clay soils without the addition of chemical fertilizers. But established agricultural chemical companies have rejected his proposals. After six months of promoting his invention during his time off from his regular job, Roland has decided to set his dream aside. Roland lacks a key characteristic of successful entrepreneurs, which is a. the ability to identify opportunities. b. a corporate sponsor. c. financial slack. d. passion for his invention.

22. Which of the following is NOT related to a CEO having long tenure in his or her position? a. more effective strategic control b. greater influence on board decisions c. more limited perspective d. high level of innovation

23. The risks of international entrepreneurship include all the following EXCEPT a. unstable foreign currencies. b. problems with market efficiencies. c. limitations on market size. d. strong "buy-domestic" programs.

25. The three structural characteristics which differ between organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.

26. Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration

3. Firms develop innovations in all the following ways EXCEPT a. Through autonomous or induced strategic behavior. b. By acquiring other companies. c. Through cooperative strategies. d. Via divestiture of low-performing units.

30. Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms Adams' company should a. be the strategic center firm in a network structure. b. have a specialized multidivisional structure. c. develop alliances with firms with complementary competencies. d. have a highly centralized, functional structure.

32. The failure of organizations to use the pool of managerial talents held by women can best be termed a. deliberate policy of discrimination. b. lack of assertiveness by women managers. c. managerial isolation from social trends. d. an opportunity cost for firms.

33. Two key strategic leadership actions include a. monitoring the hiring of key employees and focusing on growth but not learning initiatives. b. designing and then implementing the balanced scorecard. c. setting appropriate financial targets and establishing an effective business level synergy. d. determining strategic direction and establishing balanced organizational controls.

35. The CEO of CLEO, Inc., in all her communications to employees consistently refers to her dream of CLEO becoming the company of choice for employee assistance programs. She keeps this theme uppermost and it is reflected in the firm's motto, the title of its Web newsletter, and even on the company t-shirts and mugs. This is an example of the firm's a. core ideology. b. organizational culture. c. strategy. d. envisioned future.

39. Increasingly diversified firms that have decided to shift to a related-constrained strategy should change their organizational structure to the ____ structure. a. functional b. competitive form of the multidivisional c. SBU form of the multidivisional d. cooperative form of the multidivisional

40. Human capital refers to a. the net present value of the future competencies of the workforce. b. the amount of money purchasers of the firm would pay for the continuing employment of the present workforce. c. the value-added that the firm's workforce contributes to each product produced or service rendered. d. knowledge and skills of the firm's work force.

41. The BEST multidivisional structure to use a. is the competitive form. b. is the SBU form. c. is the cooperative form. d. depends on the degree of diversification.

42. Autonomous strategic behavior is a(an) ____ process in which product champions pursue new ideas. a. top-down b. horizontal c. integrated d. bottom-up

42. The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. is a structure organized around both functional specialization and business projects. d. is a structure requiring heavy use of horizontal integrative devices.

42. The goal of investing in human capital is to a. increase the number of employees in the firm. b. reduce organizational slack. c. maximize current productivity per employee. d. develop a workforce capable of continuous learning.

43. Which of the following will increase the probability that a lower-level manager will become a successful strategic leader? a. appointing many outside board members. b. increasing the firm's sales. c. increasing the homogeneity of the top management team. d. training and development programs.

46. Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures? a. Firms pursuing a related-linked strategy should implement a competitive structure with a competitive culture and centralized strategic planning activities. b. Firms pursuing an unrelated diversification strategy should use an SBU structure with a small corporate staff, emphasize the R&D function, and integrate divisions to achieve synergies. c. Firms pursuing a related-linked strategy should use an SBU structure, emphasize interdependence among divisions, and manage the strategic planning function from the central office. d. Firms pursuing a related-constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.

47. According to the chapter Strategic Focus, firms based in the U.S. have tended to overemphasize _____________. a. autonomous strategic behavior b. the use of product champions c. radical innovations d. incremental innovations

47. Clarita Cosmetics is confronting a decline in sales due largely to a general economic downturn. The top management team is debating whether to lay off employees. In the debate, the following statements are made. Which of the statements is FALSE? a. If Clarita Cosmetics lays off a large number of employees, there will be a significant loss of human capital that will cause further downturns in the firm's performance. b. A moderate-sized layoff at Clarita Cosmetics will probably improve firm performance. c. If Clarita Cosmetics restructures, it ought to increase investments in training and development. d. A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the increased number of errors employees may make until they learn their new tasks.

47. The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization. a. functional b. worldwide geographic area c. network d. matrix

48. In the chapter Strategic Focus, which of the following best characterizes Exxon-Mobil's approach to innovation? a. the use of autonomous strategic behavior b. the use of product champions c. development of radical innovations d. development of incremental innovations

49. Which key strategic leadership action plays a key role in influencing how the firm conducts its business and regulates and controls employees' behavior? a. Effectively Managing the Firm's Resource Portfolio. b. Determining Strategic Direction. c. Regulating and Controlling Employees. d. Sustaining an Effective Organizational Culture.

5. The most effective leadership style is ____ leadership. a. pragmatic b. charismatic c. inspirational d. transformational

50. Which of the following statements is TRUE regarding effective organizational cultures? a. Once a corporate culture is developed, strategic leaders can focus on other activities. b. A strategy that is historically new for a firm should be implemented by incremental changes in the organization's culture. c. A central task of strategic leaders is to revise the corporate culture on an annual basis after analyzing the changes occurring in the competitive environment. d. Organizational culture can be a source of competitive advantage because it influences employee behavior and how the firm's conducts its business.

52. The top management team at Ingenuity, Inc., has assigned a team of scientists to a multi-year project to investigate the viability of growing large amounts of fur from cloned cells of minks and foxes to produce no-kill fur products for coats and other clothing items. This idea would satisfy all the dimensions of the entrepreneurial orientation EXCEPT a. innovativeness. b. risk taking. c. proactiveness. d. competitive autonomy.

54. Competitive aggressiveness describes a firm's a. tendency to engage in new ideas and creative processes. b. willingness to allow employees to take actions free of organizational constraints. c. ability to be a leader in the marketplace. d. propensity to take actions that allow it to outperform rivals consistently and substantially.

54. The most centralized and most costly form of the multidivisional structure is the a. integrated. b. competitive. c. SBU. d. cooperative.

56. A cross-functional product development team has been examining a proposed new product intensively for six months. The team has decided that although the product is unique and technologically-advanced, the cost of production will exceed the price that the consumer would be willing to pay. At this point, the product development team should a. engage in creative destruction. b. recommend that the product be sold at a loss in order to create a new market. c. turn over the product evaluation to a new product-development team which may have more passion for the product. d. recommend that the project be set aside.

57. Research shows that ____________ is the most effective means of ensuring that employees comply with the firm's ethical requirements. a. a written code of ethics b. a statement in the firm's mission statement c. a speech on ethics by the CEO of the company d. a value-based culture

58. Managerial actions that support development of an ethical organizational culture include all of the following EXCEPT a. establishing a code of conduct. b. disseminating the code of conduct to all stakeholders to inform them of the firm's ethical standards and practices. c. creating a work environment in which people are treated with dignity. d. disciplining whistle-blowers.

58. Which of the following is one of the barriers to effectiveness when using cross-functional teams to integrate organizational functions? a. dissension within the top management team b. informal organizational processes within the firm c. the firm's strategic orientation d. organizational politics

6. Structural stability affects the organization's ability to: a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. predictably manage its daily work routines.

6. When an existing firm creates a new venture or develops an innovation, it is said to be engaging in a. corporate emergence. b. transformational leadership. c. exceptional R&D. d. corporate entrepreneurship.

60. A cross-functional work team is having difficulties in operating smoothly and friction has developed among some of the members. Many of the strongest complaints are from the representatives of management who complain that the research scientists are disorganized, haphazard, and undisciplined. Managers complain the scientists do not adhere to any fixed rules or procedures. On the other hand, the research scientists complain that the managerial representatives are excessively rule-oriented bureaucrats, and have no flexibility or spontaneity. The main problem with this team seems to be centered around differences in a. interpersonal orientation. b. time orientation. c. goal orientation. d. formality of structure.

60. The Enron employee who reported the financial manipulations at the company to her superiors can be considered to have engaged in a. managerial opportunism. b. white-collar crime. c. vindictive disloyalty. d. an act of courage.

64. Independent frames of reference and organizational politics are the two primary barriers to cross-functional team integration. Two methods to facilitate cross-functional integration are _________ and ___________. a. autonomous strategic behavior; induced strategic behavior b. incremental innovations; radical innovations c. bottom-up integration; top-down integration d. shared values; effective leadership

68. Regarding partnering in cooperative alliances, entrepreneurial new companies may seek ____ while more established companies may need ____. a. distribution channels, tacit knowledge b. deep technological expertise, distribution channels c. social capital, technical capital d. investment capital, new technological knowledge

69. The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited a. centralization. b. coordination across divisions. c. ability to meet local market needs. d. potential for global efficiency.

71. Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the ____ organizational structure. a. horizontal complementary strategic alliance b. competitive multidivisional c. strategic business unit multidivisional d. hybrid combination

72. New entrepreneurial firms are better than larger established firms at a. implementing innovations. b. gaining competitive advantage. c. making alliances. d. identification of entrepreneurial opportunities.

76. Which of the following can engage in entrepreneurial activities? a. Corporations b. Municipalities c. Nations d. Corporations, municipalities, and nations

77. Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer term contracts with suppliers, and enables engineers in the supplier company to have better communication with Toyota. This is an example of a(an): a. worldwide product divisional structure. b. functional structure. c. SBU multidivisional structure. d. strategic network.

8. One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so a. indicates to competitors that the firm is vulnerable to a hostile takeover. b. will only lead to inefficiencies. c. requires the firm undertake multi-year restructuring period that will delay retirement. d. suggests that their previous choices were not the best ones.

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

82. In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with whom it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.

9. Entrepreneurial opportunities a. present the potential for a firm to leverage existing products or services into new markets. b. present risk to the firm and should be avoided. c. are conditions contrary to a firm's established strategy and segments served. d. are conditions in which new goods or services can satisfy a need in the market.

9. Strategic controls allow corporate-level managers to a. evaluate business-level performance on objective criteria. b. concentrate on day-to-day corporate operations. c. assess performance of employees and managers in each business unit. d. examine the fit between what the firm might do and what it can do.

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

A takeover defense wherein preferred stock in the merged firm is offered to shareholders at a highly attractive rate of exchange is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.

According to the Chapter 7 Strategic Focus, China's recent approach to acquisitions has been to focus on hard assets (e.g., mineral deposits or R&D facilities) instead of established branded products because a. China's initial acquisition activities in branded products was highly successful and it wanted to apply those successful techniques to hard assets which would create more value for Chinese firms. b. hard assets around the world had appreciated rapidly and China wanted to take advantage of that appreciation. c. China's currency had depreciated relative to currencies in developed countries making acquisition of hard assets in those countries cheaper. d. it did not always have the managerial capability to realize successful performance of branded products.

Acquisitions can become a time sink for top level managers for all the following reasons EXCEPT a. the integration process after acquisition requires managerial attention. b. they must prepare for acquisition negotiations. c. managers are involved in the search for viable acquisition candidates. d. only top managers can perform the required due diligence.

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

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

Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will be most likely to be secure if a. Ambrose's research is in a non-core activity. b. the acquisition has been financed by junk bonds. c. Ambrose is in a position to take a poison pill. d. Ambrose is a key employee in the firm's primary business.

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing. This purchase is a(an) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

Cross-border acquisitions are critical to U.S. firms competing internationally a. if they are to develop differentiated products for markets served. b. when market share growth is the focus. c. where consolidated operations are beneficial. d. if they wish to overcome entry barriers to international markets.

Cross-border acquisitions are primarily made to a. reshape the firm's competitive scope. b. reduce the cost of new product development. c. take advantage of higher education levels of labor in developed countries. d. overcome barriers to entry in another country.

Each of the following is a rationale for acquisitions EXCEPT a. achieving greater market power. b. overcoming significant barriers to entry. c. increasing speed of market entry. d. positioning the firm for a tactical competitive move.

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

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

In the chapter Strategic Focus, the weakness of corporate boards was exemplified by ___________________. a. significant pay reductions for many corporate CEOs b. the appointment by EasyJet of a new chairman of the board c. Borders' decision to increase the size of its board d. The firing by President Obama of the CEO of General Motors because the board had failed to act in previous years

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(an) a. merger. b. unrelated acquisition. c. horizontal acquisition. d. vertical acquisition.

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

One problem with becoming too large is that large firms a. tend to have less market power. b. have less potential for economies of scale. c. become attractive takeover targets. d. usually increase bureaucratic controls.

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT a. Pappelbon did not fully evaluate the target. b. Pappelbon overpaid. c. Pappelbon's due diligence was not fully effective. d. Pappelbon's management was overly focused on acquisitions.

Problems associated with acquisitions include all of the following EXCEPT a. Managers overly focused on acquisitions. b. Integration difficulties. c. Large or extraordinary debt. d. Excessive time spent on the due diligence process.

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

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

Shareholder value is a. the firm's free cash flow. b. the total revenue of the firm. c. determined by the size of the firm. d. reflected in the price of the stock.

The CEO of Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Implementing a director appraisal system. c. Electing an lead director. d. All of these choices would increase involvement.

The chapter Opening Case suggests that ___________ is (are) frequently blamed for high CEO pay during periods where corporate performance has been poor. a. poor hiring practices b. greedy CEOs c. lazy stockholders d. inadequate corporate governance

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

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

The ownership of major blocks of stock by institutional investors have resulted in all of the fol-lowing EXCEPT a. making CEOs more accountable for their performance. b. increasing the concentration of ownership of large U.S. firms. c. focusing attention on ineffective boards of directors. d. tying the compensation of CEOs to measurable financial criteria.

Transaction costs include all of the following EXCEPT a. charges from investment bankers who complete due diligence for the acquiring firm. b. the loss of key employees following the acquisition. c. managers' time spent evaluating target firms. d. managers' time spent planning the diversification strategy of the firm.

When a firm acquires its supplier, it is engaging in a(an) a. merger. b. unrelated acquisition. c. hostile takeover. d. vertical acquisition.

Which of the following is NOT an attribute of a successful acquisition? a. The acquiring firm has a large amount of financial slack. b. The acquired and acquiring firms have complementary assets and/or resources. c. Innovation and R&D investments continue as part of the firm's strategy. d. Investments in advertising and image building are made quickly.

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

Which of the following is NOT one of the primary reasons many pharmaceutical firms use acquisitions as exemplified by Teva's frendly acquisition of Cephalon? a. entering markets quickly. b. overcoming the high costs of internal product development. c. improving predictability of returns on investment. d. extending patent rights on developed pharmaceuticals.

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

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

_________ refers to a divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business. a. Downsizing b. Hostile takeovers c. Shakeouts d. Downscoping

___________ is often used when the acquiring firm paid too high a premium to acquire the target firm. a. Management buyout b. Leveraged buyout c. Downscoping d. Downsizing

A global corporate-level strategy emphasizes a. differentiated products. b. economies of scale. c. sensitivity to local product preferences. d. decentralizing control and limited monitoring

A ______ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both. a. corporate-level b. business-level c. national-level d. industry-level

A fundamental reason for a country's development of advanced and specialized factors of production is often its a. lack of basic resources. b. monetary wealth. c. small workforce. d. protective tariffs.

A global corporate-level strategy differs from a multidomestic corporate-level strategy in that in a global strategy, ______. a. competitive strategy is dictated by the home office. b. competitive strategy is decentralized and controlled by individual strategic business units. c. products are customized to meet the individual needs of each country. d. the firm sells in multiple countries

A large domestic market can provide the country's industries a chance at dominating the world market because a. they have been able to develop economies of scale at home. b. they have access to abundant and inexpensive factors of production. c. the related and supporting industries will have been developed. d. the nation's culture and educational system will be adapted to producing the labor force needed for the industry.

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) ______ strategy. a. vertical complementary b. horizontal complementary c. uncertainty reduction d. network

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n) a. equity strategic alliance. b. joint venture. c. nonequity strategic alliance. d. cooperative arrangement

All of the following are business-level cooperative strategic alliances EXCEPT a. synergistic strategic alliances. b. uncertainty reduction strategic alliances. c. complementary strategic alliances. d. competition response strategic alliances

All of the following complicate the implementation of an international diversification strategy EXCEPT a. widespread multilingualism. b. increased costs of coordination between business units. c. cultural diversity. d. logistical costs

Arkadelphia Polymers, Inc., earns 60 percent of its revenue from exports to Europe and Asia. The CEO of the company would be a. concerned if the value of the dollar strengthened. b. pleased if the value of the dollar strengthened. c. unconcerned about the fluctuation in the value of the dollar because the company is widely diversified geographically. d. likely to consider moving to international strategic alliances or acquisitions if the value of the dollar fell and remained low

Dynamic alliance networks work best in industries a. characterized by frequent product innovations and short product life cycles. b. that are mature and stable in nature. c. where the coordination of product and global diversity is critical. d. that are characterized by predictable market cycles and demand

Firms able to standardize the processes used to produce, sell, distribute, and service their products across country borders enhance their ability to a. learn how to continuously reduce costs while increase the value of their products. b. increase investment in research and development. c. access to a low-cost labor force in the host market. d. mitigate cultural differences

Firms with core competencies that can be exploited across international markets are able to a. achieve synergies and produce high-quality goods at lower costs. b. enter new markets more quickly. c. enhance their market image and brand loyalty among local consumers. d. meet local government requirements more quickly than their international competitors

In China, Starbucks is standardizing its operations while simultaneously decentralizing some decision-making responsibility to local levels to meet customers tastes. Starbucks is following the _______ international corporate-level strategy. a. transnational b. global c. differentiation d. multidomestic

In a cross-border alliance, the local partner is often a useful source of information about a. sources of capital. b. the strengths of the foreign firm's technology. c. market synergies. d. long-term planning

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's a. brand name. b. capital resources. c. access to a consolidated market. d. geographic locations

International corporate-level strategy focuses on a. the scope of operations through both product and geographic diversification. b. competition within each country. c. economies of scale. d. sophistication of monitoring and controlling systems.

Internationally diversified firms a. earn greater returns on their innovations through larger or more numerous markets. b. are more likely to produce below-average returns for investors in the long run. c. may need to decrease international activities when domestic profits are poor. d. are generally unable to achieve high levels of synergy because of differences in cultures

A multidomestic corporate-level strategy has ______ need for global integration and ______ need for local market responsiveness. a. low; low b. low; high c. high; low d. high; high

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage? a. factors of production b. demand conditions c. related and supporting industries d. firm strategy, structure, and rivalry

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT a. to enhance the compensation packages of top managers. b. to leverage core competencies in new markets. c. to operate within government restrictions in the local country. d. to escape limited domestic growth opportunities

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ______ management approach. a. cost minimization b. trust but verify c. opportunity maximization d. pragmatic realism

One of the primary reasons for failure of cross-border strategic alliances is a. the incompatibility of the partners. b. conflict between legal and business systems. c. security concerns and terrorism. d. high debt financing

Reduction of competition can be accomplished through all of the following EXCEPT a. predatory alliances. b. explicit collusion. c. tacit collusion. d. mutual forbearance

Terrorism creates an economic risk for firms, which a. reduces the amount of investment foreign companies will make in a country perceived to be terror-prone. b. is created by governmental bans on doing business with terrorist regimes. c. is offset by the above-average returns for firms that have learned how to operate in such an environment. d. is absorbed by firms that are highly geographically diversified and that operate in both secure and insecure locations

The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the ______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Opening Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures. a. cost minimization; opportunity maximization b. opportunity maximization; cost minimization c. cost maximization; opportunity minimization d. bureaucratic; organic

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) ______ alliance because it allows the firms to share resources and capabilities across multiple functions. a. synergistic b. opportunistic c. horizontal d. diversifying

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are a. engaging in tacit collusion. b. following uncertainty reducing strategies. c. monitoring business competitors for opportunistic behaviors. d. following a competitive response strategy

The two basic approaches to successfully manage cooperative strategic alliances involve ______ and ______. a. cost minimization; opportunity maximization b. monitoring systems; multiple management approaches c. contractual systems; financial systems d. equity approaches; nonequity approaches

The two types of complementary strategic alliances are a. vertical and horizontal. b. macro and micro. c. outsourcing and insourcing. d. network and complementary

U.S. cola companies entered the global market because of a. limited growth opportunities in their domestic market. b. lower labor costs in the emerging markets. c. economies of scale that offset research and development costs. d. an increase in the return on investment from their U.S. bottling plants.

Which of the following is NOT a disadvantage associated with exporting? a. potential loss of proprietary technologies b. high transportation costs c. loss of control over distribution activities d. tariffs imposed by local governments

A U.S. manufacturer of adaptive devices for persons with disabilities is considering expanding internationally. It is a fairly small company, but it is looking for growth opportunities. This company should primarily consider the option of a. licensing. b. exporting. c. a strategic alliance. d. a greenfield venture

A _______ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance. a. joint venture b. synergistic strategic alliance c. diversifying strategic alliance d. dynamic alliance network

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to a. get venture capital from Pet Resort. b. gain access to Pet Resort's tacit knowledge. c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta. d. join in a vertical complementary alliance with Pet Resort

A cooperative strategy a. is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. b. is a strategy in which firms work together to achieve a shared objective. c. is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. d. specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets

A nonequity strategic alliance exists when a. two firms join together to create a new company. b. two or more firms have a contractual relationship to share resources and capabilities. c. two partners in an alliance own unequal shares in the combined entity. d. the partners agree to sell bonds instead of stock in order to finance a new venture

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of ________ resulting from an alliance. a. explicit collusion b. economies of scale c. opportunistic behavior d. distribution opportunities

All of the following are international corporate-level strategies EXCEPT the ______ strategy. a. multidomestic b. universal c. global d. transnational

An international diversification strategy is one in which a firm a. expands into nearby markets. b. expands into a potentially large number of geographic locations and markets. c. expands into one or a few markets. d. acquires a firm in a foreign country.

Firms entering into synergistic strategic alliances expect to attain a. technological complexity. b. economies of scope. c. monopolistic market power. d. learning curve efficiencies

Firms in _______ markets cooperate to pool resources and gain market power. a. slow-cycle b. standard-cycle c. fast-cycle d. hyper-cycle

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT a. a host nation may forbid a merger or acquisition. b. opportunistic behaviors are less likely. c. cooperative strategies require fewer resources. d. cooperative strategies allow greater flexibility in diversifying the firm's portfolio

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a ______, which is effective at transferring ______. a. nonequity strategic alliance; explicit knowledge. b. joint venture; tacit knowledge. c. joint venture; explicit knowledge. d. equity strategic alliance; tacit knowledge

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the ______ in Porter's model. a. strategy, structure, and rivalry among firms b. related and supporting industries c. demand conditions d. factors of production

In free-market economies, ______ must decide how rivals can collaborate with their competitors without violating established regulations. a. the invisible hand b. the government c. consumers d. the business community

In general, cross-border alliances are more ________ and _______ than domestic alliances, especially in emerging markets. a. uncertainty reducing; diversifying b. complex; risky c. highly leveraged; tightly monitored d. flexible; trust-based

In the United States, cooperative strategies to reduce competition may result in ______ if they are explicit. a. increased tax liabilities b. litigation c. government takeover of the firms d. dissolution of the firm

Increasingly, customers worldwide are demanding emphasis on local requirements and companies are needing efficiency as global competition increases. This has triggered an increase in the number of firms using the ________ strategy. a. multidomestic b. transnational c. universal d. global

International strategy refers to a(n) ________ a. action plan pursued by American companies to compete against foreign companies operating in the United States. b. strategy through which the firm sells products in markets outside the firm's domestic market. c. political and economic action plan developed by businesses and governments to cope with global competition. d. strategy American firms use to dominate international markets.

Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross-border alliance, this partnership can be called a(n) a. nonequity strategic alliance. b. joint venture. c. horizontal complementary alliance. d. equity strategic alliance

Most firms enter international markets sequentially, introducing their ______ first. a. most innovative products b. largest and strongest lines of business c. most generic products, which will be more likely to generate universal product demand, d. products customized to the region

Moving into international markets is a particularly attractive strategy to firms whose domestic markets a. demand a differentiation strategy for success. b. are limited in opportunities for growth. c. have developed unfriendly business attitudes toward the industry. d. have too much regulation

Mutual forbearance is a. illegal in the United States. b. a type of competition-reducing strategy. c. a variety of risk-sharing by firms in highly fragmented industries. d. exercised when alliance partners refrain from opportunistic behaviors

Of the various business-level strategic alliances, ______ alliances have the most probability of creating sustainable competitive advantage, and ______ have the lowest. a. horizontal complementary; vertical complementary b. vertical complementary; competition reducing c. competition reducing; horizontal complementary d. uncertainty reducing; competition reducing

Skaredykat Inc. is considering initial expansion beyond its home market. The firm has decided not to enter markets that differ greatly from its home market, instead expanding within the twelve-nation region that includes its home country. a. The firm is not engaging in international trade. b. The firm is using a regional approach to international expansion. c. The firm will not be able understand the cultures, legal, and social norms of this market. d. Skaredykat is a scaredy-cat

Stable alliance networks will most often a. be used to enhance a firm's internal operations. b. appear in mature industries where demand is relatively constant and predictable. c. emerge in industries with short product life cycles. d. emerge in declining industries as a way to increase process innovations

The Renault Nissan alliance discussed in the Opening Case is an example of a _______ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. a. joint venture b. synergistic alliance c. horizontal complementary alliance d. dynamic alliance network

The increased pressures for global integration of operations have been driven mostly by ______. a. new low-cost entrants. b. increasing demand for similar products. c. increased levels of joint ventures. d. the rise of governmental regulation.

The positive results associated with increasing international diversification have been shown to a. continue as the level of international diversification increases. b. level off and become negative as diversification increases past some point. c. become negative quickly. d. be centered in only one or two industries

To increase the likelihood of success between partners assuming that trust exists, ______ approach(es) should be used to manage cooperative strategies. a. the cost minimization b. the opportunity maximization c. both the cost minimization and opportunity maximization d. None of the these options are correct.

When a firm INITIALLY becomes internationally diversified, its returns a. remain stable. b. decrease. c. become more variable. d. increase

Which of the following statements is TRUE? a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies. b. As many as 50 percent of cooperative strategies fail. c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources. d. Problems with international cooperative strategies usually concern financial-system differences between the partners

Which type of strategic alliance is best at passing tacit knowledge between firms? a. primary cooperative strategic alliances b. joint ventures c. equity strategic alliances d. nonequity strategic alliances

Within the Renault Nissan alliance (Chapter 9 Opening Case), both Renault and Nissan have each formed ______ strategic alliances at the business-unit level with other companies. a. vertical complementary b. horizontal complementary c. synergistic d. diversifying

______ strategic alliances have stronger focus on value creation than do ______ alliances. a. competition reducing; complementary b. complementary; competition reducing c. uncertainty reducing; complementary d. collusive; uncertainty reducing

A firm may narrow its focus to a specific region of the world a. because that market is most different from its domestic market and so represents an unexploited "greenfield opportunity" for its products. b. in order to obtain greater economies of scale. c. so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets. d. to take advantage of limited protections of intellectual property so that it can manufacture innovative products without restrictions

A licensing agreement a. results in two firms agreeing to share the risks and the resources of a new venture. b. is best way to protect proprietary technology from future competitors. c. allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host country. d. can be greatly impacted by currency exchange rate fluctuations

A multidomestic corporate-level strategy is one in which a. a corporation chooses not to compete internationally but where there are a number of international competitors in the firm's local marketplace. b. the firm produces a standardized product, but markets it differently in each country in which it competes. c. the firm customizes the product for each country in which it competes. d. the firm competes in a number of countries, but it is centrally coordinated by the home office.

A transnational corporate-level strategy seeks to achieve a. customization for the local market. b. economies of scale and centralized strategic control. c. global efficiency and local responsiveness. d. standardization of products across countries

All of the following are correct about what managers should know about firms based in a country with a national competitive advantage EXCEPT a. success is not guaranteed as the firm implements its chosen international business-level strategy. b. the actual strategic choices made are most compelling reasons for success or failure. c. success is guaranteed as the firm implements its chosen international business-level strategy. d. the determinants of national competitive advantage provide a foundation for a firm's competitive advantages

Associations such as the European Union, Organization of American States, and the North American Free Trade Association, encourage _________. a. global strategies. b. domestication. c. regional strategies. d. nationalization.

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture? a. BPM will own more than 50 percent of the venture and a new company will be formed. b. J3 will own more than 50 percent of the venture and a new company will be formed. c. BPM and J3 will both own 50 percent of the venture and a new company will be formed. d. BPM and J3 will both own 50 percent of the venture but no new company will be formed

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this? a. joint venture b. equity strategic alliance c. nonequity strategic alliance d. competition reduction alliance

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will a. insist on excessively close monitoring of DDD's actions. b. gain access to DDD's core competencies and use them to become a future competitor. c. not fully share its intangible resources. d. not make equivalent investments to the alliance as does DDD

Disney suffered lawsuits in France at Disneyland Paris as a result of the lack of fit between its transferred personnel policies and the French employees charged to enact them. This is an example of ______. a. the effects of regionalization. b. the risks of a multidomestic strategy. c. the liability of foreignness. d. the effect of demand conditions

Firms in a standard-cycle market may form alliances in order to a. take advantage of opportunities in emerging market countries. b. more quickly distribute new products. c. capture economies of scale. d. share risky R&D investments

If conflict in a strategic alliance or joint venture is not manageable, a(n) ______ may be a better option. a. licensing strategy b. exporting strategy c. acquisition d. new wholly owned subsidiary

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ______ is the preferred entry mode. a. exporting b. strategic alliance c. a joint venture or wholly owned subsidiary d. licensing

In a(n) _______, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. a. equality-based strategic alliance b. non-equity strategic alliance c. joint venture d. equity strategic alliance

In addition to the four basic dimensions of Porter's "diamond" model, ______ may also contribute to the success or failure of firms. a. national work ethic b. educational requirements c. government policy d. national pride

In managing cooperative strategies, research indicates that ______ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage. a. extensive capitalization b. stability c. trustworthiness d. Internet competency

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n) a. joint venture. b. network strategy. c. equity strategic alliance. d. nonequity strategic alliance

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that a. firms will have to accept greater risks. b. trust will be eroded. c. spontaneous opportunities are minimized. d. power coalitions will still develop

Raymond Vernon states that the classic rationale for international diversification is to ______. a. pre-emptively dominate world markets before foreign companies can establish dominance. b. avoid domestic governmental regulation. c. extend the product's life cycle. d. avoid international governmental regulation.

Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type lighting in non-traditional style homes. Smith has invested 40 percent and Revelation has invested 60 percent into the new operation. This is an example of a(n) a. joint venture. b. nonequity alliance. c. horizontal complementary strategic alliance. d. vertical complementary strategic alliance

The Renault Nissan alliance (Chapter 9 Opening Case) is an example of a scope by sharing resources and capabilities. a. diversifying strategic alliance b. vertical complementary alliance c. synergistic strategic alliance d. nonequity-based horizontal complementary alliance

The choices that a firm has for entering the international market include all of the following EXCEPT a. exporting. b. licensing. c. leasing. d. acquisition.

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n) a. collusive tactic. b. merger. c. cross-border strategic alliance. d. international acquisition

The decision of what entry mode to use is primarily based on all of the following factors EXCEPT a. the industry's competitive conditions. b. the country's situation and government policies. c. the worldwide economic situation. d. the firm's unique set of resources, capabilities, and core competencies

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in a. excessive cooperation. b. joint ventures. c. tacit collusion. d. horizontal strategic alliances

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT a. factors of production. b. demand conditions. c. political and economic institutions. d. related and supporting industries.

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT a. labor. b. capital. c. infrastructure. d. technology

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to a. learn about the brand and technology from the franchisee. b. test the franchisee for potential future acquisition. c. transfer to the franchisee knowledge and skills needed to compete at the local level. d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter ________ markets in Europe and Asia. The steel industry is an example of a typically use alliances to gain market access. a. fast-cycle b. standard-cycle c. slow-cycle d. intermediate-cycle

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of a. increasing rejection of American culture across much of the world. b. the sophistication of the international consumer because of the Internet. c. consumer needs, political and legal structures, and social norms vary by country. d. the increasing loss of economies of scale

Under industry structural analysis (Chapter 2), ____ rivalry is viewed as detrimental to profitability. Under the ______ model of national advantage (Chapter 8), rivalry is viewed as _______ as it results in competition and surviving firms are able to compete against global rivals. a. low; low; beneficial b. low; low; detrimental c. high; high; beneficial d. high; high; detrimental

Which of the following is NOT a risk for firms engaged in cooperative strategies? a. misrepresentation of a partner's competencies b. partner acts opportunistically c. insufficient variation in firms' core competencies d. failure of partners to make complementary resources available to the partnership

Which of the following is NOT an incentive for firms to become multinational? a. to gain access to consumers in emerging markets b. to gain easier access to raw materials c. to avoid high domestic taxation on corporate income d. opportunities to integrate operations on a global scale

Which of the following is an advantage associated with greenfield ventures? a. governmental support and subsidies in the host country b. the lower cost of this type of venture c. the level of control over the firm's operations d. the lower level of risks involved

Working in multiple international markets can provide firms with ______ perhaps even in terms of ______. a. location advantages; larger markets. b. research and development activities; larger markets. c. new learning opportunities; research and development activities. d. economies of scale and learning; larger markets.

________ is the set of costs associated with unfamiliar operating environments; economic, administrative and cultural differences; and the challenges of coordination over distances. a. Transnational risk b. Regionalization c. Liability of foreignness d. International risk

?A nation's competitiveness depends on the capacity of its industries to ______ and thereby maintain its competitive advantage. a. diversify internationally b. have access to critical resources c. protect its proprietary capabilities d. innovate

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ______ advantage. a. economic b. collusive c. alliance d. relational

A global corporate-level strategy assumes a. efficiency and customization can be achieved simultaneously. b. a rise in income levels across the world. c. increasing levels of cultural differences among nations. d. more standardization of products across country markets

A global strategy a. is easy to manage because of common operating decisions across borders. b. achieves efficient operations without sharing resources across country boundaries. c. increases risk because decision making is centralized at the home office. d. lacks responsiveness to local markets

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with a. low-cost labor production facilities in another country. b. similar products who could help the firm establish economies of scale. c. access to franchises in new markets. d. excess resources for investing

A strategy in which firms work together to achieve a shared objective is a a. functional-level strategy. b. business-level strategy. c. corporate-level strategy. d. cooperative strategy

All of the following are reasons why firms use international strategic alliances EXCEPT a. sharing of risks and resources. b. alliances facilitate the development of new capabilities. c. learning new competencies particularly those related to technology. d. strategic alliances are easy to manage

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breech of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here? a. having a true perception of the partner's trustworthiness b. failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy c. the partner misrepresenting competencies it can bring to the partnership d. opportunistic behavior

Bunyan Heavy Equipment, a U.S. firm, is investigating expanding into Russia using a greenfield venture. The committee researching this project has delivered a negative report. The MAIN concern of the committee is probably a. loss of intellectual property due to Russian piracy. b. the fluctuation in the value of the ruble. c. the numerous and conflicting legal authorities in Russia. d. Russia's recent actions to gain state control of private firms' assets

Effectively implementing the ______ international corporate-level strategy often produces higher performance than does implementing either the _______ or _________ strategies. a. multidomestic; global; transnational b. global; multidomestic; transnational c. cost leadership; differentation; focus d. transnational; multidomestic; global

Firms participate in strategic alliances for all the following reasons EXCEPT to a. create value that they could not develop by acting independently. b. enter competitive markets more quickly. c. gain access to resources. d. retain tight control over intangible core competencies

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should a. avoid future cooperative alliances because they lack the skills needed to manage them successfully. b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent opportunistic behavior by the alliance partner. c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance partner in the future. d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT: a. Has AsiaFoods accurately represented its competencies? b. Will AsiaFoods make alliance-specific investments? c. Can Greentech expect opportunistic behavior from AsiaFoods? d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is correct about this relationship? a. This is a joint venture because in licensing arrangements, a new company is created. b. This is an equity strategic alliance because licensing does not involve the creation of a new company, but does involve an equity commitment. c. The firms risk charges of collusion because most licensing relationships between competitors involve explicit collusion. d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities

In Porter's model, a specialized factor of production would include a. abundant natural resources. b. a large workforce. c. an extensive highway transportation system. d. workers with advanced engineering skills

In Porter's model, if a country has both ______ and ______ production factors, it is likely to serve an industry well by spawning strong home-country competitors that can also be successful global competitors. a. basic; advanced b. advanced; generalized c. basic; generalized d. advanced; specialized

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy? a. the loss of unexpected opportunities b. the cost of extensive monitoring mechanisms c. the costs of writing detailed contracts d. the prevention of opportunistic behavior by the partner(s)

In some countries, the only legal way for foreign firms to invest in the country is through a. acquisitions. b. mergers. c. greenfield ventures. d. strategic alliance with a local firm

McDonald's, Hilton International, and Subway all heavily rely on the ______ strategy. a. transnational b. network cooperative c. cross-border alliances d. franchising cooperative

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement? a. Meredith will own a majority equity stake in the new venture. b. JaZz will own a majority equity stake in the new venture. c. Meredith or JaZz will own an equal equity stake in the new venture. d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

The alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a ________ to speed up development of new products and services. a. slow-cycle market b. medium-cycle market c. standard-cycle market d. fast-cycle market

The benefits of expanding into international markets include each of the following opportunities EXCEPT a. increasing the size of the firm's potential markets. b. economies of scale and learning. c. location advantages. d. favorable tax concessions and economic incentives by home-country governments.

The global airline industry is one in which a. national political interests prevent airlines from making international alliances. b. the fast-cycle nature of the industry mandates heavy use of alliances. c. most alliances tend to be vertical complementary. d. alliance versus alliance competition dominates firm versus firm competition

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT a. low-cost labor. b. access to critical supplies. c. access to customers. d. evasion of host country governmental regulations

The means of entry into international markets that offers the greatest control is a. licensing. b. acquisitions. c. joint ventures. d. greenfield ventures

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT a. laws. b. culture. c. trade policies. d. technology

The problems associated with exporting include a. merging corporate cultures. b. a partner's incompatibility. c. difficulty in negotiating relationships. d. high transportation costs and the expense of tariffs

The risks of being accused of collusion are MOST likely under what type of alliance? a. equity-based vertical complementary alliance b. equity-based horizontal complementary alliance c. nonequity-based vertical complementary alliance d. nonequity-based horizontal complementary alliance

The transnational strategy is becoming increasingly necessary to compete in international markets for all the following reasons EXCEPT a. the growing number of competitors heightens the requirements to keep costs down. b. the desire for specialized products to meet consumers' needs. c. differences in culture and institutional environments also require firms to adapt their products and approaches to local environments. d. it is easy to use.

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are _________ and _________. a. culture; geographic scope. b. cost; quality. c. regionalization; globalization. d. liability of foreignness; regionalization.

The use of strategic alliances a. is unlikely to yield success if partnering firms are headquartered in the same country. b. may be too restrictive to facilitate entry into new markets. c. usually increases the investment necessary to introduce new products. d. is more frequent than other types of cooperative strategies

When using cooperative strategies, firms most frequently develop strategic alliances that a. enhance the firm's reputation in the marketplace. b. are long-lived. c. will reduce the firm's political risk. d. create a competitive advantage

Which of the following is NOT a disadvantage of international acquisitions? a. They are very expensive and often require debt financing. b. The acquiring firm has to deal with the regulatory requirements of a host country. c. Merging the acquired and acquiring firm is difficult. d. It is the slowest way to enter a new market

Which of the following is NOT a factor pressuring companies for local responsiveness? a. differences in employment laws b. customization due to cultural differences c. government pressure for firms to use local sources for procurement d. availability of low labor costs

Which of the following is NOT a typical disadvantage of licensing? a. little control over the marketing of the products b. licensees may develop a competitive product after the license expires c. lower potential returns than the use of exporting or strategic alliances d. incompatibility of the licensing partners

Which of the following statements is FALSE? a. Franchising is most appropriate in fragmented industries. b. Franchising provides corporate growth with less risk than do mergers and acquisitions. c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. d. Franchising agreements require more trust between firms than do other cooperative strategies

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model? a. Japanese cameras and copiers b. Italian leather-processing and shoes c. U.S. computers and software d. highway systems and the supply of debt capital

Why are alliances in the airline industry unstable? a. Unstable industries make for unstable alliances. b. The potential for firms to take opportunistic actions is too widespread. c. The industry is declining and profits are not sufficient to divide among alliance partners. d. The alliances require cooperation among firms that must also compete with one another

________ are LEAST likely to involve potential or current competitors. a. Mutual forbearance strategies b. Tacit collusion strategies c. Horizontal complementary strategic alliances d. Vertical complementary strategic alliances

Exam 2

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