Exam 3 Policy

Boston Consulting Group (BCG) growth-share matrix

A corporate planning tool in which the corporation is viewed as a portfolio of business units, which are represented graphically along relative market share (horizontal axis) and speed of market growth (vertical axis). SBUs are plotted into four categories (dog, cash cow, star, and question mark), each of which warrants a different investment strategy.

real-options perspective

Approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time

inside directors

Board members who are generally part of the company's senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources.

factor

organic organization

Characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.

Which of the following best explains why Disney showed superior post-merger

Disney managed its new subsidiaries more like alliances rather than attempting full integration.

output controls

Mechanisms in a strategic control-and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

multidivisional structure (M-form)

Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility.

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

Promised synergies never take place.

board of directors

The centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders

organizational culture

The collectively shared values and norms of an organization's members; a key building block of organizational design.

Globalization

The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.

Which of the following is true of acquisitions?

They can be friendly or hostile.

specialized assets

Unique assets with high opportunity cost: They have significantly more value in their intended use than in their next best use. They come in three types: site specificity, physical asset specificity, and human-asset specificity.

About 20 years ago, Xx-zobam, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market.Eventually, the backpack market reached the maturity stage and slowed down. However ,by this time, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Xx-zobam was a star that developed into a cash cow.

Multinational Enterprise (MNE)

a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country?

a firm that extracts and exports iron ore

Foreign Direct Investment (FDI)

a firm's investments in value chain activities abroad

Inertia

a firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure

managerial hubris

a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary

organizational structure

a key to determining how the work efforts of individuals and teams are orchestrated and how resources are distributed

Franchising

a long-term contract in which a franchisor grants a franchisee the right to use the franchisor's trademark and business processes to offer goods and services that carry the franchisor's brand name

Agency Theory

a theory that views the firm as a nexus of legal contracts

hostile takeover

acquisition in which the target company does not wish to be acquired

Domenick is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Domenick based on his stated credentials without verifying them. Two days into the job, Domenick's team lead realizes that Domenick does not know much of what he claimed to know during the interview. This scenario best exemplifies

adverse selection

Diversification

an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes

formalization

an organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures

location economies

benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be

outside directors

board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals

Bob is the strategic business unit (SBU) CEO in charge of manufacturing cufflinks for men's clothing. While the market he competes in is low growth, Bob's SBU's earnings and cash flow are both ranked at high and stable. When examining Bob's SBU through the Boston Consulting Group (BCG) matrix lens, we can conclude that his SBU would be classified as a

cash cow

mechanistic organization

characterized by a high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making

external transaction costs

costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract

Hot Potatoes, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Hot Potatoes stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

franchising

Paul runs an organization that implements a cost-leadership strategy. This business-level strategy supports both a ____ and _____ structure

functional; mechanistic

A greater cultural distance between two trading countries

increases the liability of foreignness.

explicit knowledge

knowledge that can be codified; concerns knowing about a process or product

tacit knowledge

knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task

Walmart sells live animals (snakes, eels, toads, etc.) for food preparation inChina whereas IKEA sells kimchi refrigerators and metal chopsticks in South Korea.These examples illustrate the need for ________ which often requires the competing firm to tailor their products and services to meet the needs of the market in which they are competing.

local responsiveness

Duke & Duke Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Duke & Duke Autos Inc. is reaping the benefits of

location economies

simple structure

organizational structure in which the founders tend to make all the important strategic decisions as well as run the day-to-day operations

functional structure

organizational structure that groups employees into distinct functional areas based on domain expertise

Global Strategy

part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

non-equity alliance

partnership based on contracts between firms

equity alliance

partnership in which at least one partner takes partial ownership in the other

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

Which of the following is an unintended side effect of a high degree of specialization in an organization?

reduced employee satisfaction due to repetition of tasks

Toyota's global success in the 1990s and early 2000s was based to a large extension a network of world-class suppliers in Japan. This tightly knit network allowed for fast-two knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of

related and supporting industries/complementors.

32. Vanessa just graduated from law school and wants to open her own law firm. Vanessa should probably adopt a(n) _______ structure for the firm.

simple

principle agent problem

situation in which an agent performing activities on behalf of a principle pursues his or her own interests

learning races

situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary

global-standardization strategy

strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost

multidomestic strategy

strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies

Transnational Strategy

strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable)

International Strategy

strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets

merger

the joining of two independent companies to form a combined entity

strategic alliances

voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services

Ethics is

A) not synonymous with law

liability of foreignness

Additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances

acquisition

the purchase or takeover of one company by another; can be friendly or unfriendly

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech start-up Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates

the real-options perspective