Fair Value
Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is a(n) ________ for Anderssen and a(n) ________ for EEC. A. COO; CEO B. inside director; outside director C. outside director; inside director D. CEO; COO
B
Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital? A. software B. brand name C. a lease for a new building D. a new CEO
B
Which of the following corresponds to the use of tacit knowledge? A. Chandra reads a demographic report about minorities in Texas. B. Igor assembles a motorcycle from memory C. Miguel studies a fact sheet about France. D. Paulette uses a scientific article to defend her thesis about global warming.
B
The translation of strategy into action primarily takes place in a firm's
Business Model
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A. differentiator is able to significantly reduce the value gap. B. source of a competitor's differential appeal is tangible rather than intangible. C. differentiator is able to create a significant difference between perceived value and current market prices. D. new product features added raise costs but not the perceived value in the minds of consumers.
C
Adverse selection in a public stock company occurs when A. information asymmetry increases the likelihood of selecting inferior alternatives. B. an agent manipulates information to benefit stockholders. C. a principal is not aware of the context from which information from an agent is derived. D. a firm's work tasks, incentives, and employment contracts minimize opportunism by agents.
A
Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A. architectural innovation. B. disruptive innovation. C. incremental innovation. D. radical innovation.
A
FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through A. strategic positioning. B. strategic liquidation. C. strategic profiling. D. strategic parity.
A
Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company, Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take? A. Turn down the acquisition offer and prepare to resist a hostile takeover. B. Attempt a friendly merger and use managerial hubris to improve results at Maximum. C. Do nothing; the two companies cannot combine without Samm Hardware's explicit consent. D. Welcome the acquisition and use knowledge transfer to impart Sam Hardware's management practices.
A
It is April 2018 and Mark is a novice investor who wants to decide between purchasing shares in EagleCorp or Myna Bird Inc. In fiscal year 2017, EagleCorp's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Myna Bird Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell Mark? A. EagleCorp is more likely to create value while Myna Bird Inc. is more likely to destroy value. B. Myna Bird Inc. is more likely to create value while EagleCorp is more likely to destroy value. C. Neither Myna Bird Inc. nor EagleCorp are likely to create value. D. Both Myna Bird Inc. and EagleCorp are likely to create value.
A
The informational advantage that agents possess over principals is often based on the fact that A. insiders are the first to learn about important developments before the information is released to the public. B. agents are legally permitted to freely trade the information in exchange for benefits, unlike principals. C. public stock companies are characterized by information symmetry. D. the information is extremely secure and protected from exposure to anyone outside the company.
A
The key objective for firms during the growth phase is to A. stake out a strong strategic position not easily imitated by rivals.. B. pursue a harvest strategy. C. reduce their network effects. D. invest as many resources as possible in product innovations.
A
The most important yet least visible element of organizational culture is A. values. B. artifacts. C. laws. D. norms.
A
Using the Boston Consulting Group growth-share matrix, the managers of Xylicon International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results? A. Increase investment in the personal health monitoring unit to encourage future growth. B. Seek to lower costs in the personal health monitoring unit to increase market share. C. Immediately divest from the personal health monitoring industry. D. Harvest as much cash flow as possible before shutting the business down.
A
Which of the following scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Rigoletto Inc.? A. The owner of another company buys all the outstanding shares of Rigoletto in order to take it private. B. A private equity firm, Stormcloud Inc., buys a large number of shares of Rigoletto in order to publicly trade it under a new name. C. Rigoletto sells all its shares and declares bankruptcy. D. Rigoletto buys back a large amount of its own shares from the stock market.
A
When a firm diversifies into different product lines and geographies, a ________ structure is preferred. A. multidivisional B. network C. functional D. simple
A, or matrix
A software firm is interested in acquiring an app development company that is small but highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate? A. Because most acquisitions are profitable, there is little to worry about in this scenario. B. The software firm may overpay for the app developer, poorly serving the software firm's shareholders. C. A rival software firm may imitate this approach by acquiring a similar app developer. D. The software firm may underpay for the app developer, cheating the app developer's shareholders of profit.
B
When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event. A. extinction B. miracle C. black swan D. wild card
C
Which of the following is a common drawback of a non-equity alliance? A. difficulty terminating the contract B. lack of flexibility for the partners C. lack of trust between partners D.difficulty initiating the contract
C
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A. Each firm would be catering to a different customer segment. B. No firm would face direct competition from others in the industry; hence, profit potential would be high. C. The firms would eventually have no resources to invest in product and process improvements. D. Each firm would be in a better position to gain a competitive advantage.
C
A long-term strategic decision that is both difficult and costly to reverse.
Credible Commitment
Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A. differentiation B. niche marketing C. product diversification D. cost-leadership
D
Due to several black swan events in the past, the A. nations around the globe have explicitly appreciated and accepted capitalism as an economic system. B. need for corporate governance and transparency has decreased within various industries. C. shareholders of public companies have become more confident in investing their resources in businesses. D. implicit trust relationship between the corporate world and society at large has deteriorated.
D
During an AFI planning session, the managers of the Fukuhara Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? A. corporate governance B. philanthropic strategy C. business ethics D. organizational design
D
Euan manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Euan's reaction be? A. If the industry barriers to entry are high, he doesn't need to do anything. B. If the industry barriers to entry are low, he doesn't need to do anything. C. He should consult lawyers about the possibility of suing for copyright infringement. D. He needs to find out if his company as well as other companies can provide the complements.
D
How does a sustainable strategy typically help a firm? A. It reduces the need for corporate social responsibility within the firm. B. It helps the firm focus solely on its financial goals. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.
D
The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage. A. Sarbanes-Oxley Act B. stakeholder impact analysis C. Ansoff's growth strategy matrix D. AFI strategy framework
D
Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? A. Maintain prices but replace all the expert employees with less-skilled workers to control costs. B. Lower prices but continue employing high-paid expert gardeners. C. Offer similar services as competitors but raise prices to increase profits. D. Narrow the scope of competition and focus on unique features such as the use of organic materials.
D
Which of following practices of a firm satisfies its ethical responsibilities? A. using advertising and other forms of promotion to endorse luxurious lifestyles B. outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. using plastic as the packaging material though it is harmful to the environment, yet legal D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns
D
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it A. cleaned better than other cleaners and used easy-to-obtain ingredients. B. cleaned as well as other cleaners and could be produced more efficiently. C. cleaned better than other cleaners and did not cost more to produce. D. cleaned as well as other cleaners and used organic ingredients.
D
________, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A. Dividend yield B. Earnings per share C. Receivables turnover D. Total return to shareholders
D
As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? A. stockpile of supplies B. new production facilities C. enthusiastic company culture D. large cash holdings
Enthusiastic Company Culture
During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?
Firm effects because you have the most impact on it
Tacit Knowledge
Knowledge contained in people's heads, knowing how to do something, found through actively participating and trying something out
Weak ties between partners, which can result in a lack of trust and commitment.
Non-equity alliance
A payroll company in the nation of Antono is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion
One that used to have a colonizer or colonized relationship with Antono
Which of the following accurately describes an organic organization?
Organic organizations often are flexible and foster fast decision making and high employee motivation.
Colon colonizer relationships have __________ impact on bilateral trade between countries
Positive
Polygon sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Polygon implementing? subscription-based razor-razor-blade pay-as-you-go direct sales
Razor-Razor-Blade
Situations in which different social and business systems interact with one another. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach. Therefore, Kristin's Cosmetics attempt to imitate how Monica's Makeup
Social Complexity
is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.
Stakeholder Strategy
A way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution.
Taper Integration
The CEO of Mabel Automobiles was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?
Upper Echeclons
a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives.
Upper Echelons Theory
What it means to do it all in house?
Vertical Integration
joint venture
an agreement between two or more companies to share a business project
Initial investment is usually _______________ while marginal cost is ____________
high, low
The administrative and political distance between two trading countries decreases when
there is a well functioning capital market in the host country
Multinational Enterprise (MNE) like Harley Daavidson, Rolex, and Starbucks are said to be following an international strategy because
they offer the same products and services in all of their stores
GameGo is a publicly traded manufacturer of home electronics. Based on what you have read, which of these actions would be wisest for GameGo's board of directors to take to be sure that the company's new CEO is as motivated as possible? A. Encourage her to emulate Warren Buffett and to take a lower salary than she might command elsewhere. B. Link the CEO's pay to her performance, but avoid high-powered incentives that may cause reckless behavior. C. Encourage the CEO to take all of her compensations in stock options, which will motivate her to keep the stock price high. D. Offer the largest bonus possible to prevent the CEO from leaving to go a rival firm.
B
In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A. redeploying and recombining existing core competencies to compete in markets of the future. B. building new core competencies to create and compete in markets of the future. C. leveraging existing core competencies to improve current market position. D. building new core competencies to achieve vertical integration.
B
Mona sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Mona's business? A. a firm that relies on high output controls to tap into extrinsic motivation B. a firm that relies on high output controls to tap into intrinsic motivation C. a firm that relies on high input controls to tap into extrinsic motivation D. a firm that relies on high input controls to tap into intrinsic motivation
B
Phoenix Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results? A. Introduce a budget line of guitars to diversify the firm's offerings. B. Pursue taper integration. C. Abandon the idea of vertical integration entirely. D. Invest in vertical integration despite the cost of producing pickups.
B
What must a cost-leadership strategy accomplish to be successful? A. It must reduce the firm's cost below that of its competitors while offering superior value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must increase the firm's cost above that of its competitors while offering adequate value.
B
Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. B. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. C. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm. D. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup.
B
Which of the following global strategies best matches with a multidivisional structure? A. transnational B. multidomestic C. international D. global-standardization
B
Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? A. The bargaining power of buyers in the travel industry has decreased. B. The travel industry changed from a consolidated structure to a fragmented one. C. The pricing power of the incumbent firms in the travel industry has increased. D. The structure of the travel industry changed from monopolistic competition to an oligopolistic one.
B
Greenfield Operation
Building factories and offices from scratch (on a proverbial piece of "green field" formerly used for agricultural purposes).
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is A. superior customer service. B. economies of scale. C. low-cost input factors. C. availability of complements.
C
Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should A. continue to outsource production. B. diversify its activities. C. vertically integrate. D. exit the laptop industry.
C
HealthTech wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, HealthTech invested $100 million in the project. This investment made by HealthTech will result in a A. corrective action. B. parent-subsidiary relationship. C. credible commitment. D. cartel.
C
How has Kraft Foods benefited from its hostile takeover of Cadbury PLC? A. It has opened a market that is growing slowly but has high profit margins. B. It gained a monopoly in the chocolate-manufacturing industry. C. It has access to convenience stores and a new distribution channel. D. Its main strategic focus is now on the domestic market.
C
In the context of industrial growth, which of the following statements is true of standards? A. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. Standards can emerge bottom-up through competition in the marketplace, or be imposed top-down by government or other standard-setting agencies. D. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers.
C
Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be A. high. B. moderate. C. low. D. unpredictable.
C
Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming. B. Netflix moved from online streaming to online DVD rentals via the Internet. C. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. D. Netflix moved from content development to upgrading its data analytics to provide faster online streaming.
C
Facing stiff competition in the e-reader market, Sumac Industries wants to protect its competitive advantage by increasing the perceived value of its reader. Sumac's best strategy to accomplish this would be to A. increase the cost of production to add innovative new features. B. try to imitate some of the features found in competing products. C. lower the retail price of its e-reader to attract new customers. D. highlight the number of celebrities who use Sumac e-readers.
D
Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A. oligopoly B. monopolistic competition C. perfect competition D. monopoly
D
BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a
Stakeholder Strategy
