Final Exam Review 10-12

John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies A. the strong relationship between executive compensation and company performance. B. the public's perception of a company's stock value based on executive compensation figures. C. the avoidance of control mechanisms to guide performance. D. the inversely proportional relationship between CEO compensation and the pay of the average employee.

A. the strong relationship between executive compensation and company performance.

Which of the following positions is an example of an inside director for a firm? A. a senior consultant who is not an employee B. a chief financial officer C. a board member who is not an employee D. a middle manager

B. a chief financial officer

The day-to-day operations of a publicly traded company are conducted by A. people who own the company, such as shareholders. B. its managers and lower-level employees. C. people who finance the company, such as investors. D. the CEO and the board of directors.

B. its managers and lower-level employees.

Who appoints the board of directors in a public stock company? A. auditors B. shareholders C. employees D. CEOs

B. shareholders

_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. A. Corporate social responsibility B. Stakeholder impact analysis C. Corporate governance D. Shareholder capitalism

C. Corporate governance

_____ organizations are characterized by a high degree of specialization and formalization, and tall hierarchies that rely on centralized decision making. A. Organic B. Virtual C. Mechanistic D. Flat

C. Mechanistic

Which of the following do not serve as additional external-governance mechanisms? A. auditors B. government regulators C. board of directors D. industry analysts

C. board of directors

Which of the following is an important external corporate-governance mechanism? A. shareholder capitalism B. board of directors C. market for corporate control D. executive compensation

C. market for corporate control

A firm's _____ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. A. norm B. culture C. structure D. control

C. structure

Which of the following shows founder imprinting? A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades. B. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture changes after a few years. C. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes despite resistance from some employees. D. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes after it is sold again in five years.

A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades.

Why must managers use a mechanistic structure to implement a cost-leadership strategy? A. A mechanistic structure offers a centralized structure with well-defined lines of authority. B. A mechanistic structure allows for a lower degree of specialization. C. A mechanistic structure offers continuous innovation and flexibility as well as creativity. D. A mechanistic structure allows for the CEO to delegate tasks.

A. A mechanistic structure offers a centralized structure with well-defined lines of authority.

Which of the following best defines duality in a board of directors? A. A person holds both the role of CEO and chairperson of the board. B. A person holds both the role of inside director and outside director of the board. C. A person holds both the role of director and shareholder of the company. D. A person holds the role of CEO on the boards of two companies.

A. A person holds both the role of CEO and chairperson of the board.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A. Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement. B. GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy. C. Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. D. Goldman Sachs was party to the Abacus deal despite knowing its shortcomings.

A. Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.

Which of the following provides an example of a common drawback of a functional strategy? A. Bert had a difficult time communicating efficiently with the manager of another department. B. Marietta was surprised about the inflexibility of her firm when it rejected her marketing plan. C. Juan's manager dismissed his idea because it was too innovative. D. Mary did not accept the position with the firm because it has an ineffective cost-leadership strategy.

A. Bert had a difficult time communicating efficiently with the manager of another department.

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Vijay most likely to agree? A. Businesses can use their resources to create profit as long as they do so within the rules of the game. B. Firms should not go beyond their economic responsibility to increase profits. C. Firms should define value creation more narrowly in terms of financial performance. D. Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.

A. Businesses can use their resources to create profit as long as they do so within the rules of the game.

Which of the following is true of business ethics? A. Certain notions such as fairness, honesty, and reciprocity are universal norms. B. Business ethics is an agreed-upon code of conduct in business, based on laws. C. The perception of what is ethical and what is not is similar across different cultures. D. Business ethics needs to be codified into law in order to be followed.

A. Certain notions such as fairness, honesty, and reciprocity are universal norms.

Grey Designs Inc., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Charles Grey, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Charles Grey as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true? A. Charles Grey has a wide span of control. B. Grey Designs Inc. has a tall hierarchical structure. C. Charles Grey is underworked. D. Grey Designs Inc. is a mechanistic organization.

A. Charles Grey has a wide span of control.

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework? A. Doing so could yield significant business opportunities that could improve the standard of living of the poor. B. Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization. C. Doing so could be the only way to meet stockholder expectations in a highly competitive market. D. Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains.

A. Doing so could yield significant business opportunities that could improve the standard of living of the poor.

Which of the following statements is true of a multidomestic strategy? A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. B. The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage. C. Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level. D. The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation.

A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements. B. Fragra Inc. will pursue a differentiation strategy at the business level, whereas SaveMarket Inc. will pursue a cost-leadership strategy at the business level. C. Fragra Inc. will be better protected from exchange rate fluctuations when compared to SaveMarket Inc. D. Fragra Inc. will not be able to leverage its home-based core competencies in foreign markets as much as SaveMarket Inc.

A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy? A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance. B. He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally. C. He should remember that he has only one framework at his disposal to make global strategy decisions. D. He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.

A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy? A. It allows a cost-leader to upgrade core competencies in manufacturing and logistics. B. It enables a cost-leader to build products that are different from its competitors' offerings. C. It enables a cost-leader to increase costs above that of its competitors. D. It allows a cost-leader to operate in a decentralized organizational structure.

A. It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization? A. It allows a high level of integration. B. It helps contain the core competencies within a strategic business unit (SBU). C. It leads to competition between SBUs. D. It helps evaluate each SBU as a stand-alone profit-and-loss center.

A. It allows a high level of integration.

Which of the following statements is true of an international strategy? A. It enables firms to leverage their home-based core competencies in foreign markets. B. It is advantageous when firms face high pressures for both local responsiveness and cost reductions. C. It relies on joint ventures to reap economies of scale by accessing a larger market. D. It effectively protects a firm from exchange rate fluctuations.

A. It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following is a benefit of the transnational strategy? A. It facilitates global learning and harnesses economies of location. B. It completely eliminates a firm's risk of intellectual property expropriation. C. It helps to create a matrix global structure, which is cost-effective and easy to implement. D. It helps a firm pursue a cost-leadership strategy by minimizing the need for local responsiveness.

A. It facilitates global learning and harnesses economies of location.

Which of the following is one of the features of an international strategy? A. It is characterized by limited local responsiveness. B. It is one of the newest types of global strategies. C. It is characterized by cost-leadership as a preferred business strategy. D. It is often used successfully by firms with relatively small domestic markets.

A. It is characterized by limited local responsiveness.

What was Goldman Sachs' rebuttal to SEC's claim that it defrauded investors? A. It is up to the clients to assess the risks involved in any investments. B. Fabrice Tourre was responsible for putting the deal together, and it was the lapse of an individual, not the entire firm. C. John Paulson did not reveal his intentions behind creating Abacus. D. Goldman Sachs' itself lost $100 million in the deal.

A. It is up to the clients to assess the risks involved in any investments.

What most likely happens when a firm optimizes its organizational structure to its current situation? A. It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur. B. It achieves superior performance. C. It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution. D. It transforms strategy into actions and business models.

A. It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure. A. global matrix B. multidivisional C. functional D. simple

A. global matrix

What element of organizational structure deals with positioned-based reporting lines? A. specialization B. formalization C. centralization D. hierarchy

D. hierarchy

Plethora Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Bejukistan, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Plethora Inc.? A. It will be able to benefit from economic arbitrage. B. It will be able to successfully leverage its competitive advantage from economies of standardization. C. It will be able to replicate its existing business model easily. D. It will be able to easily sell products for which demand varies by income.

A. It will be able to benefit from economic arbitrage.

Why is the optimal organizational structure a multidivisional structure? A. Its focus is on driving down costs. B. Its focus is on producing differentiated products. C. Its focus is on retaining activities within a single geographic area. D. Its focus is on establishing a flat hierarchy operated in a decentralized fashion.

A. Its focus is on driving down costs.

Which of the following best exemplifies the use of input controls? A. McDonald's use of standard operating procedures B. GM's use of the multidivisional strategy C. Zappos' use of monitoring-free customer service calls D. Southwest Airline's use of employee friendliness

A. McDonald's use of standard operating procedures

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal? A. Once the firm starts growing and attracting more customers she is likely to feel overloaded. B. Hiring more employees will result in loss of intellectual property. C. People are highly unlikely to buy clothes from a store run by a fashion design student. D. The online admiration of her designs will not translate into sales.

A. Once the firm starts growing and attracting more customers she is likely to feel overloaded.

Which of the following is an advantage that a private company enjoys over a public company? A. Private companies are not required to disclose financial statements. B. Private companies experience more scrutiny from analysts. C. Private companies can focus more on short-term viability. D. Private companies often do not have a CEO.

A. Private companies are not required to disclose financial statements.

A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A. The bank knows that the customer will be unable to pay the loan if the interest rate rises. B. The bank is not aware of the investments made by the customer. C. The bank has the financial statements of the customer, but it is not aware of each source of income. D. The bank is depending on the customer to pay back the loan before term completion.

A. The bank knows that the customer will be unable to pay the loan if the interest rate rises.

Which of the following is most likely an accurate statement? A. The multinational enterprise PanDigital benefited from advances in communications technology. B. The multinational enterprise TransEuropa was hindered by falling investments barriers. C. The multinational enterprise ShopWorld benefited from rising trade barriers. D. The multinational enterprise GeoPlus was hindered by reduced transportation costs.

A. The multinational enterprise PanDigital benefited from advances in communications technology.

Which of the following is a common result of a hostile takeover of a company? A. The new owner sells the company in pieces. B. The new owner keeps the company intact. C. The new owner keeps the board of directors of the company the same. D. The new owner enhances the reputations of the company's management.

A. The new owner sells the company in pieces.

Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm, Telbok Inc.? A. The owner of another company buys all the outstanding shares of Telbok. B. A private equity firm, Rainbow Inc., buys a large amount of shares of Telbok. C. Telbok sells all its shares and declares bankruptcy. D. Telbok buys back a large amount of its own shares from the stock market.

A. The owner of another company buys all the outstanding shares of Telbok.

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos? A. Their culture reflects complex relationships with their employees, customers, and suppliers. B. They produce products that cannot be copied easily because of their complex designs. C. The employees in the organization themselves are unaware of the factors contributing to their organizational culture. D. It is not commercially viable for other companies to implement the same culture.

A. Their culture reflects complex relationships with their employees, customers, and suppliers.

Which of the following did management at Zappos do to reduce the level of formalization in their organization? A. They avoided asking their customer service reps in call centers to follow a detailed script. B. They increased their reliance on drop-shipment orders. C. They established top-down management as their primary strategy. D. They put an end to the practice that enabled employees to horizontally rotate to different jobs once they had mastered a particular job.

A. They avoided asking their customer service reps in call centers to follow a detailed script.

Which of the following is true of the codes of conduct of an organization? A. They detail how the organization expects an employee to behave and to represent the company in business dealings. B. They are a reiteration of the laws pertaining to business dealings in a corporate environment. C. They are a guide to determine what is lawful and what is unlawful. D. They help the board of directors and the CEO implement shareholder capitalism.

A. They detail how the organization expects an employee to behave and to represent the company in business dealings.

Which of the following is true of the process of organizing for competitive advantage? A. To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes. B. Strategy formulation and strategy implementation are independent activities. C. Organizing for competitive advantage is a static and not a dynamic process. D. Formulating an effective strategy is a necessary and sufficient condition for gaining and sustaining competitive advantage.

A. To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

Which of the following is true of the board of directors in a public stock company? A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors. B. Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. C. The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. D. The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.

A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors.

Sam is a manager at StyleOne Apparels Inc. and is friends with the company's CEO. This privilege gives Sam the information that StyleOne Apparels is in the midst of talks to take over a leading rival. Sam buys stocks of StyleOne with the expectation that its stocks will appreciate. But the deal falls through and the stocks of StyleOne depreciate in the following months. Are Sam's actions unethical? Why? A. Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome. B. Yes, because it is illegal and unethical for Sam to possess any kind of insider information. C. No, because Sam did not ask the CEO to disclose such information to him. D. No, because Sam did not make any profits from trading stocks using this information.

A. Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a one-product strategy

A. a multidomestic strategy

W. L. Gore & Associates is the inventor of path-breaking new products such as breathable GORE-TEX fabrics, Glide dental floss, and Elixir guitar strings. Which of the following would be most likely to hinder its intention of fostering employee satisfaction, retention, and creativity? A. an extremely formalized organizational structure B. a highly organic organizational structure C. a low degree of centralization D. a flat organization structure

A. an extremely formalized organizational structure

Why do shareholders of public companies need to appoint a board of directors to represent their interests? A. because of the separation of ownership and control B. because employees of a company cannot be shareholders C. because the board of directors itself is made up of shareholders D. because they want tighter control over day-to-day operations of a company

A. because of the separation of ownership and control

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? A. benefits from lower labor costs in manufacturing and services B. access to low-cost raw materials such as lumber and iron ore C. low levels of economic growth in emerging economies D. inefficient infrastructure in countries like China, which have brought down setting-up costs

A. benefits from lower labor costs in manufacturing and services

Which of the following is regarded as the most internal of control mechanisms? A. business ethics B. executive compensation C. the market for corporate control D. government regulation

A. business ethics

According to the agency theory, A. conflicts that arise in corporations should be addressed in the legal realm. B. corporations are more than a set of contracts between parties. C. companies should focus on generating profits for stockholders. D. principals and agents have interchangeable roles.

A. conflicts that arise in corporations should be addressed in the legal realm.

Michael Porter recommends that managers use the shared value creation framework to focus on A. creating new regional clusters. B. narrowing the customer base to eliminate nonconsumers. C. streamlining traditional internal firm value chains. D. reducing the involvement of nongovernmental organizations.

A. creating new regional clusters.

The _____ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally. A. death-of-distance hypothesis B. local-responsiveness hypothesis C. real options framework D. dynamic capabilities framework

A. death-of-distance hypothesis

The relationship between strategy and structure that directly impacts a firm's performance is A. dynamic. B. independent. C. static. D. unpredictable.

A. dynamic.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved A. exporting goods. B. making foreign direct investments. C. making foreign institutional investments. D. licensing production and distribution.

A. exporting goods.

For which of the following products is an international strategy most suitable? A. for luxury goods that can be shipped across the globe B. for products with low value-to-weight ratios such as steel C. for food products that are specific to certain cultures D. for products with high linguistic content

A. for luxury goods that can be shipped across the globe

McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of A. formalization. B. specialization. C. decentralization. D. hierarchy.

A. formalization.

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the A. globalization hypothesis. B. upper-echelons theory. C. real-options perspective. D. global scaling theory.

A. globalization hypothesis.

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.? A. greenfield operation B. export C. joint venture D. acquisition

A. greenfield operation

The global-standardization strategy arises out of the combination of A. high pressure for cost reductions and low pressure for local responsiveness. B. high pressure for local responsiveness and low pressure for cost reductions. C. low pressure for both local responsiveness and cost reductions. D. high pressure for both local responsiveness and cost reductions.

A. high pressure for cost reductions and low pressure for local responsiveness.

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer A. higher quality for lower costs for international routes. B. higher quality for similar costs for U.S domestic routes. C. similar quality for lower costs for international routes. D. similar quality for lower costs for U.S domestic routes.

A. higher quality for lower costs for international routes.

To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate? A. how an organization accommodates strategy implementation through a flexible organizational structure B. how strategy implementation has an effect on resource allocation and power distribution C. how an organization demonstrates organizational inertia, and therefore sets the stage for the firm's subsequent failure D. how an organization optimizes its organizational structure to the current situation

A. how an organization accommodates strategy implementation through a flexible organizational structure

Adverse selection in a public stock company occurs when A. information asymmetry increases the likelihood of selecting inferior alternatives. B. a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. C. a principal is not aware of the context from which information from an agent is derived. D. an agent manipulates information to benefit stockholders.

A. information asymmetry increases the likelihood of selecting inferior alternatives.

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc. The manager received some inside information about how to trade MegaRed stock to get a huge profit. He shared this information with his Jennifer. This scenario is an example of A. information asymmetry. B. adverse selection. C. stakeholder strategy. D. shared value creation.

A. information asymmetry.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A. informational advantage of the lower-level employees. B. higher number of lower-level employees than senior executives. C. knowledge of employees regarding day-to-day tasks. D. operational expertise of lower-level employees in concentrated areas of a particular field.

A. informational advantage of the lower-level employees.

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by A. introducing results-only-work-environments to tap intrinsic motivations. B. refining the budgeting process to encourage more department collaboration. C. updating standard operating procedures to allow more process flexibility. D. using output controls only when the goal is to ensure a predictable outcome.

A. introducing results-only-work-environments to tap intrinsic motivations.

United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A. is a world leader in the pharmaceutical industry. B. has nationalized the pharmaceutical industry. C. has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. D. is a potential foreign market for multinational pharmaceutical companies to sell their products.

A. is a world leader in the pharmaceutical industry.

Organizational culture can be the basis of a firm's competitive advantage if A. it is valuable, rare, and difficult to imitate. B. it is trademarked and copyright protected. C. it converts the organization's core competency into its core rigidity. D. it changes the organization's inertia into its core rigidity.

A. it is valuable, rare, and difficult to imitate.

Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm? A. joint ventures B. acquisitions C. greenfield operations D. exports

A. joint ventures

Which of the following will most likely increase geographic distance between two countries? A. lack of adequate transportation between the two countries B. differences in consumer incomes between the two countries C. lack of human resources available in the two countries D. different knowledge base in the two countries

A. lack of adequate transportation between the two countries

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? A. legal but not ethical B. ethical but not legal C. legal and ethical D. neither legal nor ethical

A. legal but not ethical

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A. location economies. B. economies of scope. C. learning races. D. network effects.

A. location economies.

McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast-food chain pursuing? A. multidomestic strategy B. focused differentiation strategy C. global-standardization strategy D. international strategy

A. multidomestic strategy

Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

A. multidomestic strategy.

Ethics is A. not synonymous with law. B. impossible to codify into law. C. always universal and cannot differ between cultures. D. the minimum acceptable standard in business practice.

A. not synonymous with law.

If a firm pursues only a differentiation strategy, it is most likely a(n) _____ organization. A. organic B. mechanistic C. integrated D. centralized

A. organic

GreenValue Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, GreenValue defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, GreenValue developed a A. resistance to change. B. innovative approach. C. significant value gap. D. holacratic system.

A. resistance to change.

While working a night job at a call center, Carlos creates an app called DineSmart, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on DineSmart. He creates a start-up called TYOP and hires three people to help him improve DineSmart and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure. A. simple B. matrix C. mechanistic D. functional

A. simple

Employees learn about an organization's culture through the process of A. socialization. B. exploitation. C. co-opetition. D. acculturation.

A. socialization.

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) A. stock option. B. commission. C. stock exchange. D. bonus.

A. stock option.

The key components of organizational design are A. structure, culture, and control. B. structure, efficiency, and control. C. innovation, efficiency, and culture. D. innovation, culture, and control.

A. structure, culture, and control.

Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business? A. the nonsustainable debt levels incurred by sovereign governments to fund social programs B. the financial crisis in Europe brought about by money lenders seeking to make quick money C. the collapse of the economy in the U.S. brought about by the housing crisis D. the rise of GDP in countries that do not believe in Milton Friedman's philosophy

A. the non-sustainable debt levels incurred by sovereign governments to fund social programs

Organizational design is A. the process of creating, implementing, and modifying the structure of an organization. B. primarily focused on replacing a firm's competitive advantage with competitive parity. C. a process that always functions independently of strategy formulation. D. primarily focused on formulating effective strategies, not implementing them.

A. the process of creating, implementing, and modifying the structure of an organization.

Which of the following factors is the most important determinant of economic distance? A. the wealth and per capita income of consumers B. the ethnicity and religion of consumers C. the presence of legal institutions in a country D. the topography of a country

A. the wealth and per capita income of consumers

In a public stock company, senior executives, such as the CEO, face agency problems when A. they delegate authority of strategic business units to general managers. B. they decide to get involved in the day-to-day operations of a company. C. the board of directors possesses more information about the company than they do. D. the firm designs work tasks, incentives, and employments that minimize opportunism.

A. they delegate authority of strategic business units to general managers.

Zappos established its unique organizational culture A. through explicitly stated values that are connected to its reward system. B. through input control systems that mandated adherence to organizational values. C. by closely monitoring employees calls with customers. D. by giving employees gift cards to shop at Zappos and Amazon.

A. through explicitly stated values that are connected to its reward system.

A(n) _____ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A. transnational B. multidomestic C. international D. global-standardization

A. transnational

The most important yet least visible element of organizational culture is A. values. B. norms. C. laws. D. artifacts.

A. values.

Which of the following statements about an organization's culture is not true? A. A positive culture motivates employees by appealing to high ideals. B. A strong monitoring and supervision mechanism is needed to enforce the culture. C. A positive culture encourages employees to make decisions not only with their heads, but also with their hearts. D. Employees feel that they are part of a larger community by internalizing the firm's values and norms.

B. A strong monitoring and supervision mechanism is needed to enforce the culture.

_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team. A. Moral hazard B. Adverse selection C. Information asymmetry D. Shareholder capitalism

B. Adverse selection

Which of the following is true of W. L. Gore & Associates, which has a lattice organizational form? A. It has a high degree of centralization. B. All employees are empowered to speak to all other employees in the organization. C. Its culture has been linked to lower employee satisfaction and retention. D. The degree to which a task is divided into separate jobs is high.

B. All employees are empowered to speak to all other employees in the organization.

Which of the following is the result of a leveraged buyout (LBO)? A. An LBO changes the CEO of a public company. B. An LBO changes a public company into a private company. C. An LBO changes a private company into a public company. D. An LBO changes the board of directors of a private company.

B. An LBO changes a public company into a private company.

Which of the following accurately describes what the integration-responsiveness framework does? A. By juxtaposing the pressures a multinational company faces for export tariffs and foreign responsiveness, it devises four strategies to gain and sustain competitive advantage. B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage. C. By juxtaposing the pressures a multinational company faces for export tariffs and local-responsiveness, it devises two strategies to gain and sustain competitive advantage. D. By juxtaposing the pressures a multinational company faces for cost-reduction and foreign responsiveness, it devises two strategies to gain and sustain competitive advantage.

B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage.

Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company? A. The company's competitive advantage lies in leveraging its home-based core competencies in foreign markets. B. Each country unit owned by the company will tend to be highly autonomous. C. Majority of the value creation for the company will take place in its home country. D. The company will not face any operational inefficiency as the key business functions do not have to be duplicated.

B. Each country unit owned by the company will tend to be highly autonomous.

Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A. Very few and specific corporate-governance mechanisms can be effective in addressing the principal-agent problem. B. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. C. Leading by ethical example often has a less strong effect on employee behavior than words. D. A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.

B. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.

Flight Stream Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Flight Stream for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario? A. Flight Stream Inc. is a mechanistic organization. B. Flight Stream Inc. has a flat organizational structure. C. Flight Stream Inc. has a high degree of centralization. D. Flight Stream's organizational culture is governed by codified rules.

B. Flight Stream Inc. has a flat organizational structure.

_____ is a process of closer integration and exchange between different countries and peoples worldwide. A. Diversification B. Globalization C. Standardization D. Modification

B. Globalization

Although demand for IKEA's low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened? A. IKEA has failed to hire top designers for its furniture. B. IKEA's global supply chain has become bottlenecked. C. IKEA has had a revolving door of CEOs for the past 20 years. D. IKEA's holding companies are all located in Sweden.

B. IKEA's global supply chain has become bottlenecked.

What best describes transferability of investor ownership in a public stock company? A. Investors can give out company stocks as a gift. B. Investors are allowed to trade shares of stocks. C. Investors are allowed to participate in strategy formulation. D. Investors can be hired as employees.

B. Investors are allowed to trade shares of stocks.

Which of the following statements is true of organizational culture? A. Changes in culture are too frequent to have any impact on strategic implementation. B. It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages. C. It is always better to focus on output control and performance than on organizational culture. D. According to research, more than 50 percent of firms change culture successfully.

B. It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies? A. It gives the managers greater control of the performance of the organization in the long term. B. It reduces the trust of shareholders in the organization as a vehicle for value creation. C. It helps companies increase firm profits by creating shared value. D. It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.

B. It reduces the trust of shareholders in the organization as a vehicle for value creation.

Which of the following is true of a functional structure? A. It offers a lower degree of specialization than a simple structure. B. It relies on a relatively flat organizational structure. C. It offers decentralized management. D. It relies on bottom-up communication rather than top-down communication.

B. It relies on a relatively flat organizational structure.

Which of the following is a feature of a multinational company pursuing a global-standardization strategy? A. Its key business functions are located at the home country headquarters. B. Its business-level strategy tends to be cost-leadership. C. Its competitive advantage lies in its high local responsiveness. D. Its core competency lies in its strong product differentiation.

B. Its business-level strategy tends to be cost-leadership.

According to Michael Porter, which of the following is a problem with many publicly traded companies? A. Shareholders of publicly traded companies do not have a legitimate claim on profits. B. Many publicly traded companies have defined value creation too narrowly in terms of financial performance. C. There is no transferability of stock ownership in publicly traded companies. D. The legal owners of publicly traded companies also make management decisions for the company.

B. Many publicly traded companies have defined value creation too narrowly in terms of financial performance.

Which of the following real-world scenarios best exemplifies formalization? A. Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts B. McDonald's use of standard operating procedures across the world C. W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses D. Yahoo's decision to fire its CEO after incurring huge losses

B. McDonald's use of standard operating procedures across the world

If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy? A. Yes, they should change the strategy because it provides benefits to the society. B. No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues. C. No, they should not change the strategy because the change would necessitate making tough ethical decisions. D. Yes, they should change the strategy because creating value for society is against the principles of stakeholder strategy.

B. No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues.

_____ are board members who are not employees of the firm, but frequently are senior executives from other firms or full-time professionals. A. Inside directors B. Outside directors C. CEOs D. Auditors

B. Outside directors

All public companies listed on the U.S. stock exchanges must file a number of financial statements with the A. GovernanceMetrics International (GMI). B. Securities and Exchange Commission (SEC). C. EDGAR database. D. The Wall Street Journal.

B. Securities and Exchange Commission (SEC).

What does "limited liability for investors" imply in a public stock company? A. Shareholders are liable for their invested capital and personal wealth and not for any other investments made. B. Shareholders who provide the risk capital are liable only to the capital specifically invested. C. Shareholders are liable for all the decisions made by the board of directors of the company. D. Shareholders have financial but not legal responsibilities toward the public stock company.

B. Shareholders who provide the risk capital are liable only to the capital specifically invested.

Why does strategy implementation often require changes within an organization? A. Strategy implementation is less important than strategy formulation. B. Strategy implementation transforms strategy into actions and business models. C. Strategy always follows structure. D. Strategy implementation does not affect resource allocation and power distribution within an organization.

B. Strategy implementation transforms strategy into actions and business models.

After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A. The company's operations will become more cost-efficient. B. The company's exposure to exchange rate fluctuations will reduce. C. The company will be able to reap greater benefits from economies of scale. D. The company will be exposed to a lower risk of intellectual property appropriation.

B. The company's exposure to exchange rate fluctuations will reduce.

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A. The firm customizes products and services to better suit local requirements. B. The firm reaps significant economies of scale and location economies. C. The firm follows a differentiation strategy at the business level. D. The firm has all its key business functions located in the home country.

B. The firm reaps significant economies of scale and location economies.

How will an increase in coordinated economic and political integration between countries affect the world economy? A. The world's market economies will become self-sufficient and independent. B. There will be gains in social welfare and living standards across the globe. C. The cost of labor will further decline in emerging economies. D. There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B. There will be gains in social welfare and living standards across the globe.

Which of the following statements is true of shareholders in a public stock company? A. They directly supervise and coordinate the manufacture of products and delivery of services. B. They are granted a charter of incorporation by the state and legally own company stock. C. They are the centerpiece of corporate governance. D. They are appointed by a board of directors to oversee the company's management.

B. They are granted a charter of incorporation by the state and legally own company stock.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy? A. They cannot leverage their home-based core competencies in foreign markets. B. They are highly affected by exchange rate fluctuations. C. They have to be highly responsive to local needs and preferences. D. They cannot reap the benefits of economies of scale due to their highly customized products.

B. They are highly affected by exchange rate fluctuations.

Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario? A. While Marc Works Inc.'s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities. B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc. C. Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide. D. Torque Inc. is exposed to greater risks of exchange rate fluctuations.

B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc.

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)? A. Uber promised a large donation to NREC but then reneged on the offer when NREC would not provide Uber with researchers. B. Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC. C. Uber allegedly stole ideas from the NREC research team and then claimed that these ideas were generated by their own researchers. D. Uber bribed NREC officials to give permission for building an extension to the NREC facility that focuses solely on Uber research.

B. Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.

Leila is a graduate student pursuing a course in business. Presented with the case of Uber's unethical behavior, Leila wonders if Uber's board of directors should ask the CEO of Uber, Travis Kalanick, to step down. Having a strong belief in Michael Porter's idea of value creation, Leila is most likely to conclude that A. Uber's board of directors should not ask Kalanick to step down because doing so would cause a profit dip that would affect its shareholders. B. Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society. C. Uber's board of directors should not ask Kalanick to step down because he was responsible for an almost 90 percent appreciation of the company's stock. D. Uber's board of directors should ask Kalanick to step down because agents, unlike principals, are disposable.

B. Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society.

Which of the following types of organizations comparatively requires the lowest levels of investment and control? A. joint ventures B. franchising C. acquisition D. greenfield operations

B. franchising

W. L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in the U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate? A. W. L. Gore is pursuing a cost-leadership strategy. B. W. L. Gore is using a multidivisional structure. C. W. L. Gore is using a simple structure. D. W. L. Gore is pursuing an integration strategy.

B. W. L. Gore is using a multidivisional structure.

Which of the following types of groups is most susceptible to groupthink? A. a diverse group B. a cohesive group C. a heterogeneous group D. a decentralized group

B. a cohesive group

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has A. a formalized structure. B. a decentralized structure. C. organizational inertia. D. a top-down management style.

B. a decentralized structure.

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country? A. a firm that manufactures cell phone batteries B. a firm that extracts and exports iron ore C. a firm that produces movies D. a firm that sells wristwatches

B. a firm that extracts and exports iron ore

Fierce domestic competition in Lobekistan makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Lobekistan's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in A. a peripheral industry. B. a focal industry. C. supportive complementors. D. related complementors.

B. a focal industry.

At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of A. moral hazard. B. adverse selection. C. shared value creation. D. corporate governance.

B. adverse selection.

Raj 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 Raj based on his stated credentials without verifying them. Two days into the job, Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview. This scenario best exemplifies A. moral hazard. B. adverse selection. C. shared value creation. D. corporate governance.

B. adverse selection.

A(n) _____ organization always attempts to balance and harness different activities in trade-off situations. A. centralized B. ambidextrous C. mechanistic D. formalized

B. ambidextrous

The _____ is the centerpiece of corporate governance and is composed of inside and outside members. A. institutional investors group B. board of directors C. group of shareholders D. scientific advisory board

B. board of directors

Which of the following is an important internal corporate-governance mechanism? A. shareholder capitalism B. board of directors C. market for corporate control D. activist investors

B. board of directors

FTZ Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as A. competition. B. co-opetition. C. exploitation. D. exploration.

B. co-opetition.

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy? A. products with a high value-to-weight ratios like luxury goods B. commodity products like computer hardware C. consumer products related to national and/or religious identity like food D. products that carry country-specific quality associations like wine

B. commodity products like computer hardware

One of the ways to foster ethical behavior in employees is to A. avoid codifying organizational culture. B. create a control system that encourages desired values. C. view clients as counter parties to transactions. D. align the vision statement of the organization with its informal culture.

B. create a control system that encourages desired values.

Monica's Cosmetics Inc. has a functional structure that is flexible enough to allow it to leverage its brand name across different products. By doing this, Monica's is reaping ____ from its core competencies. A. economies of scale B. economies of scope C. diversification D. centralization

B. economies of scope

StickOn Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies A. exploration. B. exploitation. C. co-opetition. D. competition.

B. exploitation.

Which of the following modes of entering a foreign market allows for the lowest level of control? A. greenfield ventures B. exporting C. joint ventures D. acquisitions

B. exporting

In Michael Porter's diamond framework, _____ describe a country's endowments in terms of natural, human, and other resources. A. market conditions B. factor conditions C. demand conditions D. supply conditions

B. factor conditions

A functional structure is recommended when a firm A. has a broad focus in terms of its product/service offerings. B. has a low level of diversification. C. has a low degree of specialization. D. diversifies into different product lines and geographies.

B. has a low level of diversification.

A greater cultural distance between two trading countries A. increases linguistic similarities between the two countries. B. increases the liability of foreignness. C. reduces the uncertainty of doing business. D. reduces the transaction costs associated with business.

B. increases the liability of foreignness.

The board of directors of a public stock company consists of A. managers appointed by the owners of a company to run its day-to-day operations. B. individuals who formally represent the firm's shareholders and oversee the work of executives. C. the legal owners of a publicly traded company that was purchased in a leveraged buyout. D. employees of a company who belong to the senior management and directly report to the CEO of the firm.

B. individuals who formally represent the firm's shareholders and oversee the work of executives.

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by A. stakeholder strategy. B. information asymmetry. C. corporate governance. D. groupthink.

B. information asymmetry.

Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through A. output controls. B. input controls. C. multidivisional strategy. D. centralization.

B. input controls.

When a firm pursues a(n) _____, it sells the same products or services in both domestic and foreign markets. A. domestic strategy B. international strategy C. differentiation strategy D. localization strategy

B. international strategy

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's A. is organic in nature. B. is mechanistic in nature. C. has an informal structure. D. has a decentralized structure.

B. is mechanistic in nature.

A firm is said to be pursuing a polycentric innovation strategy when A. its research facility is situated in the headquarters and all other business activities are located around the world. B. it draws from multiple, equally important research facilities located throughout the world. C. it restricts its innovation to Western economies and production to developing markets. D. its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B. it draws from multiple, equally important research facilities located throughout the world.

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because A. it overestimates its need to protect its intellectual property. B. it underestimates its liability of foreignness when entering the Zevar market. C. it underestimates its dwindling reputation before it enters the Zevar market. D. it overestimates the geographic and cultural distance between Pelo and Zevar.

B. it underestimates its liability of foreignness when entering the Zevar market.

Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify? A. transferability of investor ownership B. legal personality C. limited liability for investors D. separation of legal ownership and management control

B. legal personality

ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in? A. cost-reduction B. local-responsiveness C. global-standardization D. transnational strategy

B. local-responsiveness

Ridemore 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, Ridemore Autos Inc. is reaping the benefits of A. economies of scope. B. location economies. C. resource immobility. D. resource ambiguity.

B. location economies.

Walmart is an example of a(n) _____ organization. A. organic B. mechanistic C. decentralized D. informal

B. mechanistic

The _____ structure consists of several distinct strategic business units (SBUs), each with its own profit-and-loss responsibility. A. ambidextrous B. multidivisional C. functional D. organic

B. multidivisional

Which of the following global strategies best matches with a multidivisional structure? A. international B. multidomestic C. global-standardization D. transnational

B. multidomestic

A trend observed during the Globalization 3.0 stage involves A. countries around the globe becoming more self-sufficient and independent. B. multinational companies organizing as global-collaboration networks. C. privately-owned firms getting nationalized. D. world's market economies becoming less integrated. Based on an optimal mix of costs, skills, and PESTEL factors, multinational enterprises are organized as global-collaboration networks that perform business functions throughout the world.

B. multinational companies organizing as global-collaboration networks.

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and A. eventually gives way to core rigidity. B. obeys the VRIO principles. C. does not demonstrate causal ambiguity. D. displays an absence of social complexity.

B. obeys the VRIO principles.

Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of A. corporate governance. B. on-the-job consumption. C. adverse selection. D. shared value creation.

B. on-the-job consumption.

An organization is characterized as having a flexible division of labor, distributed decision making, and generalized knowledge of how to accomplish strategic goals valued. This organization is most likely _____ in nature. A. specialized B. organic C. mechanistic D. formalized

B. organic

Plow Inc. is a greeting card manufacturing company. Plow's market dominance exists primarily because of the innovative designs of its greeting cards when compared to those of its competitors. In this scenario, Plow Inc.'s managers must ideally rely on a functional structure that resembles a(n) _____ organization. A. simple B. organic C. mechanistic D. integrated

B. organic

Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos. A. organizational structure B. organizational culture C. organizational strategy D. organizational controls

B. organizational culture

GLD Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named George. The stockholders expect George to make decisions that will benefit the company. However, George begins to find ways to maximize his total compensation, which at times hinders GLD's performance. This scenario reflects A. value creation problems. B. principal-agent problems. C. inside director-outside director problems. D. fiduciary responsibility problems.

B. principal-agent problems.

MainLine Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, its methods of obtaining gas have at times broken down, thereby causing environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that A. public companies often do not keep economic needs and societal needs separate from each other, thereby contributing to low value creation. B. public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events. C. public companies do not focus enough on increasing firm profits, thereby contributing to low value creation. D. public companies have defined value creation too narrowly and as a result have ignored political lobbying, thereby contributing to black swan events.

B. public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.

Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that A. have a tall hierarchical structure. B. pursue a differentiation strategy at the business level. C. have a high degree of specialization and centralization. D. focus on standardizing operating procedures.

B. pursue a differentiation strategy at the business level.

According to the perspective of shareholder capitalism, A. shareholders in public stock companies are restricted from buying shares of two competing companies. B. shareholders in public stock companies have the most legitimate claim on profits. C. shareholders in public stock companies have significant decision-making power. D. shareholders in public stock companies have unlimited financial liability.

B. shareholders in public stock companies have the most legitimate claim on profits.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A. inability to implement its trademark focused-differentiation strategy in the German market B. significant differences between its U.S. personnel policies and Germany's culture C. Germany's unfamiliarity with retail discount powerhouses D. Metro's hostile takeover of Walmart in Germany

B. significant differences between its U.S. personnel policies and Germany's culture

Nick just graduated from law school and wants to start his own law firm. It is best for Nick to use a _____ organizational structure. A. functional B. simple C. mechanistic D. matrix

B. simple

A high degree of formalization in an organization is most likely to A. improve customer service. B. slow down decision making. C. produce inconsistent results. D. increase creativity and innovation.

B. slow down decision making.

Strong organizational cultures that are strategically relevant align employees' behaviors more fully with the organization's A. hierarchical rigidity. B. strategic goals. C. hierarchical structure. D. strategic flexibility.

B. strategic goals.

Cynthia works as a front-line employee for a nationwide retail store. She reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store? A. flat structure B. tall structure C. centralized structure D. decentralize structure

B. tall structure

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with A. differences in climates and time zones. B. the absence of a trading bloc. C. physical remoteness. D. the lack of connective ethnic and social networks.

B. the absence of a trading bloc.

Which of the following factors pertaining to national competitive advantage enabled Nokia, a multinational company from Finland, to become an early leader in cell phones? A. the competitive intensity in the cell phone industry of Finland B. the huge demand for high-quality wireless services in Finland C. the abundance of natural resources in Finland D. the related and supporting industries present in Finland

B. the huge demand for high-quality wireless services in Finland

Which of the following statements best describes local responsiveness? A. the process of producing goods in one country and selling them in another B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements C. the belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous D. the additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances

B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

Which of the following is the source of the principal-agent problem in publicly traded companies? A. the law of legal personality B. the separation of ownership and control C. limited liability for investors D. transferability of investor ownership

B. the separation of ownership and control

Which of the following is a primary reason why firms pursue a global strategy? A. to improve their reputation B. to enhance their competitive advantage C. to expand their research capabilities D. to gain more political influence

B. to enhance their competitive advantage

Why did W. L. Gore reorganize itself into a functional structure from a simple structure? A. A simple structure was too formalized, specialized, and centralized to really facilitate any kind of productivity. B. A functional structure is more decentralized. C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth. D. A functional structure has a tall hierarchical structure that relies on bottom-up communication.

C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders. A. Shareholder capitalism B. Stakeholder strategy C. Agency theory D. Corporate governance

C. Agency theory

Which of the following countries has a high geographic distance but a low cultural distance from the United States? A. Canada B. Mexico C. Australia D. France

C. Australia

Which of the following is an observable feature in the Globalization 3.0 stage? A. Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited. B. Only sales and distribution functions of a multinational enterprise are located in a few key countries. C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. D. Firms have reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries.

C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

GreenThings Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. TransGold Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A. While TransGold Inc.'s competitive advantage will lie in its high local responsiveness, GreenThings Inc. will lack such competencies. B. GreenThings Inc. will face greater pressure for cost-reductions than TransGold Inc. due to its strategy choice. C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries. D. While GreenThings Inc. will require a global matrix structure, TransGold Inc. will require a traditional headquarters model.

C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries.

The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database. A. GAAP B. JASON C. EDGAR D. PARMER

C. EDGAR

Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? A. Frank is a part-time employee at Lofloy Greens. B. Frank cannot serve as a director on Spinson Locomotives' board. C. Frank is an outside director on Lofloy's board of directors. D. Frank is a stockholder of Lofloy Greens.

C. Frank is an outside director on Lofloy's board of directors.

Which of the following facts proves that GE's board is fairly diverse compared to other Fortune 500 companies? A. GE's board is composed of 94 percent outside directors, compared to less than 70 percent for the others. B. GE's board is chaired by its CEO while other companies have outside directors. C. GE's board is composed of 28 percent women, compared to less than 16 percent for the others. D. GE's board has five committees, each with its own chair, compared with less than three for the others.

C. GE's board is composed of 28 percent women, compared to less than 16 percent for the others.

In which of the following stages of globalization did firms organize as networks to pursue a global-standardization strategy? A. Globalization 1.0 B. Globalization 2.0 C. Globalization 3.0 D. Globalization 4.0

C. Globalization 3.0

Hank's Hot Dogs is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Hank's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Hank's? A. Hank's has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy. B. Hank's has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy. C. Hank's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy. D. Hank's has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy.

C. Hank's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.

Janis is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical? A. What are the chances that her decision to accept the opportunity will be made public? B. How much profit would be made if she decided to accept the opportunity? C. How would the media report her decision to accept the opportunity if it were to become public? D. How long lasting would the competitive advantage be if she decided to accept the opportunity?

C. How would the media report her decision to accept the opportunity if it were to become public?

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A. Investors B. Outside directors C. Inside directors D. Auditors

C. Inside directors

Which of the following is an advantage offered by a functional structure? A. It allows for an efficient top-down communication chain and thus relies on a relatively tall structure. B. It facilitates a lower division of labor, which is linked to higher productivity. C. It allows for a higher degree of specialization and deeper domain expertise. D. It facilitates a lower level of specialization.

C. It allows for a higher degree of specialization and deeper domain expertise.

Why does a functional structure rely on a flat organizational structure? A. The work in the organization is centrally coordinated by the CEO. B. It allows for a higher degree of specialization and domain expertise. C. It allows for efficient bottom-up and top-down communication. D. It allows for the implementation of a differentiation strategy.

C. It allows for efficient bottom-up and top-down communication.

Which of the following is not included within the types of strategic alliances? A. joint ventures B. franchising C. acquisitions D. licensing

C. acquisitions

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? A. It allows the firm to create incentives to foster process innovation in order to drive down cost. B. It allows the firm to reduce its cost below that of competitors while offering acceptable value. C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. D. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.

C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

Why does Zappos offer its new recruits $2,000 to quit at the end of the first week of their job? A. It is confident that employees will be impressed with the company's creativity and will stay on for a longer term. B. It does not believe that a firm's culture can flow from its values when they are linked to the company's reward system. C. It believes that individuals who choose to stay on will fit in with the Zappos culture. D. It is certain that a firm's culture flows only from founder imprinting.

C. It believes that individuals who choose to stay on will fit in with the Zappos culture.

Which of the following is a disadvantage of a functional strategy? A. It frequently lacks the tools required to pursue a cost-leadership strategy. B. It does not facilitate rich communication between members of the same department. C. It cannot effectively address a higher level of diversification. D. It does not allow organizations to be flexible or innovative.

C. It cannot effectively address a higher level of diversification.

Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business? A. It weakens the national competitive advantage enjoyed by the focal firm. B. It improves the factor conditions in the focal firm's domestic market. C. It increases the value of the focal firm's offering from a customer's perspective. D. It reduces the economic contribution created by the focal firm.

C. It increases the value of the focal firm's offering from a customer's perspective.

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal? A. It was given a "triple A" rating for Abacus. B. It made no effort to ascertain the stability of the real estate market. C. It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation. D. It lost $100 million in the Abacus fiasco.

C. It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation.

Which of the following is a drawback of pursuing a transnational strategy? A. It creates bottlenecks for global learning. B. It exposes a firm to diseconomies of scale and location. C. It requires a global matrix structure, which is difficult to implement. D. It involves locating all key business activities in the home country headquarters.

C. It requires a global matrix structure, which is difficult to implement.

What was one of the reasons for Jerry Yang's failure at Yahoo? A. Jerry made many necessary changes to the company's organizational structure. B. Jerry established a successful organizational structure and culture, but could not assert control. C. Jerry's preference for obtaining consensus among his managers led to bickering and infighting. D. Jerry focused most strategic changes on improving user experience and increasing advertising revenues.

C. Jerry's preference for obtaining consensus among his managers led to bickering and infighting.

Which of the following is a characteristic of a public stock company? A. Shareholders who provide risk capital are liable for all losses incurred by the company. B. Investor ownership cannot be transferred easily between investors. C. Legal personality allows a firm's continuation beyond the founder or the founder's family. D. In publicly traded companies, professional managers are the legal owners of the company.

C. Legal personality allows a firm's continuation beyond the founder or the founder's family.

_____ organizations have a low degree of specialization and formalization as well as a flat organizational structure. A. Mechanistic B. Centralized C. Organic D. Top-down

C. Organic

_____ describes the collectively shared values and norms of an organization's members. A. Competitive advantage B. Organizational structure C. Organizational culture D. Core competency

C. Organizational culture

_____ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure. A. PESTEL factors B. Formalization C. Organizational inertia D. Centralization

C. Organizational inertia

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A. Olax, which has the same wealth and per capita income as Zeda B. Jordax, which has a very profitable economy and where people speak Jordaxian C. Segar, where people speak English and have a low standard of living D. Terra, which is located close to Zeda and is easily accessible by road

C. Segar, where people speak English and have a low standard of living

Jamiro Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? A. Employees of Jamiro are legally permitted to invest their capital in the company's stock. B. Employees of Jamiro are also the owners of the company. C. Shareholders of Jamiro are responsible to the company only for the capital they have invested. D. Shareholders of Jamiro are not permitted to trade their company stock at the New York Stock Exchange (NYSE).

C. Shareholders of Jamiro are responsible to the company only for the capital they have invested.

Which of the following statements best supports the separation of ownership and control in publicly traded companies? A. Shareholders are liable only for the capital they invest and not for their personal wealth. B. Shareholders can freely trade the company stocks. C. Shareholders own stocks but do not run the company. D. Managers control the company but may also have stock ownership.

C. Shareholders own stocks but do not run the company.

Which of the following proves that GE's board of directors is significantly independent? A. Twenty-six percent of the board members at GE are female. B. The CEO of GE is also the chairman of the board. C. Sixteen of the 17 board directors are from outside the organization. D. GE's board has five committees, each with its own chair.

C. Sixteen of the 17 board directors are from outside the organization.

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage? A. W. L. Gore & Associates organizes its employees into project-based teams. B. Apple develops high-tech products that are preferred by consumers across the world. C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D. GM offers compensation if its products do not meet a consumer's expectations.

C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.

GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A. The CEO is likely to be more responsible because he is setting his own performance targets. B. The CEO might be able to influence the board through setting the meeting agendas. C. The CEO possesses invaluable inside information that can help chair the board effectively. D. The CEO will suggest board appointees who are friendly toward him or her.

C. The CEO possesses invaluable inside information that can help chair the board effectively.

Which of the following statements is true about the use of functional structures with various business strategies? A. The goal of a differentiation strategy is to create competitive parity. B. The goal of a cost-leadership strategy is to create competitive parity. C. The goal of a differentiation strategy is to create a competitive advantage by controlling costs. D. A cost-leadership strategy can be effectively implemented with the help of an organic structure.

C. The goal of a differentiation strategy is to create a competitive advantage by controlling costs.

What helps notions such as fairness, honesty, and reciprocity to be codified into law? A. The notions are synonymous with law. B. The notions differ to some degree in different cultures around the globe. C. The notions are universal norms. D. The notions are characteristics inherited by each person irrespective of the culture.

C. The notions are universal norms.

Why are controls like budgets and operating procedures that McDonald's implements known as input controls? A. They are independent of an organization's culture. B. They are implemented by corporate headquarters. C. They are considered before employees make any decisions. D. They are ad hoc and not codified.

C. They are considered before employees make any decisions.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode? A. They are easy to initiate and terminate. B. They require low amounts of investments in terms of capital. C. They reduce a firm's exposure to loss of reputation. D. They are based on contracts rather than ownership.

C. They reduce a firm's exposure to loss of reputation.

Stop n' Save Inc., a supermarket chain, is implementing a multidomestic strategy. SunLife Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A. Stop n' Save Inc. will focus more on cost-reduction than SunLife Inc. B. Stop n' Save Inc. will have its business functions spread across the world; SunLife Inc.'s business functions will be highly centralized. C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level. D. Unlike SunLife Inc., Stop n' Save Inc. will be able to reap significant economies of scale and location economies.

C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level.

Which of the following statements is true with regard to international trade between countries? A. Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. B. Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. C. Wealthy countries engage in relatively more cross-border trade than poorer ones. D. Political integrations decrease the expected trade intensity between two countries.

C. Wealthy countries engage in relatively more cross-border trade than poorer ones.

Veronica 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 Veronica's business? A. a firm that relies on high input controls to tap into intrinsic motivation B. a firm that relies on high input controls to tap into extrinsic motivation C. a firm that relies on high output controls to tap into intrinsic motivation D. a firm that relies on high output controls to tap into extrinsic motivation

C. a firm that relies on high output controls to tap into intrinsic motivation

What is a unicorn? A. a public stock company valued at a billion dollars or more B. a public stock company valued at a million dollars or more C. a private start-up company valued at a billion dollars or more D. a private start-up company valued at a million dollars or more

C. a private start-up company valued at a billion dollars or more

Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.? A. exporting B. franchise agreement C. acquisition D. licensing

C. acquisition

In publicly traded companies, individuals who are delegated to perform duties on behalf of company owners are known as A. principals. B. shareholders. C. agents. D. clients.

C. agents.

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies? A. organic B. simple C. ambidextrous D. mechanistic

C. ambidextrous

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it A. is pursued in response to low pressure for local responsiveness and low pressure for cost reduction. B. attempts to reap significant economies of scale by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. C. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. D. operates on the assumptions made in the globalization hypothesis in order to lower costs.

C. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.

Why did the American MTV network cable channel fail when pursuing a global-standardization strategy? A. because MTV failed to understand that music videos were a commodity product B. because the globalization hypothesis holds true for the music industry C. because cultural distance most affects products with high linguistic content D. because an international strategy was more suitable for the music industry

C. because cultural distance most affects products with high linguistic content

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A. because of the political differences between India and U.S. B. because NAFTA prohibits Walmart from investing in countries outside North America C. because of the large economic distance between U.S. and India D. because Walmart's low-cost strategy has not been accepted by Indian consumers

C. because of the large economic distance between U.S. and India

A firm pursuing a transnational strategy would believe that A. key business functions should be located in its home country headquarters. B. local-responsiveness is more important than cost-reductions for competitive advantage. C. best practices, ideas, and innovations should be diffused throughout the world. D. the majority of the value creation should take place in the home country.

C. best practices, ideas, and innovations should be diffused throughout the world.

How has the administrative and political distance between Canada, Mexico, and the United States been reduced? A. by adopting similar national cultures B. by lowering the disparities between their per capita incomes C. by establishing the North American Free Trade Agreement (NAFTA) D. by reducing their linguistic differences

C. by establishing the North American Free Trade Agreement (NAFTA)

Maurice sent in a complaint about a rude salesperson he dealt with at FirstElectronics Inc. He didn't get a response for about three months. Also, when the response finally came, it was just a formal, cursory letter. Based on this scenario, FirstElectronics most likely has an extremely _____ organizational structure. A. specialized B. formalized C. centralized D. hierarchical

C. centralized

Because of poor management, the stock prices of DigiKing Inc. falls and many investors sell their shares. Soon DigiKing becomes the target of a hostile takeover, during which Charles buys enough shares to exert control over the firm. In this scenario, Charles performs the role of a(n) A. inside director. B. outside director. C. corporate raider. D. corporate consultant.

C. corporate raider.

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A. greenfield operations B. brownfield operations C. exporting D. crowdsourcing

C. exporting

A firm following a multidomestic strategy A. is highly efficient. B. lacks local responsiveness. C. faces a greater risk of intellectual property (IP) appropriation. D. requires exposing explicit knowledge because products are manufactured locally.

C. faces a greater risk of intellectual property (IP) appropriation.

For which of the following types of industries is a multidomestic strategy most common? A. machine-tool industries B. genetic industries C. food industries D. capital goods industries

C. food industries

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) _____ strategy. A. international B. multidomestic C. global-standardization D. localization

C. global-standardization

Jade Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Jade Mobiles Inc. most likely pursue? A. international strategy B. multidomestic strategy C. global-standardization strategy D. localization strategy

C. global-standardization strategy

The informational advantage that agents possess over principals is often based on the fact that A. the information is extremely secure and protected from exposure to anyone outside the company. B. public stock companies are characterized by information symmetry. C. insiders are the first to learn about important developments before the information is released to the public. D. agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.

C. insiders are the first to learn about important developments before the information is released to the public.

Fakhir is a board member at Garfield Motors Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Blixt Electronics. According to this scenario, Fakhir A. cannot serve on the board of any other organization. B. is more likely than Ernest to take care of stockholder interests. C. is an inside director of Garfield Motors. D. can use information from board meetings to trade stocks of Garfield Motors.

C. is an inside director of Garfield Motors.

Kaito is the CEO of Henson and Fukui Consulting Inc. Kaito's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting. What does this scenario best exemplify? A. buyback B. merger C. leveraged buyout D. initial public offering

C. leveraged buyout

For a multinational enterprise (MNE), applying the globalization hypothesis would mean A. being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction. B. customizing each product sold by an enterprise to differentiate it from its competitors. C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. D. pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage.

C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure. A. functional B. multidivisional C. matrix D. simple

C. matrix

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) _____ in the context of a principle-agent problem. A. adverse selection B. stakeholder strategy C. moral hazard D. shared value creation

C. moral hazard

Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use? A. basic B. simple C. multidivisional D. functional

C. multidivisional

When a firm diversifies into different product lines and geographies, a _____ structure is preferred. A. simple B. functional C. multidivisional D. network

C. multidivisional

Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a _____ in the automobile industry. A. capital gain B. trade surplus C. national competitive advantage D. liability of foreignness

C. national competitive advantage

Michael Porter's diamond framework is used to explain A. national value creation. B. domestic value creation. C. national competitive advantage. D. domestic competitive advantage.

C. national competitive advantage.

Which of the following types of organizations best helps match a differentiation strategy to a functional structure? A. ambidextrous organization B. mechanistic organization C. organic organization D. rigid organization

C. organic organization

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly A. formalized. B. specialized. C. organic. D. mechanistic.

C. organic.

Allgreva Inc. is located in Movaria near the nation of Clozame. Allgreva is considering expanding into Clozame. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Movaria rules this land. Which of the following would most likely prevent Allgreva from expanding into Clozame? A. geographic distance B. economic distance C. political distance D. cultural distance

C. political distance

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A. adopting a narrow shareholder perspective B. separating economic interests and social needs C. practicing effective corporate governance D. adopting the principles of shareholder capitalism

C. practicing effective corporate governance

Which of the following is an unintended side effect of a high degree of specialization in an organization? A. decreased trade-off between breadth and depth of knowledge B. decreased opportunities for the division of labor C. reduced employee satisfaction due to repetition of tasks D. reduced productivity

C. reduced employee satisfaction due to repetition of tasks

Which of the following characteristics of a public stock company deals with principals and agents? A. limited liability of investors B. transferability of investor ownership C. separation of legal ownership and management control D. legal personality

C. separation of legal ownership and management control

Creating economic value for shareholders while also creating social value is known as creating A. a social market economy. B. shareholder capitalism. C. shared value. D. stakeholder strategy.

C. shared value.

Successful _____ requires managers to design and shape structure, culture, and control mechanisms. A. strategy innovation B. strategy formulation C. strategy implementation D. strategy diversification

C. strategy implementation

Which of the following is a feature of an organic organization? A. high degree of specialization B. rigid division of labor C. clear lines of authority D. high span of control

D. high span of control

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n) A. organic organizational structure. B. decentralized organizational structure. C. tall hierarchical structure. D. flat hierarchical structure.

C. tall hierarchical structure.

The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after A. Level-5 leadership. B. the Sarbanes-Oxley pledge. C. the Hippocratic oath in medicine. D. Goldman Sach's code.

C. the Hippocratic oath in medicine.

Which of the following is a major issue at the forefront of CEO compensation in recent years? A. a comparison of the performance of the organization before and after the CEO's tenure B. the performance of the CEO as an employee versus the performance as a board member C. the absolute size of the CEO pay package compared with the pay of the average employee D. a comparison of the compensation of senior management hired during and before the CEO's tenure

C. the absolute size of the CEO pay package compared with the pay of the average employee

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because A. they pursue a cost-leadership strategy in their respective industries. B. they are highly responsive to the local needs and preferences of customers in the host countries. C. they offer the same products or services in all their stores throughout the world. D. they attempt to combine benefits of localization and standardization strategies simultaneously.

C. they offer the same products or services in all their stores throughout the world.

Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A. to reduce the transferability of stocks between stockholders B. to bring about a separation of CEO/chair duality C. to align incentives between shareholders and management D. to change the liability of shareholders from limited to unlimited

C. to align incentives between shareholders and management

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally? A. international strategy B. global-standardization strategy C. transnational strategy D. focused-differentiation strategy

C. transnational strategy

De Bruyne Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to De Bruyne's board to achieve board independence? A. 1 B. 3 C. 5 D. 7

D. 7

Which of the following will most likely harm a MNE's reputation? A. Principal-agent problems cause a MNE to merge with another MNE. B. Increased competition causes a MNE to close a factory in a developing country. C. Wages for workers in a factory owned by a MNE increase, causing profits to decline. D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

_____ are an agreed-upon code of conduct in business, based on societal norms. A. Fiduciary responsibilities B. Poison pills C. Strategic business points D. Business ethics

D. Business ethics

_____ refers to the degree to which decision making is concentrated at the top of the organization. A. Specialization B. Formalization C. Naturalization D. Centralization

D. Centralization

Which of the following is not true of corporate governance in public stock companies? A. Corporate governance seeks to benefit multiple stakeholders, not just shareholders. B. Corporate governance provides rules for making decisions on corporate affairs. C. Corporate governance attempts to address the principal-agent problem. D. Corporate governance seeks to create a separation between ownership and control.

D. Corporate governance seeks to create a separation between ownership and control.

Which of the following accurately describes GE's ecomagination initiative? A. Ecomagination decreases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services. B. Ecomagination decreases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services. C. Ecomagination increases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services. D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.

D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.

Which of the following perspectives best supports the shared value creation framework? A. Markets are more often than not defined by societal needs rather than economic needs. B. Failing to create value for society almost always reflects on the bottom line. C. A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

Frappe operates as a strategic business unit (SBU) under More or Less Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that A. Frappe does not have its own profit and loss responsibility. B. Frappe is dependent on the other SBUs in More or Less Inc. C. Frappe has a matrix organizational structure. D. Frappe is led by its own CEO (or equivalent general manager).

D. Frappe is led by its own CEO (or equivalent general manager).

A. It continually changes the organizational values that guide its employees. B. It refrains from monitoring its employees' calls. C. It encourages employees to be creative and innovate and to go the extra mile to deliver a wonderful customer experience. D. It enforces that each group member's compensation depends in part on the group's overall productivity.

D. It enforces that each group member's compensation depends in part on the group's overall productivity.

Which of the following statements best describes groupthink? A. It is a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure. B. It is a situation in which organizations compete with one another for resources, but they also need to cooperate to share competencies. C. It is a process whereby employees internalize an organization's values and norms through immersion in its day-to-day operations. D. It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

D. It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization? A. It frequently ranks among the top 500 companies to work for. B. Its communication lines are bottom-up and well-defined. C. Its decision power is spread across the organization. D. Its job descriptions are very descriptive.

D. Its job descriptions are very descriptive.

Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? A. Rosa can legally sell shares of Hoptin in the stock market. B. John is a shareholder of Hoptin but does not have any managerial duties. C. Kevin, an employee at Hoptin, is not responsible for any losses that Hoptin incurs. D. Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

D. Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

Which of the following is a feature of the Globalization 2.0 stage? A. Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. B. Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. C. Two-way knowledge flow between the local subsidiaries and their U.S. headquarters was strong. D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

_____ define appropriate employee attitudes and behaviors. A. Values B. Artifacts C. Appraisals D. Norms

D. Norms

Which of the following statements is true of strategy in an organization? A. Strategy implementation is considered unsuccessful if it requires changes within an organization. B. To implement a strategy successfully, an organization's structure must be rigid. C. Strategy implementation does not affect resource allocation and power distribution within an organization. D. Organizational structure must follow strategy in order for firms to achieve superior performance.

D. Organizational structure must follow strategy in order for firms to achieve superior performance.

A typical college of business (or school of management) has several areas such as management, marketing, finance, accounting, MIS, and so on. This is an example of a(n) _____ structure. A. simple B. M-form C. matrix D. functional

D. functional

Which of the following organizational structures matches best with an international strategy? A. simple B. matrix C. multidivisional D. functional

D. functional

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry? A. Galleon Group's decision to trust Rajat Gupta's information as accurate B. Rajaratnam receiving information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs C. Warren Buffet's decision to inject a huge amount of money into Goldman Sachs based on its financial reports D. Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

D. Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

Which of the following describes a firm in the Globalization 1.0 stage? A. Robinson Inc. has a large office in New York, which is one cog in a global network. B. Robinson Inc. has a large office in New York, which functions with other large offices in Europe and Asia. C. Robinson Inc. has a base office in New York and a replica office in Amsterdam. D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

_____ describes the degree to which a task is divided into separate jobs. A. Hierarchy B. Formalization C. Centralization D. Specialization

D. Specialization

How has China been affected by its one-child-per-family policy and appreciation of its currency? A. The purchasing power of its workforce has reduced. B. The value added to production has reduced. C. The standard of living within the economy has lowered. D. The country's advantage in low-cost manufacturing has reduced.

D. The country's advantage in low-cost manufacturing has reduced.

Which of the following statements best supports the view that GE's ecomagination strategy is in line with the shared value creation framework? A. The ecomagination strategy is the brainchild of the founder of the company. B. The ecomagination strategy helps GE spend more on research and development than other similar companies. C. The ecomagination strategy generated $3 billion in revenues for GE during 2012. D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change? A. The firm's original core competency can turn from a liability into an asset. B. The firm's organizational inertia can turn into its core rigidity. C. The firm's competitive parity can turn into its competitive advantage. D. The firm's culture can turn from a core competency into a core rigidity.

D. The firm's culture can turn from a core competency into a core rigidity.

How does W. L. Gore exemplify founder imprinting? A. Gore consistently ranks among the top 25 of Fortune's "100 Best Companies to Work For" list. B. W. L. Gore & Associates is organized in a formal and centralized manner. C. The compensation of Gore associates is decided through a peer review system. D. The four core values articulated by Bill Gore guide the company and its associates to this day.

D. The four core values articulated by Bill Gore guide the company and its associates to this day.

Which of the following is a drawback of pursuing a multidomestic strategy? A. The strategy allows for the lowest possible local responsiveness. B. The strategy lowers the differentiation of a firm's product and service offerings. C. The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy. D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

What are poison pills? A. They are used by shareholders to prevent the founder of a company from taking the company private through a leveraged buyout. B. They are unspecified conditions in the contract between stakeholders in an organization. C. They are used by companies in a bid to perform a hostile takeover of competing firms. D. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

D. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

Which of the following is not true about the members of the board of directors in a public stock company? A. They represent the shareholders' interests. B. They may hire and fire top management. C. They oversee the firm's operations. D. They are not responsible to shareholders.

D. They are not responsible to shareholders.

TopDrawer Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about TopDrawer's board of directors? A. TopDrawer's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments. B. TopDrawer's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions. C. TopDrawer's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO. D. TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.

D. TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.

In late 2014, Uber senior executive Emil Michael was heard to say that Uber should spend a million dollars to hire private investigators to dig up dirt on journalists who wrote damaging pieces on Uber. When the remarks became public, he apologized. How did Uber's CEO deal with Michael? A. Uber's CEO demoted Michael. B. Uber's CEO fired Michael. C. Uber's CEO promoted Michael. D. Uber's CEO refused to discipline Michael.

D. Uber's CEO refused to discipline Michael.

Which of the following statements about W. L. Gore & Associates best supports the fact that it is organized in an informal and decentralized manner? A. W. L. Gore & Associates' employees are organized by their seniors into teams that are led by sponsors, not bosses. B. W. L. Gore & Associates prefers e-mail communication to face-to-face communication. C. W. L. Gore & Associates is characterized by a vertical organizational form. D. W. L. Gore & Associates refers to its employees as associates rather than employees.

D. W. L. Gore & Associates refers to its employees as associates rather than employees.

Which of the following accurately describes an organic organization? A. an inflexible organization that fosters slow decision making and high employee motivation B. an inflexible organization that fosters fast decision making and high employee motivation C. a flexible organization that fosters slow decision making and high employee motivation D. a flexible organization that fosters fast decision making and high employee motivation Organic organizations often are flexible and foster fast decision making and high employee motivation.

D. a flexible organization that fosters fast decision making and high employee motivation

To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A. a transnational strategy B. a multidomestic strategy C. a localization strategy D. a global-standardization strategy

D. a global-standardization strategy

Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use? A. an international strategy B. a focused-differentiation strategy C. a multidomestic strategy D. a transnational strategy

D. a transnational strategy

Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a transnational strategy

D. a transnational strategy

Broadview Company integrated certain important functions of Widget.com with Widget, while keeping other functions independent. To support this integration, the president of Widget shifted compensation incentives for both senior teams to accomplish joint goals rather than to focus solely on each business unit's performance. This scenario best exemplifies a(n) A. multidivisional structure. B. organic organization. C. simple structure. D. ambidextrous organization.

D. ambidextrous organization.

Opula Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Opula Inc. most likely pursue? A. a multidomestic strategy B. a transnational strategy C. a global-standardization strategy D. an international strategy

D. an international strategy

The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs. A. liquidation B. product diversification C. international D. blue ocean

D. blue ocean

Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior A. is neither unlawful nor unethical; hence, Neville and Andre cannot be reprimanded. B. typically exemplifies the agency problem of adverse selection. C. goes against the principles of shareholder capitalism. D. can be stopped by implementing performance incentives and strict control mechanisms.

D. can be stopped by implementing performance incentives and strict control mechanisms.

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies A. decentralization. B. founder imprinting. C. groupthink. D. core rigidity.

D. core rigidity.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance. A. political B. geographic C. administrative D. cultural

D. cultural

Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter's diamond framework does this scenario best exemplify? A. factor conditions B. complementor availability C. competitive intensity D. demand conditions

D. demand conditions

Which of the following entry modes was used extensively in Globalization 1.0 stage? A. strategic alliances B. acquisitions C. greenfield operations D. exports

D. exports

Which of the following terms or phrases best characterizes Zappos' organizational structure? A. centralized B. mechanistic C. extremely tall D. extremely flat

D. extremely flat

According to Alfred Chandler in his book Strategy and Structure, implementing a successful strategy depends on having an organizational structure that is _____ enough to accommodate the formulated strategy and future growth and expansion. A. insightful B. strong C. complex D. flexible

D. flexible

Which of the following features helps match a cost-leadership strategy to a functional structure? A. decentralization B. process and product innovations C. flexibility and mutual adjustment D. focus on economies of scale

D. focus on economies of scale

What is the term used to describe a situation in which a manager of a company has more inside information than an investor of the company? A. insider monopoly B. stakeholder strategy C. moral hazard D. information asymmetry

D. information asymmetry

Dmitri is a senior manager for the firm Kopney Inc. Because of his experience, he has been appointed to the board of HKS Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Dmitri is a(n) _____ for Kopney and a(n) _____ for HKS. A. CEO; COO B. COO; CEO C. outside director; inside director D. inside director; outside director

D. inside director; outside director

Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas. A. threat of new entrants B. liability of foreignness C. loss of reputation D. intellectual property exposure

D. intellectual property exposure

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n) A. transnational strategy to a multidomestic strategy. B. transnational strategy to a global-standardization strategy. C. international strategy to a multidomestic strategy. D. international strategy to a global-standardization strategy.

D. international strategy to a global-standardization strategy.

Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena A. is a board member of a major client. B. is more likely than other board members to take care of the stockholders. C. is also the CEO of other companies. D. is likely to provide the board with valuable inside information.

D. is likely to provide the board with valuable inside information.

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A. food processed in Fernsland. B. movies and TV shows produced in United Nerumbia. C. iron ore extracted in Fernsland. D. luxury items manufactured in United Nerumbia.

D. luxury items manufactured in United Nerumbia.

The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are A. difficult to differentiate. B. complex to produce. C. exported long distances. D. manufactured locally.

D. manufactured locally.

Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup? A. organic B. simple C. matrix D. mechanistic

D. mechanistic

In principal-agent relationships, _____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts. A. the agency problem B. adverse selection C. on-the-job consumption D. moral hazard

D. moral hazard

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of A. shareholder capitalism. B. adverse selection. C. shared value creation. D. moral hazard.

D. moral hazard.

DigiGames Inc. established itself as the foremost producer of computer games. However, as the market for these games moved from laptop computers to cell phones based on cloud applications, DigiGames failed to adapt its games enough to this new environment. As result, the firm soon lost its competitive advantage. Which of the following best describes this scenario? A. movement from core rigidity to core competency B. movement from core rigidity to founder imprinting C. movement from founder imprinting to core competency D. movement from core competency to core rigidity

D. movement from core competency to core rigidity

A(n) _____ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. A. international strategy B. transnational strategy C. global-standardization strategy D. multidomestic strategy

D. multidomestic strategy

Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a A. nonprofit organization. B. nationalized firm. C. sole proprietorship. D. multinational enterprise.

D. multinational enterprise.

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because A. it has emerged as a manufacturing powerhouse. B. of an efficient infrastructure and high labor costs. C. it has an abundance of uneducated workers who are highly trainable. D. of an abundance of well-educated, English-speaking young people.

D. of an abundance of well-educated, English-speaking young people.

Fast Call Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, Fast Call has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, Fast Call Inc. is most likely an organization that is A. formalized. B. mechanistic. C. centralized. D. organic.

D. organic.

Which of the following is part of Geert Hofstede's cultural dimensions? A. locus of control B. self-efficacy C. span of control D. power distance

D. power distance

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon? A. product differentiation B. superior customer service C. local responsiveness D. price

D. price

Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) A. shareholder capitalism scenario. B. inside director-outside director conflict. C. fiduciary responsibility oversight. D. principal-agent problem.

D. principal-agent problem.

An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) A. agent. B. manager. C. employee. D. principal.

D. principal.

SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to A. reduce its geographical distance from the other countries. B. increase its administrative distance from the other countries. C. increase its economic distance from the other countries. D. reduce its cultural distance from the other countries.

D. reduce its cultural distance from the other countries.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way 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 A. factor conditions. B. competitive intensity in a focal industry. C. demand conditions. D. related and supporting industries/complementors.

D. related and supporting industries/complementors.

Larry's Auto Repair is a small business in which the founder, Larry, makes most of the important strategic decisions as well as runs the day-to-day operations. He has three mechanics and a financial secretary working for him. Based on this scenario, Larry's Auto Repair has a(n) _____ structure. A. ambidextrous B. organic C. functional D. simple

D. simple

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A. the expectation that the agent will follow the country's laws and regulations B. the expectation that the agent will go above and beyond the call of duty C. the expectation that the agent will reconnect economic and social needs D. the expectation that the agent will act in the principal's best interest

D. the expectation that the agent will act in the principal's best interest

The conflict in a principal-agent relationship arises when A. the company has more outside directors than inside directors. B. the strategy adopted by the company's agents tries to emulate the mission statement created by the principals. C. stockholders and agents are involved in the day-to-day operations of the company. D. the goals of the principals and agents are not aligned with each other.

D. the goals of the principals and agents are not aligned with each other.

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that A. managers need to keep economic needs and societal needs disconnected from each other. B. a firm should expand its internal value chain to include nontraditional partners. C. businesses should focus on creating regional clusters such as Silicon Valley in the U.S. D. the largest but poorest socioeconomic group can yield significant business opportunities.

D. the largest but poorest socioeconomic group can yield significant business opportunities.

The administrative and political distance between two trading countries reduces when A. there are FDI restrictions in the host country. B. there is no independent central bank in the host country. C. there are tariffs and trade quotas in the host country. D. there is a well-functioning capital market in the host country.

D. there is a well-functioning capital market in the host country.

Outside directors are more likely to watch out for the interests of shareholders of their firm because A. they are more likely to benefit from using inside information to trade stocks. B. they do not have the safety of serving on the boards of other firms. C. they are part-time employees of the firm. D. they have more independence than inside directors.

D. they have more independence than inside directors.

Poison pills have become rare because A. leveraged buyouts can effectively skirt the measures put in place by poison pills. B. the market for corporate control is dead. C. federal laws prevent hostile takeovers. D. they retard an effective function of equity markets.

D. they retard an effective function of equity markets.

A company that is using extrinsic motivation as an output control mechanism will most likely A. organize training sessions for employees. B. cut budgets during recessions. C. implement a peer review system. D. threaten to lay off employees if they do not achieve targets.

D. threaten to lay off employees if they do not achieve targets.

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy? A. to take advantage of the high labor costs in the southern United States B. to take advantage of the high cost of living in the southern United States C. to take advantage of the low impact of globalization in the United States D. to take advantage of lower taxes in the southern United States

D. to take advantage of lower taxes in the southern United States

Warren owns shares in a company called Gerarch Communications Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Warren wants to proactively cut his losses and therefore sells his shares. Lawrence, a trading enthusiast, buys shares in Gerarch Communications because he believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A. separation of legal ownership and management control B. legal personality C. limited liability for investors D. transferability of investor ownership

D. transferability of investor ownership

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

D. transnational strategy.

In which of the following situations is pursuing an international strategy advisable? A. when a firm manufactures products related to national and religious identity B. when a firm operates in an industry where the pressure to keep the costs low is extremely high C. when a firm wants to be perceived as a domestic company by the host-country consumers D. when a firm enjoys a large domestic market, strong reputation, and brand name

D. when a firm enjoys a large domestic market, strong reputation, and brand name

As a result of globalization, the A. economies around the world are becoming more independent. B. cultural distance between countries is increasing. C. cost of doing business around the world is increasing. D. world's market economies are becoming more integrated. Globalization allows companies to source supplies at lower costs and to further differentiate products. Consequently, the world's market economies are becoming more integrated and interdependent.

D. world's market economies are becoming more integrated.