Intg Bus Policy & Strategy- Quiz Questions CH8-12

One of Waterfall Apparel's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "True to You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Waterfall's competitors. Although the campaign has resulted in a 10 percent decline in profits, Waterfall has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Waterfall's culture, exemplified by the "True to You" campaign, fail to support a competitive advantage? A) It does not increase economic value creation for the firm. B) It is not a rare resource. C) Waterfall lacks founder imprinting. D) The culture is not difficult to imitate.

A) It does not increase economic value creation for the firm.

WackyPop Inc. produces an inexpensive microwave popcorn 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 WackyPop performed poorly in? A) cost reduction B) local responsiveness C) global standardization D) transnational strategy

B) local responsiveness

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. They have defined value creation too narrowly in terms of financial performance. C. There is no transferability of stock ownership in publicly traded companies. D. Publicly traded companies have no legal standing and are not responsible for their debts.

B. They have defined value creation too narrowly in terms of financial performance.

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

In a non-equity alliance, which of the following types of information would firms most likely share? A. a manager's knowledge related to solving non-routine problems B. a top-level manager's experience related to making strategic decisions C. the documented information about the material composition of a product D. the employees' entrepreneurial skills

C. the documented information about the material composition of a product

Which of the following motivations for business growth involves principal-agent problems? A) increasing profits B) increasing market power C) reducing risk D) motivating managers

D) motivating managers

Which of the following statements is true of an equity alliance? A) An equity alliance is based on contractual agreements rather than partial ownership. B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D) An equity alliance creates weaker ties between the alliance partners when compared to a nonequity alliance.

B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

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.

Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate? A) knowledge race B) competitive feasibility C) managerial hubris D) unfettered free market

C) managerial hubris

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.

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

B) adverse selection.

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

B) should ask the CEO to step down because it has a greater obligation toward society.

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? A) to pursue an unrelated-options perspective without disrupting existing market economics B) to make small-scale investments in ventures poised to disrupt existing market economics C) to invest their excess cash flow in the superior technology of the biotech start-ups D) to share their continuously updated research technology with the biotech start-ups

B) to make small-scale investments in ventures poised to disrupt existing market economics

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should A) continue to outsource production. B) vertically integrate. C) exit the laptop industry. D) diversify its activities.

B) vertically integrate.

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest? A. Coolco, because air conditioners cost more to ship than dog toys do B. Coolco, because firms that face stiff competition at home tend to do better abroad C. Barker, because firms that face little or no competition at home tend to do better abroad

B. Coolco, because firms that face stiff competition at home tend to do better abroad

Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A. a break-even analysis. B. a real-options perspective. C. credible commitment. D. transaction cost economics.

B. a real-options perspective.

When Turbo Autos Inc. wanted to sell its cars in the country of Sylvanistan, it lacked access to distribution channels and marketing expertise in the country. Thus, Turbo Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A. increasing competitive intensity B. accessing critical complementary assets C. procuring additional capital investments D. reducing differentiation of product and service offerings

B. accessing critical complementary assets

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

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.

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.

General Electric's board has only one inside director, John Flannery, 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. A CEO is likely to be more responsible because he or she is setting his or her 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 him or her chair the board effectively. D. Any CEO will suggest board appointees who are friendly toward him or her.

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

________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. A. Venture capitalism B. Bootlegging C. Vertical integration D. Crowdsourcing

C. Vertical integration

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

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

Gino is the CEO of a financial services firm. What action should Gino take to be sure the firm avoids moral hazards? A) He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. B) Gino must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." C) He must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company. D) Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.

D) Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.

Which of the following is an example of explicit knowledge? A) knowing how to create surveys B) a research skill C) knowing how to assemble semiconductors D) a research summary

D) a research summary

What are poison pills? A. Shareholders use them 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. Companies use them 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.

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.

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 it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

D. transnational strategy.

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

A) It will benefit from economic arbitrage.

Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy? A) M-Form with centralized decision-making power (cooperative multidivisional) B) M-Form with decentralized decision-making power (competitive multidivisional) C) functional with centralized decision-making power D) functional with decentralized decision-making power

A) M-Form with centralized decision-making power (cooperative multidivisional)

Sanjaya was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically? A) Observe executives at the company, and see whether they model ethical behavior and demand it of others. B) Research the results of the ethics violations. If the perpetrators were fired or jailed, then the rest of the company is sound. C) Check the company's mission statement to make sure that it guarantees respect and integrity. D) Ignore the alleged ethics violations because there is no one standard of ethical behavior.

A) Observe executives at the company, and see whether they model ethical behavior and demand it of others.

Ruby, 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 Ruby? 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 scenarios best exemplifies a leveraged buyout of a microchip manufacturer, Rigoletto Inc.? A) The owner of another company buys all the outstanding shares of Rigoletto in order to take it private. B) A private equity firm, Stormcloud Inc., buys a large number of shares of Rigoletto in order to publicly trade it under a new name. C) Rigoletto sells all its shares and declares bankruptcy. D) Rigoletto buys back a large amount of its own shares from the stock market.

A) The owner of another company buys all the outstanding shares of Rigoletto in order to take it private.

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.

Blush Bashful Cosmetics Inc. 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 Blush Bashful most likely implement? A) a multidomestic strategy B) a local-as-global strategy C) a transnational strategy D) a sole provider strategy

A) a multidomestic strategy

Radial Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Radial should pursue A) backward integration. B) forward integration. C) product diversification. D) geographic diversification.

A) backward integration.

Sunset Foods relies on a highly centralized functional structure to ensure consistency in the quality and taste of its products and to drive down costs via process innovations. However, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. With the launch of its new line of breakfast foods coming up, how can Sunset improve its ability to collaborate without sacrificing the benefits of its current structure? A) by establishing cross-functional teams B) by switching to a simple structure C) by switching to a competitive M-form structure D) by decreasing managers' span of control

A) by establishing cross-functional teams

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.

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing. A) industry B) functional department C) economy D) customer segment

A) industry

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.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because A) the U.S. population was growing slowly and becoming more health conscious. B) its strategic position in the U.S. market was well protected through high entry barriers. C) this would help the company gain access to large cocoa plantations in China. D) Hershey's main strategic focus was on product and market diversification and not on the domestic market.

A) the U.S. population was growing slowly and becoming more health conscious.

Which of the following could be used as an example of why a stakeholder strategy approach to business has shortcomings? 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 United States brought about by the housing crisis D) the rise of GDP in countries that do not believe in Milton Friedman's philosophy

A) the nonsustainable 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 best illustrates forward vertical integration? A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B. A chain of ice cream parlors launches a brand of toys and accessories for children. C. A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D. A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

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.

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Elemental Pharma? A. It will lower its costs through economies of scale. B. It will diminish its economic value creation. C. Elemental Pharma will increase its cost of distribution. D. Elemental Pharma will reduce the size of its product line.

A. It will lower its costs through economies of scale.

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

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

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.

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate? A. a joint venture B. a franchisee C. a licensing contract D. a corporate acquisition

A. a joint venture

A primary advantage of organizing economic activity within firms is the A. ability to coordinate highly complex tasks to allow for specialized division of labor. B. low administrative costs because of reduced bureaucracy. C. eradication of the principal-agent problem. D. high-powered incentive to work as salaried employees for an existing firm.

A. ability to coordinate highly complex tasks to allow for specialized division of labor.

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should A. be prepared to restructure as the landscape changes. B. stick with the structure that brought it success no matter what happens. C. attempt to implement an unstructured organization. D. switch to whichever structure is most common in the industry.

A. be prepared to restructure as the landscape changes.

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A. by having higher performance in another sector B. by sharing their market power C. by increasing the firm's risk in another sector D. by motivating managers

A. by having higher performance in another sector

Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate? A. information asymmetry B. principal-agent problem C. experience-curve effect D. learning-curve effect

A. information asymmetry

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.

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.

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

Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A. licensing B. franchising C. crowdsourcing D. bootlegging

A. licensing

Which of the following statements about managing alliance-related tasks is true? A) Forming an alliance with another firm prohibits that firm from forming other alliances. B) Alliance management capability is based on three alliance-related tasks. C) A merger is one of the three options for alliance design and governance. D) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

B) Alliance management capability is based on three alliance-related tasks

Future Clothes Inc., a publicly traded company, designs and manufactures wearable technology. What approach should Future Clothes take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently. A) Compete based on price in order to drive out remaining competitors and create a monopoly. B) Focus on research and development as a form of non-price competition. C) Encourage new competitors to enter the market to improve competition. D) Prepare to resist a hostile takeover by buying back as much stock as possible.

B) Focus on research and development as a form of non-price competition.

Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its lowcost 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, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because A) it overestimated its need to protect its intellectual property. B) it underestimated its liability of foreignness when entering the Balalaika market. C) it underestimated its dwindling reputation before it enters the Balalaika market. D) it overestimates the geographic and cultural distance between Vandevar and Balalaika.

B) it underestimated its liability of foreignness when entering the Balalaika market.

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A. Recent advances in management science have greatly improved the success rate of strategic alliances. B. Many owners, managers, and business analysts believe they are essential to survive in an industry. C. Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D. These alliances have an excellent record of success if managers have enough confidence in the outcome.

B. Many owners, managers, and business analysts believe they are essential to survive in an industry.

Fun Foods Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fun Foods snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fun Foods take? A. Achieve economies of scale by using the global-standardization approach. B. Pursue a multidomestic strategy that includes new "local" brands. C. Keep costs low with undifferentiated product in the international strategy. D. Appease pressures for cost reductions by following the transnational approach.

B. Pursue a multidomestic strategy that includes new "local" brands.

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

B. Slalom Corp. focuses more on cost-reductions when compared to Janessa Inc.

Three months ago, Darren became a board member at Runswell, a publicly traded company. Two weeks ago, the board members discovered that Runswell's CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Darren and the other board members hold the CEO? A. They should hold her to the same ethical standards that they would expect of any Runswell employee—no more, no less. B. They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny. C. If the board members are able to determine that the CEO is not a "bad apple," then they should give her their full support. D. The board members must wait until the lawsuit results in a settlement or a guilty verdict.

B. They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny.

For which of the following companies will geographic distance be the most relevant factor in deciding whether 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

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers? A. licensing some of its newest designs to overseas competitors B. acquiring an airplane-parts manufacturer in another country C. beginning a brownfield project in its home country D. exporting airplane parts to many other countries

B. acquiring an airplane-parts manufacturer in another country

ABX 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.

A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n) A. non-equity alliance. B. equity alliance. C. joint venture. D. capital venture.

B. equity alliance.

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.

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.

Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying? A. concentric integration B. taper integration C. horizontal integration D. conglomerate integration

B. taper integration

Which of the following is an example of an external transaction cost? A. the cost of setting up a production unit B. the cost of searching for a contract manufacturer C. the cost of recruiting and retaining employees D. the cost of maintaining plant and machinery

B. the cost of searching for a contract manufacturer

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

C) Both Milk Benefits Inc. and Andrew Products Inc. will have to duplicate key business functions in multiple host countries.

R&M Chatelaine is one of the largest tax-preparation firms in the United States. It wants to acquire The Tax Experts, a smaller rival. After the merger, Chatelaine will be one of the two largest income-tax preparers in the U.S. market. What should Chatelaine include in its acquisition plans? A) It should refocus its attention from the national to the international market. B) In addition to acquiring The Tax Experts, it should also determine the best way to drive independent "mom and pop" tax preparers out of business. C) Chatelaine will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers. D) Chatelaine should enter a price-based competition with its other major competitor to force it out of business and become a monopoly.

C) Chatelaine will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.

Elvira 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?

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.

Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? A) The firm will be protected against the principal-agent problem. B) The firm's administrative costs will be low because of necessary bureaucracy. C) The firm will have more flexibility in purchasing and comparing prices of goods and services. D) The firm will have high-powered incentives, such as hourly wages and salaries.

C) The firm will have more flexibility in purchasing and comparing prices of goods and services.

Save On Everything Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Future 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) Save On Everything Inc. will focus more on cost-reduction than Solar Future Inc. B) Save On Everything Inc. will have its business functions spread across the world; Solar Future Inc.'s business functions will be highly centralized. C) Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level. D) Unlike Solar Future Inc., Save On Everything Inc. will be able to reap significant economies of scale and location economies.

C) Unlike Solar Future Inc., Save On Everything 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.

Vassar Systems 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 that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Vassar Systems? A) exporting B) franchise agreement C) acquisition D) licensing

C) acquisition

RHC Pharmaceuticals Inc., Lawrence Pharma Inc., and Quincy Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A) takeover B) buyout C) co-opetition D) acquisition

C) co-opetition

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

C) franchising

A payroll company in the nation of Antono is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion? A) one that considers payroll companies essential to national security B) one that is outside of any trading blocs that Antono participates in C) one that used to have a colonizer or colonized relationship with Antono D) in a country that has extensive tariffs and trade quotas to protect businesses

C) one that used to have a colonizer or colonized relationship with Antono

True Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, True Tomato worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A) site specificity B) research specificity C) physical-asset specificity D) human-asset specificity

C) physical-asset specificity

The managers at Speed Automobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Speed Automobile is most likely a result of A) time compression diseconomies. B) experience-curve effects. C) principal-agent problems. D) resource ambiguity.

C) principal-agent problems.

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in A) strategic outsourcing. B) lean manufacturing. C) product-market diversification. D) process diversification.

C) product-market diversification.

Mediflow, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Mediflow's European sales? A. Alert the European Union that conditions in the European medical technology market are approaching oligopoly. B. Initiate a hostile takeover of a European rival. C. Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can gain access to new distribution channels. D. Contact its congressional representative to request higher tariffs on European technology products.

C. Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can gain access to new distribution channels.

American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern? A. Require business units at American Snacks and Très Bien to sign loyalty pledges. B. Encourage business units at American Snacks to act independently. C. Arrange for the alliance to be managed at the corporate level. D. Sever the relationship with Très Bien and find a more trusting corporate partner.

C. Arrange for the alliance to be managed at the corporate level.

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

Vermilion Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. 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 Vermilion most likely pursue? A. international strategy B. multidomestic strategy C. global-standardization strategy D. transnational strategy

C. global-standardization strategy

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate? A. supply-chain B. technological C. horizontal D. perfect

C. horizontal

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

C. multidivisional

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. D. the surviving firms will need protection against the relaxed entry barriers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.

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.

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

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

Bulldog Holdings is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A) venture capitalism B) franchising C) joint venture D) parent-subsidiary relationship

D) parent-subsidiary relationship

Which of the following is an example of an internal transaction cost? A) the cost of searching for a contract manufacturer B) the cost of signing a contract with a supplier C) the cost of buying raw materials D) the cost of maintaining a production unit

D) the cost of maintaining a production unit

How does horizontal integration within an industry affect the surviving firms? A. By increasing the threat the surviving firms will face from new entrants B. By strengthening the rivalry among existing firms C. By requiring the surviving firms to shift their focus from non-price to price competition D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Which of the following best illustrates physical-asset specificity? A. a unique training program developed in an organization B. a ship container designed to carry more than the average load of iron ore C. a generic machine that can be used to churn different mixtures D. a machine solely designed to give a candy its trademarked shape

D. a machine solely designed to give a candy its trademarked shape

BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure 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, BioCure Inc. is most likely an organization that is A. formalized. B. mechanistic. C. centralized. D. organic.

D. organic.