MANA 4322 EXAM 2
32.When an organization with a simple structure increases its sales revenue and volume of outputs, it is most likely to develop a
A) divisional structure. B) functional structure. C) product-market structure. D) geographic structure. Answer: B
46.All of the following are advantages of a strategic business unit (SBU) type of organizational structure except
A) divisions with similar products, markets, or technologies are formed into homogeneous groups that can achieve synergies. B) divisional executives can respond quickly to market changes and opportunities. C) planning and control by the corporate office is more manageable. D) the corporate office is more removed from the individual divisions. Answer: D
50.A matrix organizational structure is characterized by
A) dual reporting relationships. B) a combination of functional and divisional organization structures. C) efficient use of resources and expertise. D) all of the above Answer: D
67.In firms with related diversification strategies, the culture should foster ________ levels of interdependence and rewards should be based primarily on _____________ measures of output.
A) low, financial B) low, behavioral C) high, financial D) high, behavioral Answer: D
44. Appreciation of the U.S dollar will have the following impact on McDonald's:
A) lower sales abroad because foreign customers cannot afford McDonalds' products. B) more transfer of ingredients from the U.S to branches abroad to take advantage of the higher dollar. C) lower profits, because foreign profits will be reduced when measured in dollars. D) no impact at all. Answer: C
33.When an organization with a functional structure diversifies into related product-markets, it generally
A) maintains its functional structure. B) develops a divisional structure. C) develops a matrix structure. D) develops a worldwide product-division structure. Answer: B
39.At Sharp Corporation, work is divided into units that specialize in production, marketing, research and development, and other management tasks. This is an example of a
A) simple structure. B) functional structure. C) divisional structure. D) matrix structure. Answer: B
19.Boundaries and constraints are just used to maintain order in an organization and have little effect on the organization's strategic priorities.
Answer: False
19.Evaluation activities add value by helping firms finalize transactions including negotiating contracts, making payments, and taking delivery.
Answer: False
19.In a barrier free organization, differences in skills, authority, and talent disappear.
Answer: False
19.To successfully empower employees to achieve organizational goals, leaders must perform the tasks of resource allocation and power brokering.
Answer: False
2.Radical innovations are evolutionary applications of novel ideas within existing paradigms.
Answer: False
20. A multidomestic strategy is the most appropriate strategy for international operations because it drives economies of scale as far as possible and provides a middle of the road product appealing to the largest number of consumers in every market.
Answer: False
20.An advantage of the barrier-free form of organizing is that internal cooperation and shared objectives are not required for it to work.
Answer: False
20.Content such as entertainment programming does little to improve the value proposition of a website.
Answer: False
21.The "top-down" view of empowerment is concerned with risk taking, change, and "doing the right thing."
Answer: False
21.The factor that most distinguishes a "superior" team from a "good" team is talent.
Answer: False
21.Unexpected events (such as wildcat strikes or new government regulations) have little effect on short-term objectives that need to remain fixed to be effective.
Answer: False
22.Because the modular form of organizing involves outsourcing vital functions, modular firms often forfeit full strategic control.
Answer: False
23.Exit champions are often reluctant to gather hard data about a venture because it might kill the project.
Answer: False
23.The phrase "Lead, follow, or get out of the way" is indicative of the bottom-up approach to empowerment.
Answer: False
24.Real options logic is useful when corporations consider stock options as a way to finance entrepreneurial ventures.
Answer: False
24.The Internet offers few advantages for focusers because niche players and small companies cannot implement Internet capabilities as effectively as their larger competitors.
Answer: False
25.In firms with a differentiation strategy, qualitative and intangible incentives and rewards are not an effective means of motivating employees.
Answer: False
25.Internal benchmarking is discouraged in most organizations because it creates competition and internal rivalries that are counterproductive.
Answer: False
26.Personalization and customization features always add value to the websites of differentiators that use them.
Answer: False
26.The term "skunkworks" is used to refer to a type of in-house facility that corporations use to develop entrepreneurial ideas.
Answer: False
27.Competitive benchmarking is a method of seeking the best examples of practices or processes that have essentially the same function regardless of industry.
Answer: False
27.Technological innovativeness refers to novelty in management systems, control techniques, and organizational structure.
Answer: False
28.First movers in an industry often capture above-average profits, but usually find it difficult to maintain early market share gains.
Answer: False
28.The Internet has provided a small subset of companies with greater tools for managing costs.
Answer: False
29. Typically, joint ventures involve less control and risk than franchising.
Answer: False
29.Although many organizations encourage creativity and risk taking, few successful companies tolerate failure.
Answer: False
29.Auditors are appointed by the Securities and Exchange Commission to audit a company's financial statements.
Answer: False
3.As an industry matures, there are greater opportunities for change and so innovations tend to be more radical.
Answer: False
3.For firms competing in highly unstable and turbulent industries, "traditional" strategic controls are most appropriate.
Answer: False
30. A franchise generally expires after a few years whereas a license is designed to last into perpetuity.
Answer: False
30.In their book, Reengineering the Corporation, Michael Hammer and James Champy suggest the innovative application of new engineering technologies to revitalize American corporations.
Answer: False
30.Stock analysts generally issue more "sell" recommendations than "buy" recommendations.
Answer: False
31. Foreign direct investment includes exporting and licensing.
Answer: False
31.Ethical crises are bad for an organization's reputation but they rarely have any financial consequences.
Answer: False
31.One of the advantages of boundaryless structures is that they can be implemented without upgrading the skills of workers and managers.
Answer: False
33.The Sarbanes-Oxley Act of 2002 stipulates that executives of a firm will still be able to sell their shares in the firm when other employees cannot.
Answer: False
34.An effective way to instill ethical behavior in an organization is to distribute rewards strictly on the basis of outcomes.
Answer: False
4.Leaders play an important role in sustaining an organization's culture, but they are powerless to change it.
Answer: False
4.Since the Balanced Scorecard makes no mention of innovation most firms do not need to innovate in order to improve performance and/or achieve competitive advantages.
Answer: False
5.Leaders are not expected to accept personal responsibility for ethical behavior in an organization because ethics is a matter of individual choice.
Answer: False
6."Contemporary" strategic controls involve comparing actual performance to predetermined goals.
Answer: False
6.The Internet suppresses the bargaining power of buyers by providing them with more information to make buying decisions.
Answer: False
6.To enhance integration and control of related product market activities, the functional structure minimizes centralization.
Answer: False
7.In general, radical innovations occur quickly and incremental innovations take a long time to develop.
Answer: False
8.A major disadvantage of a divisional structure is that because when divisions are separated to manage individual product-markets, there is a separation of strategic and operational control.
Answer: False
8.An end user's switching costs are potentially much higher because of the Internet.
Answer: False
8.Behavioral barriers to change occur because of conflicts between departments, conflicts arising from power relationships, and refusal to share information.
Answer: False
9.A firm's innovation efforts rarely benefit from partnering with non-business entities such as universities and government agencies.
Answer: False
9.As firms downsize, a control system based on rewards and culture becomes dysfunctional.
Answer: False
9.The two broad bases of a leader's power are organizational and hierarchical.
Answer: False
In "single loop" learning, the organization's assumptions, premises, goals and strategies are continuously monitored, tested, and reviewed.
Answer: False
1.Three key interdependent strategic leadership activities are: designing the organization; determining its direction; and, nurturing a culture dedicated to excellence and ethical behavior.
Answer: True
10.Channel conflict occurs when buyers can access the same products through several different outlets.
Answer: True
10.For young managers who see themselves as free agents, behavioral controls such as rewards and culture can be an effective way to enhance organizational loyalty.
Answer: True
10.Strategic renewal and the pursuit of new venture opportunities are the two primary aims of corporate entrepreneurship.
Answer: True
11."Coercive power" is the power exercised by use of fear of punishment for errors of either omission or commission by employees.
Answer: True
11.Corporate entrepreneurship is sometimes called "intrapreneurship."
Answer: True
12.The process known as disintermediation occurs when "middlemen" are removed from a supply chain or distribution channel.
Answer: True
13. An advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain.
Answer: True
13.Emotional Intelligence (EI) is generally a better predictor of life success than intelligence quotient (IQ).
Answer: True
13.Firms using a focused approach to corporate entrepreneurship typically separate corporate venturing activities from on-going operations of the firm.
Answer: True
13.The matrix structure attempts to combine the advantages of the functional and product-oriented structure.
Answer: True
14.Business incubators are designed to support fledgling entrepreneurial ventures until they can operate as stand-alone businesses.
Answer: True
15.Different functional areas within an organization often have different reward systems.
Answer: True
15.The Internet heightens the threat of substitutes because it creates new ways to accomplish the same tasks.
Answer: True
16.A worldwide product division structure is used when global strategies require that each division be responsible for overall efficiency and performance.
Answer: True
16.Successful learning organizations have a proactive, creative approach to the unknown.
Answer: True
17. Within a worldwide market, the most effective strategies are neither purely multidomestic nor purely global.
Answer: True
17.Dispersed approaches to corporate entrepreneurship are often found in organizations with a strong spirit of entrepreneurship.
Answer: True
17.For a reward system to be effective, it must be perceived as fair and equitable.
Answer: True
17.Most analysts agree that use of the Internet will lower transactions costs.
Answer: True
18. Theodore Levitt has argued that people around the world are willing to sacrifice preferences in product features, functions, and design if they are offered lower prices and high quality.
Answer: True
18.The purpose of boundary-less forms of organizing is to facilitate the widespread sharing of knowledge and information across internal and external boundaries of the organization.
Answer: True
19.According to the text, new venture ideas must pass through two critical stages to be implemented by corporations -- project definition and project impetus.
Answer: True
2.A small firm with a simple structure often fosters creativity and individualism because of its informal atmosphere.
Answer: True
2.Setting a direction is the leadership activity that involves developing a strategic vision of what the organization could become.
Answer: True
2.The traditional approach to strategic control relies on feedback from performance measurement to strategy formulation.
Answer: True
20.In the "top-down" approach to empowerment, leaders clarify the mission, delegate responsibility, and hold people accountable for results.
Answer: True
20.Product champions are critical during the period after a new venture project has been defined but before it has gained momentum and achieved project impetus.
Answer: True
20.Short-term objectives and action plans are types of boundaries that channel the efforts of employees toward goal accomplishment.
Answer: True
21.Business models can be defined as methods companies use to create value and earn profits in a competitive environment.
Answer: True
21.Only about 50 percent of corporate venturing efforts reach profitability within six years of their launch.
Answer: True
22.Action plans permit a degree of autonomy for managers who sometimes must modify activities to achieve the desired outcome.
Answer: True
22.The strategic goals of corporate entrepreneurship are often just as important as the financial goals.
Answer: True
22.The trend among many organizations is toward forms of empowerment that rely on trust, team building, and the expertise of employees at all levels.
Answer: True
23. In a global strategy a firm operates all its businesses under a single common strategy regardless of location.
Answer: True
23.Modular companies can achieve rapid growth because they don't require large investments in fixed assets.
Answer: True
23.Rule-based controls are appropriate in organizations where most of the employees are unskilled.
Answer: True
24."Open book" management is a technique for gathering and disseminating internal information so that all employees can be involved in decision making and management.
Answer: True
24.In firms that compete on the basis of cost, incentives tend to be based on explicit quantitative targets.
Answer: True
24.Outsourcing relieves companies of the requirement to maintain skill levels needed to manufacture essential components.
Answer: True
25.Corporate ventures that use real options logic in decision making tend to keep total investment low in order to minimize the downside risk of a project.
Answer: True
25.One of the risks of outsourcing is a loss of cross-functional skills.
Answer: True
26.In firms that follow related diversification strategies, reward and control systems rely on qualitative indicators since the organization needs to reward and reinforce behaviors that facilitate sharing and collaboration.
Answer: True
26.In order to gather information from informal sources, successful executives must be good listeners.
Answer: True
26.The virtual type of organization is a network of independent companies linked together to share skills, costs, and access to one another's markets.
Answer: True
27.The virtual organization is characterized by participating firms which pursue a collective strategy that enables them to cope with environmental uncertainty through cooperative efforts.
Answer: True
28.Establishing a culture of dissent can be an effective means of questioning the status quo.
Answer: True
28.Managing virtual structures requires new and difficult-to-acquire managerial skills.
Answer: True
28.The risk of being acquired by hostile raiders is often referred to as the takeover constraint.
Answer: True
29.Competitive aggressiveness is a response to threats whereas proactiveness is a response to opportunities.
Answer: True
29.Horizontal organization structures facilitate resource sharing and help create a sense of common purpose.
Answer: True
29.Many differentiation advantages are diminished by the Internet.
Answer: True
3.A simple organizational structure may lead to problems such as unclear boundaries of authority and few career advancement options.
Answer: True
3.Designing the organization is the leadership activity that involves building structures, teams, systems, and processes that facilitate the implementation of a leader's vision.
Answer: True
30.Business risk taking refers to the risk associated with entering untested markets or committing to unproven technologies.
Answer: True
30.Incumbent firms that thought a niche market was too small to enter in the past may use Internet technologies to enter that segment and compete with focusers.
Answer: True
30.Leaders who fail to institute proper systems and controls that facilitate ethical conduct share responsibility with those who conceive, execute, and knowingly benefit from corporate misdeeds.
Answer: True
31.Public companies are required by law to disclose information regarding executive compensation packages.
Answer: True
31.The Internet makes it possible for firms that want to expand internationally to "leapfrog" the usual path(s) of international development because the technology allows firms to directly reach customers from around the globe.
Answer: True
32.Corporate codes of conduct provide norms and expectations for employees to refuse to commit unethical acts.
Answer: True
32.The Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of publicly-listed companies must reveal off-balance-sheet finances and vouch for the accuracy of information provided.
Answer: True
33.Ethical behavior can be reinforced through the use of an appropriate reward and evaluation system.
Answer: True
4.In most industries, new entrants will be a bigger threat because the Internet lowers entry barriers.
Answer: True
4.One disadvantage of a functional structure is that differences in functional orientation may impede organization coordination and communication.
Answer: True
4.Sales quotas, operating budgets, and production schedules are examples of "traditional" controls.
Answer: True
5.As firms grow, owner managers often need to hire functional specialists to handle the increased information-processing burden.
Answer: True
5.New entrants who use the Internet to launch their businesses can use overall low cost and/or differentiation strategies to compete.
Answer: True
5.Process innovations are often associated with a low cost leadership strategy.
Answer: True
6.The tendency of many individuals to throw "good money at bad decisions" despite negative performance feedback is referred to as "escalation."
Answer: True
6.The term "strategic envelope" refers to the scope of a firm's innovation efforts.
Answer: True
7.A major disadvantage of adopting a divisional structure is the tendency for managers to focus on short-term objectives
Answer: True
7.Because a large amount of consumer information is available via the Internet, end users typically have greater bargaining power.
Answer: True
7.Informational control is primarily concerned with whether or not the organization is "doing the right things."
Answer: True
7.Systemic barriers to change refer to elements of an organization's design, structure, and reporting relationships that impede the flow of information.
Answer: True
8.Continuous monitoring enhances an organization's ability to respond with speed and flexibility.
Answer: True
8.Radical innovation often involves open-ended experimentation which can be very time consuming.
Answer: True
9.Operational decision making in a large business places excessive demands on the firm's top management.
Answer: True
9.The bargaining power of distribution channel buyers may decrease because of the Internet.
Answer: True
Boundaries and constraints, when used properly, can minimize improper and unethical conduct.
Answer: True
International expansion can extend the life cycle of a product that is in its maturity stage in a firm's home country.
Answer: True
High levels of environmental awareness in Denmark have led to a decline in Denmark's Industrial competitiveness in the international marketplace.
False
The factor conditions of a country are inherited and cannot be created.
False
The trend towards worldwide markets makes it easier to predict where competitors will spring up
False
Typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.
False
With regard to "factor conditions" the pool of resources that a firm (or nation) has is much more important than the speed and efficiency with which these resources are deployed.
False
Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent
True
61.The "bottom-up" perspective of empowerment
A) clarifies the organization's values and mission. B) builds teams to encourage cooperative behavior. C) communicates specific plans. D) encourages employees to "ask permission rather than forgiveness." Answer: B
52.On average, approximately what percentage of corporate ventures reach profitability after six years?
A) 80 percent B) 65 percent C) 50 percent D) 35 percent Answer: C
Which one of the following is one of Theodore Levitt's assumptions supporting a pure global strategy?
A) Consumers are willing to pay more for specific product features. B) Customer needs and interests are becoming more dissimilar. C) If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved. D) MNCs can compete with aggressive pricing on low cost products that meet the common needs of global consumers. Answer: D
Industries in which proportionally more value is added in ___________ activities are more likely to benefit from a ________ strategy.
A) Downstream; global B) Upstream; Multidomestic C) Upstream; global D) Manufacturing; multidomestic Answer: C
31.In the opening case, Polaroid fell victim to the "innovator's dilemma." What does this refer to?
A) Excessive borrowing in order to develop more radical innovations. B) Whether to innovate radically or incrementally. C) Becoming preoccupied with meeting current market needs and ignoring future innovation needs. D) Conflict over how to integrate product and process innovations. Answer: C
32.The company in the opening case, Agillion, Inc., provided expert Internet services on an outsourced basis for less money than it cost firms to develop those capabilities internally. This type of business is known as a(n)
A) Internet service provider. B) Application service provider. C) Contract laborer. D) Human resources consultant. Answer: B
68.All of the following are ways that Internet technologies are being used to enhance a differentiation strategy except:
A) Internet-based knowledge management systems that link all parts of the organization are shortening response times and accelerating organization learning. B) Virtual organizing and online "officing" are being used to minimize firm infrastructure requirements and lower costs. C) Online access to real-time sales and service information is being used to empower the sales force and continually update R&D and technology development efforts. D) Automated procurement and payment systems provide both suppliers and customers with access to detailed status reports and purchasing histories. Answer: B
32.In the opening case, Polaroid was forced to declare bankruptcy after 30 years of strong financial performance. What was the fundamental problem that led to Polaroid's downfall?
A) It overestimated the value of its core business. B) Its innovations were considered too radical. C) It was unwilling to borrow funds to invest in innovation. D) All of the above. Answer: A
___________ are most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multiple locations in many countries.
A) Joint ventures B) Strategic alliances C) Licensing agreements D) Wholly owned subsidiaries Answer: D
____________ entail the creation of a third-party legal entity, whereas __________ do not.
A) Licensing agreements, joint ventures B) Joint ventures; strategic alliances C) Strategic alliances; joint ventures D) Franchising agreements; strategic alliances Answer: B
70.All of the following are ways that Internet technologies are being used to enhance a focus strategy except:
A) Permission marketing techniques are focusing sales efforts on specific customers who opt to receive advertising notices. B) Niche portals that target specific groups are providing advertisers with access to viewers with specialized interests. C) Human resources departments are using online testing and evaluation techniques in the hiring process and online training after they hire. D) Procurement technologies that use Internet software to match buyers and sellers are highlighting specialized buyers and drawing attention to smaller suppliers. Answer: C
65.All of the following are ways that Internet technologies are being used to enhance an overall cost leadership strategy except:
A) Quick online responses to service requests and rapid feedback to customer surveys and product promotions are enhancing marketing efforts. B) Direct access to progress reports and the ability for customers to periodically check work-in-progress is minimizing rework. C) Online bidding and order processing are eliminating the need for sales calls and minimizing sales force expenses. D) Online purchase orders are making many transactions paperless, reducing the costs of procurement and paper. Answer: A
36._______________________________ refers to efforts to create designs and applications of technology to develop new products; _______________________ refers to efforts to improve the efficiency of organizational systems such as manufacturing and operations.
A) Radical innovation; incremental innovation B) Breakthrough innovation; instrumental innovation C) Product innovation, process innovation D) Product innovation, service innovation Answer: C
64.All of the following are examples of Internet business models except
A) Referral-based model B) Subscription-based model C) Prescription-based model D) Production-based model Answer: C
35.________________ produce fundamental changes that can transform a company or even revolutionize an industry; ___________________ enhance existing practices and often represent evolutionary applications of fundamental breakthroughs.
A) Technological breakthroughs, product-market breakthroughs B) New technologies, new paradigms C) Incremental innovations, radical innovations D) Radical innovations, incremental innovations Answer: D
71.Internet start-up Buy.com tried to build brand with an overall low cost leadership strategy. Why is this a risky strategy?
A) To build brand recognition, companies must sell high-priced products or services. B) The Internet may help focusers build competitive advantage, but not low cost leaders. C) Only combination strategies that combine features of more than one competitive strategy will work for Internet companies. D) Investing heavily to build brand recognition is considered ineffective for low cost leaders because customers who seek low prices are typically not brand loyal. Answer: D
40.The leader's role in developing a strategic vision provides many benefits including
A) a clear future direction. B) a framework for their organization's mission and goals. C) enhanced employee communication and commitment. D) all of the above Answer: D
62.Even though Brazilian-based Semco, Inc. does not rely on rules and job titles to maintain control, and even allows its employees to bid for their own salaries, it has grown into a large diversified company. This is an example of
A) a culture based on loyalty and trust. B) a reward system based on self-limiting controls. C) replacing boundaries and constraints with culture and rewards. D) all of the above Answer: D
68.The phrase that best defines a virtual organization is
A) a dot.com company. B) a type of modular structure. C) an organization that uses information technology to integrate different functions. D) a continually evolving network of independent companies. Answer: D
51.The source of referent power is
A) a subordinate's identification with the leader. B) a leader's identification with the subordinates. C) derived from the fact that the manager can potentially act as a reference when the employee applies for another job. D) derived from the manager's ability to provide effective incentives to employees. Answer: A
65.What advantages does outsourcing provide an organization?
A) accessing best in class goods and services B) enabling rapid expansion with relatively low capital investment C) focusing scarce resources on core competencies D) all of the above Answer: D
34.The "traditional" approach to strategic control is sequential. Which of the following is not one of the steps in the sequence?
A) action plans are submitted by lower level managers. B) performance is measured against the predetermined goal. C) strategies are implemented. D) strategies are formulated and top management sets goals. Answer: A
57.Which of the following statements about action plans is true?
A) action plans, though specific, should permit a degree of autonomy to managers and not be constrained by budgets. B) action plans must be specific so that managers will have a clear understanding of the resource requirements necessary to implement the plan. C) action plans should not be constrained by a time frame in order to allow for modification. D) although managers must be held accountable for implementing action plans, this accountability often erodes the managers motivation to implement the plan on a timely basis. Answer: B
56.Effective short-term objectives have all of the following priorities except
A) an emphasis on "do your best" goals. B) being achievable yet challenging. C) providing a specific time horizon for their attainment. D) being specific and measurable. Answer: A
49.Top executives who support the view that employees should "do as I say, not as I do"
A) are simply demonstrating their leadership position. B) are emphasizing the need for consistency in word and deed. C) can sabotage cultural cohesion and employee commitment. D) are just being honest and open about the role of executives. Answer: C
50.Product champions
A) are typically senior executives. B) are usually inventors of some sort. C) scavenge for resources and encourage others to back promising new ideas. D) are strong supporters of the status quo. Answer: C
33.Incremental innovations
A) are usually highly disruptive. B) usually represent technological breakthroughs. C) are usually small improvements in products or processes. D) nearly always can be patented. Answer: C
70.Complete the following sentence: "Virtual organizations ____________________________ whereas modular organizations ____________________________."
A) are usually permanent, are usually temporary B) accept interdependent destinies, pursue collective strategies C) pursue collective strategies, forfeit strategic control D) give up part of their strategic control, retain full strategic control Answer: D
69.External control mechanisms include all of the following except
A) auditors. B) analysts. C) competitors. D) the market for corporate control. Answer: C
59.Which of the following is NOT an advantage of teams?
A) because teams interact so closely, coordination and integration becomes unnecessary. B) teams substitute peer-based control for hierarchical control of work. C) because of sharing, teams often develop more creative solutions. D) teams permit the absorption of administrative tasks previously performed by specialists. Answer: A
42.Top managers at USA Today meet every Friday to review daily operational reports and year-to-date data. This is an example of
A) behavioral control. B) informational control. C) strategy formulation. D) strategy implementation. Answer: B
56.To evaluate whether to get into automobile sales, Wal-Mart recently invested in just four auto sales operations on a trial basis to assess consumer reaction. According to the text, this action reflects a form of
A) bottom-up corporate venturing. B) real options logic. C) financial planning. D) environmental scanning. Answer: B
44.Complete the following sentence: "As firms simultaneously downsize and face the need for increased coordination across organization boundaries, a control system based primarily on ________________________________is dysfunctional."
A) boundaries and constraints B) culture and rewards C) organizational loyalty D) innovation and risk taking Answer: A
52.Internet-based venues that draw business buyers and sellers together in one virtual space where participants can reach new customers and reduce transaction costs are known as
A) browsers. B) E-marketplaces. C) cyberstores D) portals. Answer: B
70.Which kind of risk taking requires that a company borrow heavily or commit a large portion of its resources in order to grow?
A) business risk taking B) financial risk taking C) personal risk taking D) technological risk taking Answer: B
69.All of the following are types of risks that executives must address except
A) business risk taking. B) financial risk taking. C) personal risk taking. D) product-market risk taking Answer: D
55.How do infomediaries and consumer information websites increase the intensity of competitive rivalry:
A) by shifting customers attention away from issues of price. B) by making competitors in cyberspace seem less equally balanced. C) by consolidating the marketing message that consumers use to make a purchase decision to a few key pieces of information that the selling company has little control over. D) by highlighting a firms unique selling advantages. Answer: C
67.Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?
A) celebrity endorsements B) prestige packaging C) exceptional service D) mass customization Answer: D
48.Removing the organizations or business process layers responsible for intermediary steps in the value chain is known as
A) channel conflict. B) disaggregation. C) disintermediation. D) reintermediation. Answer: C
40.The innovation dilemma known as seeds versus weeds refers to
A) choosing to pursue radical rather than incremental innovations. B) choosing to pursue product rather than process innovations. C) promoting organizational stars onto innovation teams rather than involving all employees in innovation efforts. D) none of the above. Answer: D
45.According to the text, ________________________ which support fledgling startups are often used to pursue specific entrepreneurial ventures developed by _________________________.
A) collaboration partners; strategic partners B) business incubators; new venture groups C) product champions; corporate venture capitalists D) lower-level managers; upper-level managers Answer: B
72.Technical Computer Graphics uses small project teams and forms alliances with its teams, customers, and suppliers to accomplish projects. This is an example of
A) combining forms of organizational structure. B) outsourcing. C) horizontal systems and processes. D) democratic management control. Answer: A
66.The benefits gained by firms that are the first to enter new markets, establish brand identity, and/or adopt new technologies are known as
A) competitive aggressiveness. B) technological capabilities. C) first-mover advantages. D) breakthrough innovations. Answer: C
72.By takeover constraint, we mean
A) constraints placed by the firm on raiders who want to takeover the firm. B) legal constraints that limit the ability of the raiders to acquire a firm. C) provisions in the charter of a company that prevents it from attempting a takeover of other companies. D) the risk of being acquired by a hostile raider. Answer: D
45.Which of the following approaches to behavioral strategic control should be utilized least in an organization in which there is a great need for innovation and a high degree of autonomy?
A) culture B) rewards C) boundaries D) all of the above are equally important Answer: C
47.All of the following are examples of how organizational culture exerts behavioral control except
A) culture helps maintain control by creating behavioral norms. B) culture generates unwritten standards of acceptable behavior. C) culture encourages individual identification with the organization and its objectives. D) culture sets explicit boundaries. Answer: D
62.Examples of value-adding content often found on websites include all of the following except
A) customer feedback. B) online shopping. C) expertise. D) entertainment programming. Answer: B
40.Which of the following is an advantage of a functional type of organizational structure?
A) decentralized decision-making enhances an organization-wide perspective across functions. B) it facilitates the development of general management talent. C) pooling of specialists enhances coordination and control. D) it is easy to establish uniform performance standards. Answer: C
39.According to the text, effective leadership is like a three-legged stool consisting of all of the following except
A) dedication to maintaining the status quo B) nurturing a culture dedicated to excellence and ethical behavior C) determining a direction D) designing the organization Answer: A
49.Expert power is
A) derived from organizationally conferred decision-making authority. B) arises from a manager's access, control, and distribution of information that is not freely available to everyone in an organization. C) derived from referent power. D) is derived from the leader's capability and knowledge in a particular field. Answer: D
35.In the opening case, Morrison Knudsen, CEO Bill Agee launched a program to build railroad cars. This was an example of
A) designing the organization. B) steering the company away from its core competencies. C) unethical behavior. D) inspired leadership. Answer: B
73.It is generally argued that the takeover constraint
A) deters management from engaging in opportunistic behavior. B) deters management from considering acquiring other companies. C) deters management from declaring dividends. D) deters management from increasing a firm's level of borrowing. Answer: A
39.The innovation dilemma known as building capabilities versus collaborating refers to
A) developing innovation skills internally versus partnering with qualified outsiders. B) building innovative products in-house versus outsourcing. C) building credibility by launching products ahead of potential collaboration partners. D) all of the above. Answer: A
41.Which of the following is a disadvantage of a functional type of organizational structure?
A) differences in functional orientation may impede communication and coordination. B) use of managerial and technical talent is inefficient due to pooling of expertise in functional areas. C) decision making is centralized at the top of the organization. D) managers tend to be overly concerned with long-term strategies that minimize the importance of functional area strengths. Answer: A
71.Which of the following is not a disadvantage of virtual structures?
A) difficulty in individual and organizational knowledge sharing. B) potential loss of operational control among partners. C) loss of strategic control over emerging technology. D) difficulty in determining where one company ends and another begins due to close interdependencies. Answer: A
48.Strategic business unit (SBU) and holding company structures result from extensive
A) diversification. B) vertical integration. C) international expansion. D) organizational flattening. Answer: A
51.Complicated working relationships, intense power struggles, and excessive reliance on group processes are disadvantages of what type of organizational structure?
A) divisional B) matrix C) holding company D) functional Answer: B
34.A strategy of related diversification requires most firms to organize around geographical areas or product lines. This type of organizational growth leads to a(n)
A) divisional structure. B) functional structure. C) matrix structure. D) international structure. Answer: A
43.Which of the following is an advantage of a divisional type of organizational structure?
A) efficient use of managerial and technical talent B) an enhanced ability to respond quickly to changes in the external environment C) high degree of emphasis on long term performance D) uniformity in image and quality across divisions Answer: B
66.Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of
A) electronic data interchange. B) knowledge management. C) collaborative design. D) mass customization. Answer: D
57.Which of the following is not one of the ways the Internet is lowering transaction costs
A) eliminating supply chain intermediaries. B) evaluating employee performance. C) minimizing office expenses. D) reducing business travel. Answer: B
60.The "top down" perspective of empowerment
A) encourages intelligent risk-taking. B) trusts people to perform. C) encourages cooperative behavior. D) delegates responsibility. Answer: D
40.The benefits of continuous monitoring include
A) enhancing the organization's ability to respond with speed and flexibility. B) replacing the time-consuming process of organizational learning. C) dramatically altering the organization's response to its competitive environment. D) all of the above Answer: A
64.The 3M Corporation, one of the most highly innovative companies, uses several approaches and "rules-of-thumb" to encourage innovation. Which of the following is not one of them?
A) ensure that all risk-taking activities have a financial pay-off within one year. B) encourage experimentation and risk-taking by tolerating failure. C) reward the champions of successful new product ideas. D) invite customers to brainstorm about new product concepts. Answer: A
68.According to the text, firms that want to enhance their entrepreneurial position by being competitively aggressive should
A) enter markets with drastically lower prices. B) foster creativity and experimentation. C) continuously seek out new products or services. D) research risk factors to minimize uncertainty. Answer: A
54.Strategic reasons for undertaking a corporate venture include which of the following:
A) entering into new markets. B) expanding capabilities by acquiring new knowledge. C) building the corporation's base of resources. D) all of the above Answer: D
58.Rule-based controls are most appropriate in organizations with all of the following characteristics except
A) environments are stable and predictable. B) employees are highly skilled and independent. C) consistency in product or service. D) the risk of malfeasance is extremely high. Answer: B
69.All of the following are guidelines an organization can use to promote the challenging of the status quo except
A) establishing a "culture of dissent." B) forcefully creating a sense of urgency. C) fostering a culture that encourages risk taking. D) creating a results-based reward system. Answer: D
71.Which of the following statements about ethics is false?
A) ethics may be defined as a system of right and wrong. B) ethics assists individuals in deciding when an act is moral or immoral. C) ethics is not concerned with whether or not an act is socially desirable. D) business ethics is the application of ethical standards to commercial enterprises. Answer: C
38.Contemporary approaches to strategic control rely primarily on
A) feedback controls. B) single-loop learning. C) double-loop learning. D) comparative learning. Answer: C
73.As a manager, when faced with ethical crises you should
A) focus on issues most relevant to stockholders. B) wait for the other party to make the first move. C) take the initiative to address the problem. D) cover up as much as possible. Answer: C
44.Incumbent firms may enjoy increased bargaining power because the Internet
A) focuses marketing efforts on end users. B) diminishes the power of many distribution channel intermediaries. C) increases channel conflict. D) has reduced the number of wholesalers and distributors. Answer: B
41.In the 1990s, DuPont used its knowledge of plastics to develop biodegradable plastic products. This is an example of
A) focusing on process rather than product innovation. B) defining its innovation efforts within the context of its "strategic envelope." C) radical innovation. D) public relations since plastics are not biodegradable. Answer: B
68.In firms with unrelated diversification strategies, the culture should foster ________ levels of interdependence and rewards should be based primarily on _____________ measures of output.
A) low, financial B) low, behavioral C) high, financial D) high, behavioral Answer: A
65.According to the text, which of the following is not one of the methods companies can use to enhance their competitive position via innovativeness?
A) fostering creativity and experimentation B) investing in new technology, R&D, and continuous improvement C) copying the business practices or techniques of successful competitors D) departing from existing technologies to develop products and practices that go beyond the current state of the art. Answer: C
45.An organization such as ConAgra that has dozens of different divisions with similar products will probably have the greatest success with which form of organization structure?
A) functional structure B) matrix structure C) strategic business unit structure D) holding company structure Answer: C
59.Internet search activities include
A) generating action plans. B) considering alternatives. C) gathering information. D) making payments and taking delivery. Answer: C
37.Which of the following is an important characteristic of a leader?
A) goal-oriented B) satisfied with the status quo C) reactive D) focused on past performance Answer: A
36.For businesses facing complex and turbulent business environments
A) goals and objectives that are uncertain prevent opportunism. B) traditional strategic controls are usually inappropriate. C) complacency about predetermined milestones can prevent adaptability. D) detailed plans are needed to maintain order. Answer: B
64.Manufacturing employees at Chaparral Steel are directly involved with customers and have access to the new innovative knowledge being developed in its manufacturing processes. This is an example of
A) hierarchical control. B) knowledge management. C) enabling heroes and drones. D) employee empowerment. Answer: D
37.A simple structure is characterized by
A) high specialization and low centralization. B) low specialization and high centralization. C) low formality and low creativity. D) high formality and low centralization. Answer: B
38.Functional structures are usually found in organizations where there is
A) high volume production. B) unrelated product lines or service offerings. C) very little vertical integration. D) a strong need to decentralize decision making. Answer: A
61.Most organizations with strong cultures and a sound system of rewards and incentives can eventually internalize boundaries rather than use explicit rules and regulations. Which of the following is not a technique for moving in that direction?
A) hire people that identify with the organization's dominant values. B) develop managerial role models. C) minimize training and indoctrination. D) align reward systems with organizational goals and objectives. Answer: C
74.Tools and techniques used to achieve effective coordination and integration of key activities in an organization include all of the following except
A) horizontal organization structures. B) horizontal systems and processes. C) horizontal diversification. D) communications and information technologies. Answer: C
51.Project ____________ involves justifying whether an opportunity is attractive in the marketplace ; project ______________ involves evaluating the strategic and economic impact of a new venture.
A) impetus, definition B) definition, impetus C) reward, development D) development, focus Answer: B
43.Rules and regulations are examples of
A) implicit controls. B) informational controls. C) cultural norms. D) boundaries and constraints. Answer: D
66.In firms with differentiation strategies, the culture should foster ________ levels of interdependence and rewards should be based primarily on _____________ measures of output.
A) low, financial B) low, behavioral C) high, financial D) high, behavioral Answer: D
74.One of the reasons the Internet is eroding sustainable competitive advantages is
A) incumbent firms are entering market segments that they previously considered to be too small. B) nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage. C) differentiators have been able to preserve the unique advantages that have always been the hallmark of their success. D) firms are ignoring opportunities to offer high-end services in niche markets. Answer: B
65.Which of the following is not one of the three core activities in the "open book" management system pioneered by Jack Stack?
A) information is generated daily that reflects the work performance and production costs of each employee. B) the information is aggregated once a week and shared with employees at every level. C) information about customer expectations and feedback is distributed monthly. D) extensive training in how to use and interpret the numbers is provided to all employees. Answer: C
66.At Whole Foods, the "no secrets" management philosophy allows employees access to most of the company's operating and financial data. This is an example of
A) information sharing. B) employee advocacy. C) bottom-up empowerment. D) internal benchmarking. Answer: A
67.Sony Corporation's mission statement says, "We should always be the pioneers with our products -- out front leading the market." This is an example of
A) innovativeness. B) proactiveness. C) competitive aggressiveness. D) autonomy. Answer: B
74.Proactive measures to prevent organizational ethics problems include all of the following except
A) instituting a reward system which considers outcomes as its primary criterion. B) using leaders as role models of ethical behavior. C) issuing statements describing the organization's commitment to certain standards of behavior. D) using the organization's information systems as a control system. Answer: A
41.Poor organizational design by leaders can result in all of the following except
A) insufficient mechanisms that integrate and coordinate activities across the firm B) inadequate accountability among managers and employees C) inappropriate budgeting and control systems D) teams, systems, and organizational processes that facilitate implementation Answer: D
44.Two common forms of a focused approach to corporate entrepreneurship include
A) internal collaboration and internal venturing. B) social capital and collaboration capital. C) business incubators and new venture groups. D) focus groups and business incubators. Answer: C
60.The value-adding activity known as problem-solving
A) involves streamlining operations. B) is typically used in the context of providing unique services. C) refers to comparing the costs and benefits of various options. D) creates access to products' ratings and price comparisons. Answer: B
51.Complete the following sentence: "Individual rationality ____________________________ organizational rationality."
A) is a good indicator of B) will ensure C) is often the opposite of D) does not always guarantee Answer: D
49.In corporations with a strong entrepreneurial culture, the willingness and ability to change
A) is imposed from the top down. B) is considered a core capability. C) often leads to instability. D) often worries stakeholders such as suppliers and creditors. Answer: B
68.Functional benchmarking
A) is not very useful for organizations with a divisional organizational structure. B) endeavors to determine best practices regardless of industry. C) restricts the search for best practices to competitors. D) is useful when researching industry-specific standards. Answer: B
42.A divisional structure
A) is organized around functional area departments. B) typically improves the performance of firms pursuing a strategy of vertical integration. C) facilitates the development of general managers. D) enhances centralized decision making. Answer: C
39.Informational control systems ask
A) is the organization "doing things right"? B) is the organization "doing the right things"? C) whether rules and regulations are being followed as information is processed? D) is the organization's environment a necessary and sufficient condition for success? Answer: B
55.All of the following are questions that should be answered when evaluating the performance of corporate venturing efforts except
A) is the venture attracting external venture funding? B) is the venture considered to be a market success? C) does the venture add to the worth of the firm internally? D) does the value proposition offered by the venture insulate it from competitive attack? Answer: A
67.Internal benchmarking at Whole Foods
A) is used by teams to compete against other teams in their stores. B) is used by teams which compete against their own goals for sales, growth, and productivity. C) is used by teams to compete against similar teams at different stores and regions. D) all of the above Answer: D
71.If the market value of a firm becomes less than its book value,
A) it becomes an attractive takeover target. B) the firm will be delisted by the stock exchange. C) the Securities and Exchange Commission will not allow it to declare dividends until the market value once again exceeds the book value. D) the firm will be unable to service its debt. Answer: A
44.All of the following are disadvantages of a divisional type of organizational structure except
A) it can be very expensive compared to a functional organizational structure. B) there is a strong tendency for divisions to focus on short-term performance. C) there can be dysfunctional competition among divisions. D) there is separation of strategic and operating control. Answer: D
41.Which of the following is not one of the characteristics of a contemporary control system?
A) it is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans. B) it must focus on constantly changing information that is strategically important. C) it circumvents the need for face-to-face meetings among superiors, subordinates, and peers. D) it generates information that is important enough to demand regular and frequent attention. Answer: C
72.Juno.com became the third largest Internet service provider by offering free email service, but eventually had to stop this practice because of what potential pitfall:
A) it offered the free service to build market share but then could not sustain the low-cost strategy. B) it copied a close competitor and was in danger of being sued. C) it let others aspects of its business slip because it was overly focused on selling advertising to support the free e-mail service. D) by offering the service for free it forfeited its bargaining power over suppliers. Answer: A
63.All of the following statements about innovativeness are true except
A) it refers to making decisions and taking risks without certain knowledge of probable outcomes. B) it refers to a firms efforts to find new opportunities and novel solutions. C) it involves creativity and experimentation. D) it is aimed at developing new products, services, and processes. Answer: A
73.Pets.com spent an enormous sum promoting its brand but eventually closed during the dot-com downturn. Which of the following was not one of the reason Pets.com failed:
A) it was based on a faulty business model with overly thin margins. B) it overextended its focus on a market niche and tried to appeal to an overly broad audience. C) despite its efforts, the Pets.com marketing campaign was ill-conceived and did not create name recognition. D) its strategy was based on a value proposition that customers did not value. Answer: B
48.The late Sam Walton, founder of Wal-Mart, used to give pep rallies at local Wal-Mart stores. What purpose did this serve?
A) it was used to remind employees of Wal-Marts rules and regulations. B) it helped reinforce and sustain Wal-Mart's culture. C) it demonstrated to employees the importance of articulating explicit goals and objectives. D) it made Wal-Mart's reward system very explicit. Answer: B
37.In 2001, Cisco Systems, Inc.'s stock price fell dramatically when it inaccurately forecast new sales orders because it relied too heavily on historical sales figures. What caused this mistake?
A) its strategic control system failed to detect changes in consumer demand. B) it "projected the past into the future." C) the momentum of its previous successes blinded it to the need to adapt and change. D) all of the above Answer: D
54.The causes of counterproductive behavior in organizations include
A) lack of a clear understanding of organizational goals and objectives. B) motivated self-interest. C) outright malfeasance. D) all of the above Answer: D
62.Which of the following is not a disadvantage of the barrier-free form of organization?
A) lack of strong leadership can lead to coordination problems. B) democratic process can be time-consuming and difficult to manage. C) fewer internal barriers means fewer political issues to deal with. D) if trust among employees is not sufficiently high, organizational performance may suffer. Answer: C
38.All of the following are dilemmas faced by corporations trying to manage the innovation process except
A) launching incremental rather than "pre-emptive" innovations. B) emphasizing marketing over management innovations. C) preferring experience over initiative. D) choosing internal rather than external staffing. Answer: B
38.All of the following statements about leadership are true except
A) leadership is focused on the creation and implementation of a creative vision. B) leadership is the process of transforming organizations from what they are to what the leader would have them become. C) leaders support the status quo and seek control mechanisms to maintain it. D) effective implementation of strategy is essential for successful leadership. Answer: C
55.Complete the following sentence: The days when a company's leader ________________ are gone; today, all employees need to be involved in ________________________.
A) learned for the organization; learning and adapting B) managed from the top; self-management C) delegated authority; assuming responsibility and control D) was held in high regard; holding leaders accountable for their actions Answer: A
48.All of the following constitute organizational bases of a leader's power except
A) legitimate power. B) reward power. C) referent power. D) coercive power. Answer: C
66.Which of the following is not a strategic risk of outsourcing?
A) loss of critical skills B) loss of cross-functional skills C) loss of control over a supplier D) loss of non-vital functions Answer: D
65.In firms with overall low cost strategies, the culture should foster ________ levels of interdependence and rewards should be based primarily on _____________ measures of output.
A) low, financial B) low, behavioral C) high, financial D) high, behavioral Answer: A
67.Nike is a company that makes use of the concept of "product expatriates." Product expatriates are
A) managers from the home country sent abroad to oversee the marketing of a company's products. B) managers from suppliers who come to work at a company's headquarters. C) managers of the company sent abroad to work at the plants of its suppliers. D) local nationals hired by the company in the countries from which it sources products. Answer: C
75.The reasons analyst recommendations are often more optimistic than warranted by an objective analysis of a firm's prospects include all of the following except
A) many analysts fail to grasp the gravity of the problems facing a company. B) "sell" recommendations generate lower commissions than buy recommendations. C) the firms for which analysts work may have lucrative investment banking relationships with the firm. D) analysts are often pressured by their superiors to overlook negative information or tone down their criticisms of the firms they analyze. Answer: B
63.What type of organization is defined as "a central hub surrounded by networks of outside suppliers and specialists"?
A) matrix B) virtual C) modular D) barrier-free Answer: C
69.Lockheed Martin uses a coalition of three entities -- its own company, academia, and government -- to achieve its goals. This is an example of a
A) matrix organization. B) modular organization. C) virtual organization. D) government contractor. Answer: C
75.Which of the following statements would least likely be found in a corporate credo?
A) maximize financial benefits for stakeholders. B) provide secure and stable employment for employees. C) establish an environment that enhances professional growth. D) support community organizations and projects. Answer: A
58.Complete the following sentence: "Inspiring and motivating people with a mission or purpose is a ____________________________________ for developing an organization that can learn and adapt."
A) necessary and sufficient condition B) necessary, but not a sufficient condition C) goal, but not a necessary condition D) goal and a required pre-condition Answer: B
42.The advantages of collaborating with strategic partners in order to innovate include
A) obtaining skills and new knowledge from outside sources. B) making firms identify their own strengths and weaknesses. C) making managers clarify what an innovation project requires to be successful and who will accomplish it. D) all of the above. Answer: D
61.After 15 teams created 128 different phones, Chris Galvin, CEO of Motorola, recently eliminated the autonomous teams being used to develop new wireless phones. This was necessary because such teams
A) often lack coordination. B) sometimes waste resources on projects with questionable feasibility. C) sometimes create inefficiencies through duplication of effort. D) all of the above Answer: D
34.Radical innovations
A) often result in quick profits. B) often represent technological breakthroughs. C) usually apply to products and processes simultaneously. D) usually cannot be patented. Answer: B
64.What is the name of the practice that many modular organization use to grow?
A) operational effectiveness B) outsourcing C) strategic leveraging D) strategic enabling Answer: B
52.When countercultures emerge that have shared values opposite from the dominant culture of an organization
A) organizational cohesiveness increases. B) information is shared rather than hoarded. C) individuals begin working at cross purposes. D) individuals gain insights into overarching goals and objectives. Answer: C
63.Internet business models
A) outline methods that online businesses use to create value. B) cannot be used by traditional businesses. C) outline specific actions a firm needs to take to be profitable. D) cannot be combined to create additional competitive advantages. Answer: A
64.The use of culture and intangible rewards as the primary means of controlling individual behavior is considered more effective than rules and boundaries when
A) output is standardized. B) measurement of performance is straightforward. C) tasks are repetitive and routine. D) work is autonomous and creative. Answer: D
58.Four Internet-based activities that are enhancing firms' capabilities to use the Internet to add value include:
A) outsourcing, problem-solving, bill-paying, and delivery. B) evaluating, bill-paying, customizing, and returning. C) search, rescue, repair, return. D) search, evaluation, problem-solving, and transaction. Answer: D
60.Cadbury Schweppes has a policy that all payments, no matter how unusual, are recorded in the company's books. This rule is
A) overly cumbersome. B) aimed at encouraging managers to make better budgetary decisions. C) directed at protecting client confidentiality. D) designed to minimize improper and unethical conduct. Answer: D
53.All of the following are characteristics of effective reward and incentive systems except:
A) performance measures are clear and highly visible. B) the structure is fixed to assure employees of consistency. C) the compensation system is perceived as fair and equitable. D) objectives are well understood, and broadly accepted. Answer: B
47.Which of the following explains why organizations are prone to inertia and slow to change?
A) personal time constraints. B) political barriers. C) vested interests in the status quo. D) all of the above. Answer: D
46.Corporate business incubators typically provide all of the following functions except
A) physical space. B) mentoring. C) funding. D) student interns. Answer: D
46.Most successful organizations minimize the need for explicit rules, regulations, and other boundaries by
A) posting written statements of the organization's goals and objectives. B) discouraging the formation of subcultures that isolate work groups. C) designing effective reward systems. D) encouraging employees to see themselves as free agents. Answer: C
62.Which of the following dimensions of entrepreneurial orientation is described as "a forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities"?
A) proactiveness B) risk taking C) autonomy D) competitive aggressiveness Answer: A
59.Which of the following is not one of the dimensions of entrepreneurial orientation?
A) proactiveness B) risk taking C) autonomy D) opportunism Answer: D
37.Whereas ________________________ are often associated with a low cost leader strategy, ____________________________ are frequently an important aspect of a differentiation strategy.
A) process innovations, product innovations B) product innovations, service innovations C) radical innovations; instrumental innovations D) marketing innovations; management innovations Answer: A
57.A manager whose role is to question the viability of corporate venture projects is know as a(n)
A) product champion. B) exit champion. C) rising star. D) mentor. Answer: B
49.Complete the following sentence: "Strategic business unit (SBU) structures are best suited for corporations pursuing _________________________, whereas holding company structures are best suited for companies with ________________________ strategies."
A) product-market diversification, international B) international diversification, product-market C) related diversification, unrelated diversification D) unrelated diversification, related diversification Answer: C
76.All of the following are types of information that a firm is required to disclose except
A) quarterly and annual filings of financial information. B) stock trading by insiders. C) details of new products under development. D) details of executive compensation packages. Answer: C
59.In order to create an environment where employees can achieve their potential as they move the organization towards its goals, the manager's role needs to be that of
A) resource allocator. B) resource controller. C) a flexible resource. D) power broker. Answer: C
73.Organizations generally tend to become internally focused when faced with
A) resource scarcity. B) declining performance. C) external pressures. D) all of the above. Answer: D
69.Which of the following phrases best completes the sentence: Because of the Internet, firms that use a focus strategy have new opportunities to ________________________________
A) respond quickly to customer requests. B) provide more services and features. C) access markets less expensively. D) access niche markets in a highly specialized fashion. Answer: D
53.Internet "cookies" can be used to violate consumer privacy because they
A) reveal an individual Web users browsing habits. B) include a record of purchases that can be sold to marketers. C) are recorded on your hard drive and can be retrieved without your knowledge or consent. D) all of the above Answer: D
63.Firms competing on the basis of cost must monitor and control costs and manage standardized and structured tasks. Therefore,
A) rewards should primarily be based on the quality of outputs. B) procedures can be used to specify the basic components of each task. C) innovation and creativity is necessary and frequent. D) frequent changes in the product process are needed to meet specifications. Answer: B
51.Conferenza is an example of an Internet company that offers busy people an alternative way to participate in conferences. This is an example of Internet-based
A) rivalry. B) competitive aggressiveness. C) channel conflict. D) substitution. Answer: D
76.A _________________ is a statement describing an organization's commitment to certain standards of ethical behavior.
A) role model B) control system C) corporate credo D) reward structure Answer: C
47.Important advantages of a holding company structure include
A) savings in personnel and overhead expenses associated with a small corporate office. B) a high level of awareness at the corporate office of issues facing individual divisions. C) a high level of control of division executives by executives at the corporate level. D) gaining synergistic benefits across businesses. Answer: A
54.Which component of emotional intelligence (EI) enables a manager to have a deep understanding of the existence and importance of cultural and ethnic differences?
A) self-awareness. B) empathy. C) social skills. D) self-regulation. Answer: B
53.All of the following are components of emotional intelligence (EI) except
A) self-awareness. B) self-regulation. C) self-promotion. D) empathy. Answer: C
48.Common features of a dispersed approach to corporate entrepreneurship include all of the following except
A) semi-autonomous new venture groups. B) a strong spirit of entrepreneurship. C) a top-down approach to supporting entrepreneurial behavior. D) an entrepreneurial culture. Answer: A
58.Whereas ________________________ are willing to violate procedures and operate outside normal channels, ___________________________ gather hard data and develop a strong case for why a project should be killed.
A) senior managers; entrepreneurial leaders B) strategic managers; financial managers C) exit champions; product champions D) product champions; exit champions Answer: D
42.Marshall Industries CEO Rod Rodin scrapped the company's commission-based reward system because it was rewarding employees for inappropriate behavior. This is an example of
A) setting a direction B) designing the organization C) unethical behavior D) failure to maintain the status quo Answer: B
70.Managerial opportunism can take all of the following forms except
A) shirking. B) job-hopping. C) on the job consumption. D) excessive product diversification. Answer: B
36.All of the following statements about simple organizational structures are true except
A) small firms with a narrow product-market scope will adopt such a structure. B) decision making authority is highly centralized. C) there is little specialization of tasks. D) creativity and individualism are rare. Answer: D
59.Rules and regulations, rather than culture or rewards, would be used for strategic control at which type of company?
A) software developer B) stock brokerage firm C) manufacturer of mass produced products D) high tech research facility Answer: C
43.Leaders play a key role in developing and sustaining an organization's _____________.
A) status quo B) culture C) reporting relationships D) rules and regulations Answer: B
47.Intel has invested $8 billion in several e-business start-ups. This is an example of
A) strategic renewal. B) internal development. C) mergers and acquisitions. D) corporate venture funding. Answer: D
55.The relationship between strategy and structure can be best described as
A) strategy determines structure but structure does not determine strategy. B) structure determines strategy but strategy does not determine structure. C) strategy and structure influence each other. D) a third force determines both strategy and structure. Answer: C
35.Generally speaking, discussions of the relationship between strategy and structure strongly imply that
A) strategy follows structure. B) structure follows strategy. C) strategy can effectively be formulated without considering structural elements. D) structure typically has a very small influence on a firm's strategy. Answer: B
53.Financial reasons for undertaking internal corporate venturing include
A) strengthening competitive position. B) obtaining above average returns C) adding to the corporation's resource base D) all of the above Answer: B
36.In the opening case, Morrison Knudsen, CEO Bill Agee made money investing company funds in securities and claiming capital gains as operating income, as well as created an extravagant lifestyle for himself as the firm's leader. These are examples of
A) striving for excellence. B) using the status of his position to build the firm's reputation. C) decisive leadership. D) potentially unethical behaviors. Answer: D
43.In a typical corporation, which of the following impact how the people within the corporation recognize entrepreneurial opportunities?
A) structural features that guide and constrain action B) corporate culture C) organizational systems that foster learning and manage rewards D) all of the above Answer: D
70.Companies that cultivate cultures of experimentation and curiosity make sure that _________ is not, in essence, "a four-letter word."
A) success B) failure C) dissent D) risk taking Answer: B
44.Barriers in which the design of the organization's structure, information processing, and reporting relationships, impede the proper flow and evaluation of information are known as
A) systemic barriers. B) behavioral barriers. C) political barriers. D) barriers to entry. Answer: A
45.Barriers associated with a manager's tendency to look at issues from a biased or limited perspective are known as
A) systemic barriers. B) behavioral barriers. C) political barriers. D) barriers to exit. Answer: B
46.Refusal to share information, conflicts over resources, conflicts between departments and divisions, and petty interpersonal differences are symptoms of which type of barrier to change?
A) systemic barriers. B) political barriers. C) behavioral barriers. D) all of the above. Answer: B
52.The three broad sets of capabilities that a leader should possess include all of the following except
A) technical skills. B) cognitive abilities. C) calculative abilities. D) emotional intelligence. Answer: C
55.Effective boundaries and constraints
A) tend to inhibit efficiency and effectiveness. B) distract employees who are trying to focus on organizational priorities. C) minimize improper and unethical conduct. D) tend to limit organizational growth. Answer: C
46.One of the greatest threats to supplier power that has emerged because of the Internet is
A) the Internet inhibits the ability of suppliers to offer highly differentiated products or services. B) Internet technologies cannot easily be imitated. C) procurement technologies eliminate the need for suppliers. D) the cost of accessing business customers has increased. Answer: A
43.Which of the following is not one of the reasons why the bargaining power of buyers is increasing because of the Internet:
A) the Internet makes it easier for consumers to obtain the information needed to compare prices and make buying decisions. B) Internet technologies are making the cost of switching products or services lower. C) the Internet isolates customers which makes differential pricing possible. D) Internet purchasing practices are shifting emphasis to price competition which is making consumers less loyal. Answer: C
54.Which of the following is not one of the reasons the Internet increases the intensity of competitive rivalry:
A) the Internet makes it more difficult for firms to differentiate themselves. B) the Internet has commoditized products that previously were regarded as rare or unique. C) the Internet has eliminated the importance of location by making geographically distant products available online. D) the Internet has made it more difficult to imitate the advantages achieved by competitors. Answer: D
61.Organizations are increasingly using teams for many reasons. The difference between a good team and an outstanding team has been found to be
A) the combined technical skills of the members. B) similarities in the way team members solve problems. C) the way team members treat each other. D) similarities in the age and experience of team members. Answer: C
61.Unique content will not add value to an Internet website under the following conditions:
A) the cost of developing the content exceeds the benefits gained. B) visitors to the website do not value or use the content. C) the content is unreliable. D) all of the above. Answer: D
74.The failure of many auditing firms to raise red flags about accounting irregularities in companies such as Enron and WorldCom is generally attributed to all of the following factors except
A) the desire to get future auditing contracts from the company. B) the desire to get consulting work from the company because most audit firms also do consulting work. C) The fact that auditors are appointed by the firm. D) the failure of U.S. audit firms to follow internationally accepted accounting standards. Answer: D
47.Supplier power has increased because of the Internet for all of the following reasons except
A) the growth of new Web-based businesses has created more outlets for suppliers to sell to. B) some suppliers have created Web-based purchasing systems that encourage switching. C) the process of disintermediation makes it possible for some suppliers to reach end users directly. D) software that links buyers to a suppliers website has created rapid, low-cost ordering capabilities. Answer: B
52.Which of the following is considered to be an advantage of a matrix structure?
A) the layering of matrices B) increased clarity in reporting relationships C) increased responsiveness to the market D) fewer power struggles and reduced conflict Answer: C
63.An empowerment perspective that delegates responsibility, focuses on accountability, and relies on clearly specified rewards to motivate is known as
A) the leadership perspective. B) the top-down approach. C) the bottom-up approach. D) the accounting model. Answer: B
62. The empowerment perspective that involves trusting people to "do the right thing," takes intelligent risks, and act with a sense of ownership is known as
A) the leadership perspective. B) the top-down approach. C) the bottom-up approach. D) the risk-taking model. Answer: C
72.All of the following statements about ethical organizations are true except
A) the potential benefits of an ethical organization are few but direct. B) ethical values shape the search for opportunities. C) organizational ethics define what a company is and what it stands for. D) ethics provide a common frame of reference that serves as a unifying force. Answer: A
50.Coercive power is
A) the power exercised by use of fear of punishment for errors of omission or commission by employees. B) The power of persuasion exercised by a charismatic leader to get compliance from reluctant subordinates. C) arises from a manager's access, control, and distribution of information that is not freely available to everyone in an organization. D) the ability of the leader or manager to confer rewards for positive behaviors or outcomes . Answer: A
75.Combination strategies may work best for Internet competitors because, in the Internet age,
A) there are fewer rather than more opportunities for achieving sustainable advantages by using traditional competitive strategies. B) cost management and control systems will increase in importance as management tools that all companies can use. C) many of the unique advantages that were the hallmark of success for differentiators can easily be imitated. D) all of the above Answer: D
60.Which of the following statements about skunkworks is false?
A) they are independent work units. B) they are used to encourage creative thinking and brainstorming. C) they refer to a specialized type of outside contractor that corporations use to develop entrepreneurial ideas. D) they help managers set aside their usual routines and practices. Answer: C
35.The primary drawback of "traditional" strategic control systems is
A) they are only appropriate when the environment is stable and simple. B) goals and objectives cannot be measured with a high level of certainty. C) they lead to complacency. D) they lack the flexibility needed to adjust to changes in the environment. Answer: D
57.Which of the following is not a characteristic of a successful learning organization?
A) they create a proactive, creative approach to the unknown. B) they actively solicit the involvement of employees at all levels. C) they regularly engage in activities to reinforce the status quo. D) they enable everyone to use their intelligence and apply their imagination. Answer: C
56.What happens to organizations that get caught up in day-to-day work activities?
A) they fail to think objectively about themselves and their business. B) they fail to refresh their strategies or reengineer their work processes. C) they fail to ask probing questions about their basic assumptions. D) all of the above Answer: D
50.Which of the following is not one of the functions of reward and incentive systems:
A) they represent a poor means of influencing an organization's culture. B) they focus efforts on high-priority tasks. C) they motivate high levels of individual and collective task performance. D) they represent an effective control mechanism. Answer: A
45.The reason Levi Strauss & Co. closed its online store for selling Levi jeans was
A) to avoid conflict with its supply chain. B) to participate in disintermediation. C) to lower the cost of accessing distribution channels. D) to eliminate channel conflict with retail outlets. Answer: D
56.The sum total of all expenses associated with conducting business are known as
A) transaction costs. B) historical costs. C) opportunity costs. D) operating expenses. Answer: A
57.Which of the following boundaries exist between the functional areas of an organization?
A) vertical boundaries B) horizontal boundaries C) external boundaries D) all of the above Answer: B
56.The boundaries between levels in an organization's hierarchy are known as
A) vertical boundaries. B) horizontal boundaries. C) external boundaries. D) geographic boundaries. Answer: A
58.Which of the following is not a boundaryless organizational design?
A) virtual. B) modular. C) matrix. D) barrier-free. Answer: C
60.According to the text, there are elements of team building that influence a team's success. These include all of the following except
A) work. Work should be relevant and meaningful to group members. B) people bonding during the "heat of the battle." Team members become more unified during a crisis. C) titles. Titles are important to a team's success. D) teams taking care of their own. Team members look after each other's best interest. Answer: C
54.If an international firm has a global strategy and a relatively low level of product diversity, the best choice for its organizational structure is
A) worldwide functional. B) worldwide product division. C) worldwide matrix. D) international division. Answer: B
53.If an international firm has a multidomestic strategy and a relatively high level of product diversity, the best choice for its organizational structure is
A) worldwide functional. B) worldwide product division. C) worldwide matrix. D) international division. Answer: C
49.EncrypTix is an electronic delivery company that uses bar-code printing technology to let customers print-out their own tickets to concerts and sporting events. This new Internet company is an example of:
A)channel conflict. B)disaggregation. C)disintermediation. D)reintermediation. Answer: D
40.Because the Internet lowers barriers to entry in most industries, it
A)decreases the threat of new entrants. B)increases the threat of new entrants. C)makes it easier to build customer loyalty. D)increases supplier power. Answer: B
34.Technologies that use information in the form of electronic signals or "bits" are called
A)digital technologies. B)analog technologies. C)high fidelity technologies. D)broadband. Answer: A
50.In general, the threat of substitutes is heightened because the Internet:
A)introduces new ways to accomplish the same tasks. B)lowers switching costs. C)lowers barriers to entry. D)increases output per unit of cost. Answer: A
41.Scale economies may be less important for new entrants that launch Web-based businesses because
A)it is relatively more expensive for an incumbent firm to create an impressive Web appearance than a new entrant. B)larger, older companies will have the same Internet expenses as new entrants. C)new entrants do not derive any benefit from making volume purchases. D)the Web makes it possible for new entrants to enter a market with relatively lower capital costs. Answer: D
33.In the opening case, Agillion, Inc., the start-up failed because
A)it was unable to provide a clear and unique value proposition. B)it offered a product that could easily be imitated. C)it never recorded a single dollar of revenue. D)all of the above. Answer: D
38.According to the text, the types of industries that are likely to be most radically transformed by the Internet are:
A)research-intensive industries such as pharmaceuticals B)manufacturing-intensive such as microprocessors C)information-intensive such as financial services D)all of the above Answer: C
39.All of the following factors are likely to be impediments to growth in Internet use except
A)speed and extent of Internet connectivity. B)strong vested interests. C)institutional and regulatory barriers. D)advances in wireless technology. Answer: D
35.Complete the following sentence: "It is the actual use of the Internet for profitable transactions, ______________________________________________"
A)that has altered the structure of the American economy. B)not the technology itself, that matters to a company's bottom line. C)not the sustainability of competitive advantages, that is creating new business opportunities. D)that is making strategizing in the Internet economy less important. Answer: B
42.End users are
A)the final consumers in a distribution channel. B)usually the C in B2C. C)likely to have greater bargaining power because of the Internet D)all of the above. Answer: D
37.In 2000 and 2001, the Internet sector of the U.S. economy plummeted for all of the following reasons except:
A)the growth in new Internet users ceased. B)investors realized that many dot-coms were overcapitalized. C)venture capital for Internet firms dried up. D)several dot-com start-ups failed. Answer: A
36.The only technology ever adopted by consumers more rapidly than the Internet was
A)the telephone. B)television. C)the automobile. D)none of the above Answer: D
18.Inspiring and motivating people with a mission or purpose is a necessary and sufficient condition for developing a learning organization.
Answer: False
18.Product champions are the employees who identify new product ideas or services.
Answer: False
27.Product diversification by a company is a cheaper way to reduce shareholder risk than portfolio diversification by shareholders.
Anseer: False
1.In a simple structure where the owner manager makes most of the important decisions, extensive rules and regulations are used to maintain order.
Answer: False
1.The "traditional" approach to strategic control is interactive; the "contemporary" approach to strategic control is sequential.
Answer: False
1.The term "innovations" refers primarily to inventions that use the latest technologies.
Answer: False
10."Referent power" refers to a manager's identification with his or her employees.
Answer: False
10.The strategic business unit (SBU) and holding company structure are variants of the functional form of structure.
Answer: False
11.Because of the Internet, it is very difficult for suppliers to create purchasing techniques that lower switching costs.
Answer: False
11.Once a strong and healthy organizational culture has been established, it becomes self-sustaining.
Answer: False
11.The strategic business unit (SBU) structure is also referred to as the conglomerate structure.
Answer: False
12.Because top executives serve as role models, employees will follow what executives say no matter what they do.
Answer: False
12.Corporate venturing that is focused permeates all parts of the organization and involves every member of the organization.
Answer: False
12.Emotional intelligence (EI) is one of the components of a high intelligence quotient (IQ).
Answer: False
12.One major advantage of the holding company form of organization structure is that it minimizes the duplication of functional activities between product lines.
Answer: False
13.An organization's reward system is typically a weak method of motivating employees.
Answer: False
13.Reintermediation is responsible for an overall reduction in business opportunities.
Answer: False
14. The laws, and the enforcement of laws, associated with the protection of intellectual property rights represent a significant currency and management risk to multinational firms.
Answer: False
14.A matrix organization is organized strictly along product lines.
Answer: False
14.E-marketplaces create new opportunities for buyers and sellers but also increase transaction costs.
Answer: False
14.Empathy, one of the components of emotional intelligence (EI), refers to one's proficiency in managing relationships and building networks.
Answer: False
14.What is best for an organization's employees is also what's best for the organization.
Answer: False
15.A major disadvantage of the matrix structure is that it duplicates the use of specialized personnel, equipment, and facilities.
Answer: False
15.Corporate business incubators often provide physical space and business services to internal ventures, but not funding.
Answer: False
15.Organizational learning works best when an organization's leaders gather information and teach it to employees who are like their students.
Answer: False
16.Corporate venture funding refers to special funds that are set aside to invest in the corporation's internal ventures.
Answer: False
16.Infomediary services are good for Internet businesses because it gives consumers the chance to compare prices and services.
Answer: False
16.Rewards systems that reinforce an organization's core values and contribute to organizational cohesiveness are the least effective type.
Answer: False
17.A key function of the leaders in a learning organization is to generate an organization-wide commitment to the status quo.
Answer: False
17.According to the text, boundary-less organizational structures are most effective when they replace rather than complement traditional organizational structures.
Answer: False
18.Generally speaking, the process of disintermediation increases transaction costs.
Answer: False
32. Typically, the best method of entry into a foreign market is the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.
FALSE
1.Because of the dot-com crash in 2000 and 2001, it is unlikely that the Internet will have a positive impact on the economy in the long term.
False
Countries with a strong supplier base benefit by adding efficiency to upstream activities.
TRUE
2.The Internet provides an electronic "staging area" for several forms of digital communications.
True
Pressures to "reduce costs" require that
A) a company should not trade idiosyncratic preferences in product features for higher economic returns. B) a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects. C) the manager should follow a multidomestic strategy to maximize the economic benefits to the company. D) the company needs to supplement the local foreign economy in a manner specified by the local government. Answer: B
All of the following are risks associated with a global strategy except:
A) a firm with only one manufacturing location must export its product—some of which may be a great distance from the operation. B) the geographic concentration of any activity may also tend to isolate that activity from the targeted markets. C) concentrating an activity in a single location makes the rest of the firm dependent on that location. D) the pressures for local adaptation may elevate the firm's cost structure. Answer: D
The difference between a franchise and licensing contract is that
A) a franchise contract is more specific and usually longer in duration. B) a franchise contract must include a foreign government. C) a licensing contract covers more aspects of operations. D) a franchise contract involves less control and less risk. Answer: A
Units coordinate their activities with headquarters and with one another, units adapt to special circumstances that only they face, and the entire organization draws upon relevant corporate resources. These are all attributes of which type of strategy?
A) a global strategy B) a transnational strategy C) an international strategy D) a multidomestic strategy Answer: B
Firms following a global strategy strive to offer ______________ products and services as well as locate manufacturing, R&D, and marketing activities in _____________ locations.
A) a wide variety of; several B) a wide variety of; few C) standardized; several D) standardized; few Answer: D
42. Microsoft decided to establish a corporate research laboratory in Cambridge, England
A) because England is an ally of the United States. B) to access the outstanding technical and professional talent available there so that they can attain world-class excellence in selected value-creating activities. C) because the local language is English. D) because the company views the United States as a risky place to expand due to the actions of the U.S. Department of Justice. Answer: B
Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include all of the following except
A) customers' needs, interests, and tastes are becoming increasingly homogenized or similar. B) consumers around the world are increasingly willing to trade off idiosyncratic preferences in product features for lower price. C) flexible manufacturing trends have allowed a decline in the minimum volume required to reach acceptable levels of production efficiency. D) fluctuating exchange rates. Answer: A
35. In Michael Porter's framework all of the following factors affect a nation's competitiveness except
A) factor conditions. B) demand characteristics. C) related and supported industries. D) policies that protect the nation's domestic competitors. Answer: D
39. All of the following would be viewed as advantages of global diversification except
A) fewer social and political risks than domestic operations. B) a firm not being solely dependent on the domestic market. C) a firm with large margins at home helping subsidize its operations in other nations. D) the potential to lower costs of operation even if the primary market is at home. Answer: A
Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?
A) firms that compete in industries in which consumer preferences vary substantially in each country B) firms in industries that are expanding very rapidly C) firms in industries that have value added by sales and marketing departments D) firms in industries that have much value added in research and design or manufacturing Answer: D
Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by
A) flexibility in adjusting to local laws and customs. B) decreased duplication of inventories which are often involved in having multiple plants producing similar products. C) decreased shipping and transportation costs inherent in local production. D) economies of scale gained through centralized production of standardized products. Answer: C
Which of the following describes the most typical order of entry into foreign markets?
A) franchising, licensing, exporting, joint venture, and wholly owned subsidiary B) exporting, licensing, franchising, joint venture, and wholly owned subsidiary C) licensing, exporting, franchising, joint venture, and wholly owned subsidiary D) exporting, franchising, licensing, joint venture, and wholly owned subsidiary Answer: B
The form of entry strategy into international operations that offers the lowest level of control would be
A) franchising. B) licensing. C) joint venture. D) exporting Answer: D
High pressure for local adaptation combined with high pressure for lower costs would suggest what type of international strategy:
A) global B) multidomestic C) transnational D) differentiation Answer: C
High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy:
A) global B) multidomestic C) transnational D) overall cost leadership Answer: B
34. The reasons that explain why some governments make better use of the inflows from foreign investment and know-how than others include all of the following except
A) governmental practices that are business-friendly. B) local entrepreneurs that can train workers and invest in modern technology. C) high tariffs and taxes on foreign investors and multinational corporations provide income to improve living conditions. D) sound management of broader economic factors such as interest rates and inflation. Answer: C
A major trend in international development includes
A) greater international trade and operations. B) A growing recognition of an international managerial perspective C) A large increase in international investment D) All of the above ANSWER: D
40. The sale of Boeing's commercial aircraft and Microsoft's operating systems in many countries enable these companies to benefit from
A) higher prices in their domestic markets. B) economies of scale. C) optimizing the location for many activities in their value chain. D) reducing their exposure to currency risks. Answer: B
As in the case of Siebel Systems, elements of a global strategy may facilitate the competitive advantage of differentiation by
A) increased freedom of individual business units to adapt to local tastes. B) the creation of a worldwide network to achieve consistent service regardless of location. C) flexibility in applying R&D to meet country-specific needs. D) tailoring products to meet country-specific needs. Answer: B
Low pressure for local adaptation combined with low pressure for lower costs would suggest what type of strategy?
A) international. B) global. C) multidomestic. D) transnational. Answer: A
A ____________ is a business in which a multinational company owns 100 percent of the stock.
A) joint venture B) strategic alliance C) wholly owned subsidiary D) franchising operation Answer: C
36. All of the factors below have made India's software services industry extremely competitive on a global scale except
A) large pool of skilled workers. B) large network of public and private educational institutions. C) tax and antitrust legislation that protect the dominant players in the industry. D) large, growing market and sophisticated customers. Answer: C
Which of the following is a disadvantage of a transnational strategy?
A) less ability to realize cost savings through scale economies B) limited ability to adapt to local markets C) unique managerial challenges in fostering knowledge transfer D) single locations may lead to higher tariffs and transportation costs. Answer: C
All of the following are limitations of a multidomestic strategy except
A) less ability to realize cost savings through scale economies. B) greater difficulty in transferring knowledge across countries. C) single locations may lead to higher tariffs and transportation costs. D) may lead to "overadaptation" as conditions change. Answer: C
Foreign direct investment includes the following form of entry strategy:
A) licensing B) franchising C) joint ventures D) exporting Answer: C
All of the following are limitations of a global strategy except
A) limited ability to adapt to local markets. B) the ability to locate activities in optimal locations. C) the concentration of activities may increase dependence on a single facility. D) single locations may lead to higher tariffs and transportation costs. Answer: B
41. Optimizing the location of every activity in the value chain can yield all of the following strategic advantages except
A) performance enhancement. B) cost reduction. C) extending the life cycle of the product of service. D) risk reduction. Answer: C
In order to realize the strongest competitive advantage, firms engaged in worldwide competition must
A) require that all of their various business units follow the same strategy regardless of location. B) ensure that all business units follow a strategy strictly tailored to their respective locations. C) pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results. D) attempt to use the strategy that was most successful in their home country. Answer: C
A domestic corporation considering expanding into international markets for the first time will typically
A) start off by implementing a wholly owned foreign subsidiary so it can maintain standards identical to those at home. B) consider licensing or franchising its operations. C) consider implementing a low risk/low control strategy such as exporting. D) form a joint venture with a reputable foreign producer. Answer: C
Gillette's worldwide success with its Sensor razor demonstrates
A) the importance of merging global and multidomestic strategies. B) the values of establishing joint ventures with several multinational corporations. C) that a global marketing effort can sometimes be successful. D) the usefulness of a multidomestic strategy. Answer: C
43. Many U.S. multinational companies set up maquiladora operations south of the US-Mexico border primarily
A) to sell products into the growing Mexican market. B) as part of US government-initiated measures to discourage illegal immigration. C) to take advantage of the lower tax rates in Mexico. D) to take advantage of the low cost of labor. Answer: D
Fees that a multinational receives from a foreign licensee in return for its use of intellectual property (trademark, patent, trade secret, technology) are usually called
A) transfer prices. B) dividends. C) royalties. D) intra-corporate inflows. Answer: C
38. According to Michael Porter, firms that have experienced intense domestic competition are
A) unlikely to have the time or resources to compete abroad. B) most likely to design strategies aimed primarily at the domestic market. C) more likely to design strategies and structures that allow them to successfully compete abroad. D) more likely to demand protection from their governments. Answer: C
Software Tech, Inc., a company in the computer software industry, invests heavily in R&D and product design. Thus, most of its value is added
A) upstream. B) in its infrastructure. C) downstream. D) midstream. Answer: A
37. Rivalry is intense in nations with conditions of ________ consumer demand, ___________supplier bases, and ____________ new entrant potential from related industries.
A) weak; weak; high B) strong; strong; low C) strong; strong; high D) weak; weak; low Answer: C
19. Among Theodore Levitt's assumptions that would favor a global strategy is that consumers around the world are becoming less price sensitive.
Answer: False
21. The need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy.
Answer: False
22.A commission-based business model, when applied to the Internet, is similar to the broadcast television model in which viewers watch shows produced with revenues from commission fees.
Answer: False
25. A multidomestic strategy would likely include the use of high volume, centralized production facilities to maximize economies of scale.
Answer: False
26. Firms pursuing a cost leadership strategy are inherently unsuited to successfully follow a multidomestic strategy.
Answer: False
15. Differences in foreign markets such as culture, language, and customs can represent significant management risks when firms enter foreign markets.
Answer: True
16. Two opposing pressures that managers face when they compete in foreign markets are: cost reduction and adaptation to local markets.
Answer: True
22. Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).
Answer: True
23.One way the Internet is creating opportunities for firms with differentiation strategies is by enabling mass customization.
Answer: True
24. Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.
Answer: True
25.The greatest danger to the success of many Internet start-ups is that the service or capability they offer can easily be imitated.
Answer: True
27. Multinational firms following a transnational strategy strive to optimize the tradeoffs associated with efficiency, local adaptation, and learning.
Answer: True
27.Focusers that use Internet technologies to expand their target markets run the risk of losing the advantages associated with offering a limited product or service offering.
Answer: True
28. A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization.
Answer: True
3.The Internet has created a new climate for business in which the traditional principles of strategic management are less important.
False
An advantage of international expansion is that competition within foreign countries is generally very similar to that of the United States
False
Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent
False
In Michael Porters "diamond of competitive advantage," there are four broad attributes that, as a system, constitute a nation's competitiveness in an industry
True
Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.
True