MGMT 434 test 3
109. In the multidivisional structure there is complete independence among the firm's divisions. a. cooperative b. matrix c. competitive d. SBU
c. competitive
111. In the structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets. a. functional b. cooperative c. competitive d. SBU
c. competitive
108. A firm pursuing an unrelated diversification strategy will utilize a structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional
c. competitive form multidivisional
116. TheLG Company has units operating in significantly different industries and uses financial controls to manage its portfolio. LG is most likely using the structure. a. combination-matrix b. cooperative form of the multidivisional c. competitive form of the multidivisional d. strategic business unit multidivisional
c. competitive form of the multidivisional
95. Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible? a. cooperative structure; no bonus due to failure to meet divisional target b. competitive structure; no bonus due to failure to meet divisional target c. cooperative structure; a bonus for increasing organizational performance d. competitive structure; a bonus for increasing organizational performance
c. cooperative structure; a bonus for increasing organizational performance
74. The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to a. an emerging professional management philosophy. b. the increasing demand by consumers for both high quality and low prices. c. coordination and control problems. d. a shift toward the global economy.
c. coordination and control problems.
102. A firm pursuing a related constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards based on division financial performance. d. temporary teams or task forces formed around specific projects.
c. division managers' rewards based on division financial performance.
93. Institutional owners are a. shareholders in the large institutional firms listed on the New York Stock Exchange. b. banks and other lending institutions that have provided major financing to the firm. c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions. d. prevented by the Sarbanes-Oxley Act from owning more than 50 percent of the stock of any one firm.
c. financial institutions such as mutual funds and pension funds that control large-block shareholder positions.
122. One of the primary disadvantages of the global strategy and worldwide product divisional structure is that a. it is difficult to achieve economies of scale. b. the firm must develop centers to offer after-sales service to customers. c. it is difficult to respond effectively to local market needs and preferences. d. achieving economies of scale with this strategy/structure combination is nearly impossible.
c. it is difficult to respond effectively to local market needs and preferences.
76. Complete the following: In small firms, managers often own a separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large
c. large; small
79. Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers' risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dismissed.
c. managers' risk of job loss, loss of compensation, and/or loss of reputation.
75. Some experts consider the structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional
c. multidivisional
118. A worldwide geographic area structure is an organizational form in which a. multiple alliances across the globe link complementary businesses. b. standardized products are offered across country markets. c. national interests dominate and management adapts to local or cultural differences. d. responsiveness to local demand is combined with economies of scale.
c. national interests dominate and management adapts to local or cultural differences.
71. Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure? a. increasing diversification b. coordination and control issues c. need for knowledge-sharing among specialists d. greater amounts of data and information to process
c. need for knowledge-sharing among specialists
117. The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are a. usually on the verge of bankruptcy. b. typically under-performing their industry. c. often performing above their industry averages. d. always outperforming their industry.
c. often performing above their industry averages.
86. Agency costs reflect all of the following EXCEPT costs. a. monitoring b. enforcement c. opportunity d. incentive
c. opportunity
118. If the market for corporate control were efficient as a governance device, then only takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly performing firms d. over-valued firms
c. poorly performing firms
130. Which of the following is TRUE of trends in Japan's corporate governance structure? a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals. b. Increased regulation in the financial sector has increased the cost of mounting hostile takeovers. c. Banks' influence over corporations is increasing. d. The gap in compensation between CEOs in public and private companies is increasing.
a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals.
78. is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification
a. Formalization
120. Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to 3 years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received a. a golden parachute. b. a poison pill. c. greenmail. d. a silver handshake.
a. a golden parachute.
89. Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to a. align financial institutions' actions with society's interests. b. increase the number of foreign firms listing on U.S. stock exchanges. c. require CEOs to attest to the accuracy of their companies' financial reports. d. increase consumer protection in pharmaceutical products.
a. align financial institutions' actions with society's interests.
72. The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits? a. aligning the corporate structure with the demands of global expansion b. more accurate monitoring of the performance of each business c. facilitating comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance
a. aligning the corporate structure with the demands of global expansion
123. Historically, have been at the center of German corporate governance structure. a. banks b. institutional shareholders c. public pension funds d. government agencies
a. banks
54. Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.
a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes.
56. A firm's specifies the work to be done and how to do it given the firm's strategy or strategies. a. structure b. controls c. culture d. strategy
a. structure
104. Boards of directors are now becoming more involved in a. the strategic decision-making process. b. selecting new CEOs. c. the firm's tax issues. d. governmental relations.
a. the strategic decision-making process.
125. IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as structure. , and the appropriate organizational structure to implement this strategy is the a. transnational; combination b. global; worldwide product divisional c. multidomestic; worldwide geographic area d. competitive; strategic business unit multidivisional
a. transnational; combination
101. When a corporation pursues a related constrained diversification strategy, financial controls may not add value to strategy implementation efforts because it is difficult to a. use them without reducing cooperation among divisional managers. b. transfer capital between units. c. maintain an arms-length relationship between headquarters and the divisions. d. identify which objective criteria to monitor.
a. use them without reducing cooperation among divisional managers.
86. Which of the following is a TRUE statement about organizational structures for implementing business-level strategies? a. A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles. b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions. c. An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision making, and vertical coordination. d. A focused strategy requires a functional structure featuring high levels of both specialization and formalization.
b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions.
113. The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.
b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan.
79. ____ is the degree to which decision-making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification
b. Centralization
129. is an important influence in Japanese corporate governance structures. a. Innovation b. Consensus c. Competition d. Individualism
b. Consensus
75. Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is most likely to be TRUE? a. Agency costs at Amos Ball are high. b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO. c. At Amos Ball, the opportunity for managerial opportunism is high. d. The functions of risk-bearing and decision making are separate at Amos Ball.
b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is CEO than if an outsider is CEO.
102. Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. What circumstances would most likely have initiated this proposal? a. ATP has been the initiator of several hostile takeovers in the last 2 years. b. The board has been successful in reducing the percentage of CEO pay that is composed of stock options. c. The CEO/chairperson of the board has been suspected of opportunistic behavior. d. The firm is traded on the New York Stock Exchange and must change its corporate governance to comply with the NYSE's new rules.
c. The CEO/chairperson of the board has been suspected of opportunistic behavior.
69. Leslie is a newly graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a structure. a. simple b. functional c. multidivisional d. network
b. functional
89. The structure is the most appropriate structure for implementing the integrated cost leadership/differentiation strategy. a. simple b. functional c. multidivisional d. strategic business unit
b. functional
99. The New York Stock Exchange requires that the audit committee be a. available to comment to external analysts. b. headed by outside directors. c. liable for any illegal actions by the top management team. d. made up of CPAs with auditing experience.
b. headed by outside directors.
110. Managers in the United States receive compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable
b. higher
119. A multidomestic strategy would be associated with a. high levels of coordination. b. informal coordination among units. c. many integrative mechanisms. d. interdependent divisions.
b. informal coordination among units.
98. Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(n) director. a. lead independent b. inside c. related d. encumbered
b. inside
115. The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned.
b. internal controls have failed.
83. Firms seeking to compete on the basis of cost leadership particularly need support from the functions. a. finance; accounting b. manufacturing; process R&D c. product R&D; marketing d. management information; finance
b. manufacturing; process R&D
70. In the United States, the fundamental goal of business is to a. ensure customer satisfaction. b. maximize shareholder wealth. c. provide job security. d. generate profits.
b. maximize shareholder wealth.
95. Research suggests that the activism of institutional investors such as TIAA-CREF and CalPERS a. increases shareholder value significantly. b. may not have a direct effect on firm performance. c. is so aggressive that boards of directors have become overly cautious. d. has weakened the effect of other governance mechanisms.
b. may not have a direct effect on firm performance.
120. Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the strategy. a. network b. multidomestic c. global d. transnational
b. multidomestic
91. Which of the following is NOT a variation of the multidivisional structure? a. competitive form b. regional form c. cooperative form d. strategic business unit form
b. regional form
83. In contrast to managers' desires, shareholders usually prefer that free cash flows be a. used to diversify the firm. b. returned to them as dividends. c. used to reduce corporate debt. d. re-invested in additional corporate assets.
b. returned to them as dividends.
85. Compared to managers, shareholders prefer a. safer strategies with greater diversification for the firm. b. riskier strategies with more focused diversification for the firm. c. safer strategies with more focused diversification for the firm. d. riskier strategies with greater diversification for the firm.
b. riskier strategies with more focused diversification for the firm.
111. The longer the focus of managerial incentive compensation, the greater the top-level managers. a. earnings potential for b. risks borne by c. incentives for d. potential tax burden for
b. risks borne by
73. Corporate governance revolves around the relationship between which two parties? a. shareholders and the board of directors b. shareholders and managers c. the board of directors and managers d. None of the these options are correct.
b. shareholders and managers
65. Typically, an organization using a simple structure would be a. large. b. small. c. of any size if the firm is privately held. d. a family-owned-and-managed firm of any size.
b. small.
104. A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems, so the administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the organizational structure. a. network b. strategic business unit multidivisional c. functional d. matrix
b. strategic business unit multidivisional
129. McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(n) a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.
b. strategic network.
134. International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing? a. the director of food service for IFS b. the board of directors of IFS c. the employees directly involved in the wrongdoing d. the head of contract services for the Marines
b. the board of directors of IFS
91. Ownership concentration is determined by both a. the number of stockholders and the parties they represent. b. the number of stockholders and total percentage of shares they own. c. the number of outside directors and the parties they represent. d. the number of outside directors and total percentage of shares they own.
b. the number of stockholders and total percentage of shares they own.
124. The need for the organization to combine local responsiveness and efficiency is most critical in a strategy. a. multidomestic b. transnational c. global d. focus
b. transnational
127. It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.
b. vertical complementary strategic alliances.
113. The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive-placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all- important at Transector. Transector probably uses the structure. a. competitive form of the multidivisional b. SBU form of the multidivisional c. worldwide geographic area d. distributed strategic network
a. competitive form of the multidivisional
100. The heavy use of integrative mechanisms in the achieve a. cooperative; economies of scope. b. competitive; cost efficiencies. c. functional; sensitivity to cultural diversity. d. SBU; quick response to local customer needs. multidivisional organizational structure is intended to
a. cooperative; economies of scope.
73. Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience a. coordination and control problems. b. bureaucratic inefficiencies. c. excessive competition among division managers. d. limited communication among functional specialists.
a. coordination and control problems.
82. Walmart's effective strategy/structure configuration is a. cost leadership/functional. b. differentiation/functional. c. related constrained/multidivisional. d. related linked/multidivisional.
a. cost leadership/functional.
78. An agency relationship exists when one party delegates a. decision-making responsibility to a second party. b. financial responsibility to employees. c. strategy implementation actions to functional managers. d. ownership of a company to a second party.
a. decision-making responsibility to a second party.
88. The integrated cost leadership/differentiation strategy is difficult to implement mostly because a. different primary and support activities are emphasized when using cost leadership and differentiation strategies. b. this strategic approach demands more flexibility than most firms can manage. c. the dual reporting relationships required for this strategy slow organizational decision making. d. the cost leadership strategy requires less structured job roles than does the differentiation strategy.
a. different primary and support activities are emphasized when using cost leadership and differentiation strategies.
117. Implementing the multidomestic strategy requires decentralization to a. facilitate the tailoring of products to the demand in local markets. b. develop economies of scale. c. achieve economies of scope. d. reduce bureaucracy and speed up decision making.
a. facilitate the tailoring of products to the demand in local markets.
58. Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.
a. firms must be flexible while retaining a degree of stability.
121. The repurchase at a premium of the target firm's shares that were acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.
a. greenmail.
100. A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead to all of the following EXCEPT a. high executive turnover. b. increased diversification of the firm. c. excessive management compensation. d. reduction in R&D expenditure.
a. high executive turnover.
82. The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry.
a. increased diversification of Sierra Infusion.
115. In the competitive form of the multidivisional structure, the focus of headquarters is on all of the following EXCEPT a. integration. b. performance appraisal. c. resource allocation. d. long-range planning.
a. integration.
131. Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with which Toyota has contracts for services. This results in the suppliers and Toyota (the strategic center firm) being more a. interdependent. b. competitive with one another. c. creative. d. complementary.
a. interdependent.
62. controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units. a. Strategic b. Managerial c. Financial d. Environmental
c. Financial
97. Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance? a. functional b. cooperative M-Form c. SBU form d. competitive M-Form
c. SBU form
130. Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to a. make the partners' true loyalties and intentions unclear. b. make the role of the strategic center firms more critical to alliance success. c. distribute the alliances along several segments of the airline industry value chain. d. be most effective when the alliances are with airlines headquartered in different nations.
a. make the partners' true loyalties and intentions unclear.
132. After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to a. reduce transaction costs. b. increase negotiating leverage with suppliers. c. become less dependent on its suppliers. d. move toward horizontal alliances with its suppliers.
a. reduce transaction costs.
114. The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is a. setting the option strike price substantially higher than the current stock price. b. insuring that the strike price value of the options can be lowered if the organizational environment becomes more risky. c. having the stock option plan designed by insiders on the board of directors who are familiar with day-to-day operations of the firm. d. consulting accounting advisors to make sure that the plan transfers wealth to the CEO without immediately appearing on the balance sheet of CyberScope.
a. setting the option strike price substantially higher than the current stock price.
64. Andermeyer Jewelers, which specializes in high-end jewelry, has been in existence since the 1870s and has served generations of wealthy families. Owned and managed by the Andermeyer family since its founding, it has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the structure. a. simple b. functional c. matrix d. network
a. simple
66. In most cases, the focus strategy is best managed using a structure. a. simple b. functional c. multidivisional d. vertical
a. simple
107. Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy? a. competitive form with related-constrained strategy b. cooperative form with unrelated strategy c. SBU form with related-linked strategy d. competitive form with related-linked strategy
c. SBU form with related-linked strategy
131. Which of the following is FALSE about corporate governance in China? a. The Chinese governance system may be tilting toward the Western model. b. With increasing frequency, the compensation of top executives of Chinese companies is closely related to prior and current financial performance of the firm. c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more volatility in those values over time.
c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms.
77. The separation between firm ownership and management creates a(n) relationship. a. governance b. control c. agency d. dependent
c. agency
126. Which of the following is NOT a preliminary task of the strategic center firm in a strategic network? a. strategic outsourcing b. encouraging friendly rivalry among network members c. allocating internal capital d. supporting development of new core competencies
c. allocating internal capital
87. All of the following are consequences of the Sarbanes-Oxley Act EXCEPT a. a decrease in foreign firms listing on U.S. stock exchanges. b. internal auditing scrutiny has improved and there is greater trust in financial reporting. c. an increased number of IPOs (initial public offerings) are expected. d. Section 404 creates excessive costs for firms.
c. an increased number of IPOs (initial public offerings) are expected.
103. Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules a. use integrative mechanisms to share core competencies. b. compete with one another in Olympia's internal capital markets. c. are not necessarily related to one another in terms of products or markets. d. are network member firms while Olympia is the strategic center firm.
c. are not necessarily related to one another in terms of products or markets.
103. Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance
c. compensating directors with stock options rather than with fixed remuneration
85. Typically, a successful firm pursuing a differentiation strategy will a. have a very hierarchical structure. b. require a structure that is very formal. c. use cross-functional development teams. d. develop free-standing business units.
c. use cross-functional development teams.
52. An important lesson from the Chapter 11 Opening Case about Borders is that a. Borders did a good job of implementing its strategy but its structure was wrong. b. structures rarely evolve in response to strategic change. c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy. d. Borders' decentralized structure led to poor decision making.
c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy.
125. German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the UK and United States largely because a. the roles of CEO and chairperson of the board of directors are usually combined. b. large institutional investors control large blocks of stock. c. private shareholders and large institutional investors rarely have large ownership positions in firms. d. of the focus on stewardship-management in German firms rather than the financial performance focus of U.S. firms.
c. private shareholders and large institutional investors rarely have large ownership positions in firms.
84. Firms seeking to differentiate particularly need support from the and functions. a. finance; accounting b. engineering; operations c. product R&D; marketing d. management information; finance
c. product R&D; marketing
68. Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership strategy. b. differentiation strategy. c. related constrained diversification strategy. d. single or dominant business corporate strategy.
c. related constrained diversification strategy.
106. One means that is considered to improve the effectiveness of outside directors is a. mandating that all outside directors be drawn from government or academia rather than industry. b. requiring that outside directors be former executives of the firm. c. requiring outside directors to own significant equity stakes in the firm. d. requiring that outside directors be truly objective by having no ownership interest in the firm.
c. requiring outside directors to own significant equity stakes in the firm.
71. In the United States, a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.
c. shareholders.
61. Financial controls are most important in the strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary
c. unrelated diversified
112. Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data.
d. The compensation committee may not have comprehensive firm performance data.
94. The ownership of major blocks of stock by institutional investors have resulted in all of the following EXCEPT a. making CEOs more accountable for their performance. b. challenges to the decisions of boards. c. focusing attention on ineffective boards of directors. d. a direct effect on firm performance.
d. a direct effect on firm performance.
122. A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill.
d. a poison pill.
127. Japanese keiretsu are a. management structures related to total quality management systems. b. company unions, which are a type of governance system. c. the banks owing the largest shares of stock in the firm. d. a system of cross-shareholding among firms.
d. a system of cross-shareholding among firms.
109. The interests of multinational corporations' shareholders may be best served when there is a. a uniform compensation plan for all corporate executives, United States and foreign alike. b. executive compensation that is primarily based on long-term performance. c. elevation of foreign executive compensation to U.S. levels. d. a variety of compensation plans for executives of foreign subsidiaries.
d. a variety of compensation plans for executives of foreign subsidiaries.
128. In Japan, the principal source of the active monitoring of large companies comes from a. boards of directors. b. stock brokerage companies. c. the government. d. banks.
d. banks.
70. One disadvantage of the functional structure is that a. career paths and professional development are limited. b. dual reporting relationships blur lines of authority. c. the CEO cannot coordinate and control the efforts of functional-level employees. d. communication and coordination are difficult among organizational functions.
d. communication and coordination are difficult among organizational functions.
57. Structural stability affects the organization's ability to a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. consistently and predictably manage its daily work routines.
d. consistently and predictably manage its daily work routines.
90. The structure is best for implementing the related-constrained diversification strategy. a. functional b. competitive form of the multidivisional c. SBU form of the multidivisional d. cooperative form of the multidivisional
d. cooperative form of the multidivisional
94. Cisco used the structure to implement its strategy. a. functional; cost leadership. b. SBU form of the multidivisional; related linked c. cooperative form of the multidivisional; related linked d. cooperative form of the multidivisional; related constrained
d. cooperative form of the multidivisional; related constrained
93. Cisco's corporate-level structure was useful in implementing its business-level strategy. a. SBU form; integrated cost leadership-differentiation b. competitive form; differentiation c. cooperative form; cost leadership d. cooperative form; integrated cost leadership-differentiation
d. cooperative form; integrated cost leadership-differentiation
106. The most centralized and most costly form of the multidivisional structure is the a. integrated. b. competitive. c. SBU. d. cooperative.
d. cooperative.
133. In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with which it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.
d. decreasing communications between network members to reduce communication costs.
119. All of the following statements are TRUE about the use of defense tactics by the target firm during a hostile takeover EXCEPT a. defense tactics are usually beneficial for the executives of the target firm. b. defense tactics are opposed by institutional investors. c. defense tactics vary in their effectiveness as a defense to takeovers. d. defense tactics make the costs of a takeover lower.
d. defense tactics make the costs of a takeover lower.
92. The BEST multidivisional structure to use a. is the competitive form. b. is the SBU form. c. is the cooperative form. d. depends on the degree of diversification.
d. depends on the degree of diversification.
60. Strategic controls allow corporate-level managers to a. evaluate business-level performance on objective criteria. b. concentrate on day-to-day corporate operations. c. assess performance of employees and managers in each business unit. d. examine the fit between what the firm might do and what it can do.
d. examine the fit between what the firm might do and what it can do.
96. The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. has a structure organized around both functional specialization and business projects. d. has a structure requiring heavy use of horizontal integrative devices.
d. has a structure requiring heavy use of horizontal integrative devices.
81. Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms. Adams' company should a. be the strategic center firm in a network structure. b. have a specialized multidivisional structure. c. develop alliances with firms with complementary competencies. d. have a highly centralized, functional structure.
d. have a highly centralized, functional structure.
123. Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the organizational structure. a. horizontal complementary strategic alliance b. competitive multidivisional c. strategic business unit multidivisional d. hybrid combination
d. hybrid combination
77. Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration
d. integration
76. The three structural characteristics that differ among organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.
d. intermediation.
99. The structure is an organizational structure that combines both functional specialization and business product or project specialization. a. functional b. worldwide geographic area c. network d. matrix
d. matrix
63. Alfred Chandler found that firms grow in a predictable pattern and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory? a. functional b. simple c. vertically integrated d. multidivisional
d. multidivisional
105. Research suggests that boards of directors perform better if a. the CEO is also the chairperson of the board of directors. b. the board includes employees as voting members. c. the board is homogenous in composition. d. outside directors own significant equity in the organization.
d. outside directors own significant equity in the organization.
108. Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance.
d. penalties for inadequate firm performance.
121. The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited a. centralization. b. coordination across divisions. c. ability to meet local market needs. d. potential for global efficiency.
d. potential for global efficiency.
84. A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to , whereas owners wish to diversify the firm to . a. generate free cash flows; reduce the risk of total firm failure b. increase the price of the firm's stock; increase the dividends paid out from free cash flows c. reduce the risk of total firm failure; reduce their total portfolio risk d. reduce their employment risk; increase the company's value
d. reduce their employment risk; increase the company's value
69. Corporate governance is all of the following EXCEPT a. mechanisms used to determine and control the strategic direction and performance of organizations. b. a means to establish and maintain harmony between owners and top managers whose interests may conflict. c. ensuring that top managers' interests are aligned with the interests of stockholders. d. resolve conflicts among corporate employees.
d. resolve conflicts among corporate employees.
88. All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT a. consumer protection. b. CEO compensation. c. regulation of derivatives. d. retirement accounts.
d. retirement accounts.
128. Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer-term contracts with suppliers and enables engineers in the supplier companies to have better communication with Toyota. This is an example of a(n) a. worldwide product divisional structure. b. functional structure. c. SBU multidivisional structure. d. strategic network.
d. strategic network.
59. One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so a. indicates to competitors that the firm is vulnerable to a hostile takeover. b. will only lead to inefficiencies. c. requires that the firm undertake a multi-year restructuring period that will delay retirement. d. suggests that the firm's previous choices were not the best ones.
d. suggests that the firm's previous choices were not the best ones.
67. The benefits of a simple structure include all of the following EXCEPT a. ease of coordination within the organization. b. the lack of a need for sophisticated information systems. c. active involvement by the owner-manager. d. the ability of specialists to develop deep expertise.
d. the ability of specialists to develop deep expertise.
133. The governance mechanism most closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is a. ownership concentration. b. the market for corporate control. c. executive compensation systems. d. the board of directors.
d. the board of directors.
96. Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm's top managers. d. the board of directors.
d. the board of directors.
72. Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control
d. the market for corporate control
81. Product diversification provides two benefits to managers that do not accrue to shareholders: and . a. greater experience in a wider range of industries; lessening of managerial employment risk b. the manager frequently invests in the acquired firm, which allows him or her extensive profits; the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered; the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk
d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk
92. As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions a. increases. b. decreases. c. remains constant. d. is eliminated.
b. decreases.
105. In an SBU structure, financial controls. is/are evaluated using strategic controls, whereas is/are evaluated using a. each SBU; divisions within the SBUs b. divisions within the SBUs; each SBU c. managers of the SBUs; headquarters staff d. headquarters staff; managers of the SBUs
b. divisions within the SBUs; each SBU
74. Corporate governance is important to nations because a. shareholders want large stock returns. b. firms seek to invest in nations with national governance standards that are acceptable to them. c. company boards have lobbied for strong governance. d. the United States requires that other nations adopt its governance practices.
b. firms seek to invest in nations with national governance standards that are acceptable to them.
90. Usually, large-block shareholders are considered to be those shareholders with at least stock. a. 5 b. 25 c. 50 d. 75
a. 5
55. The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE? a. Amos should consider adopting the multidivisional structure. b. Mr. Ball has insufficient power to change the structure of the organization. c. Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes. d. These businesses are too disparate to coordinate within one corporate structure.
a. Amos should consider adopting the multidivisional structure.
80. Managers may decide to invest in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets
b. free cash flows
124. James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision making is based on authority and few conflicts emerge. d. Mr. Abercrombie should find significant need for his services in companies in transitional economies.
b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level.
126. Which of the following statements is about corporate governance in Germany is FALSE? a. The Vorstand (management board) of a German corporation makes decisions about strategy and management. b. The Vorstand is elected by the firm's employees. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock.
b. The Vorstand is elected by the firm's employees.
114. Megaline, Inc., with five divisions, follows the competitive form of the multidivisional structure. One division has not met the rate-of-return goals for the past year. Another division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office must decide where to allocate capital in the next year. Which scenario is the MOST likely? a. The poorest-performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year. b. The highest-performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year. c. The average-performing divisions which met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements. d. All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.
b. The highest-performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year.
132. The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers.
b. a weak board of directors.
101. Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet.
b. appoint another individual as chairperson of the board of directors.
80. Successfully implementing a cost leadership strategy requires a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.
b. centralization of authority.
110. The fewest integrative devices are used in the structure. a. simple b. competitive multidivisional c. SBU d. network
b. competitive multidivisional
112. Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the structure. a. matrix b. competitive multidivisional c. hybrid combination d. horizontal complementary strategic alliance
b. competitive multidivisional
87. Successful implementation of the differentiation strategy requires a structure that a. has specialized jobs. b. decentralizes decision making. c. focuses on the finance function. d. is dominated by the operations function.
b. decentralizes decision making.
107. The CEO and Chairman of the board of directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Establishing a formal process to evaluate the board's performance. c. Electing an lead director. d. All of these options are correct.
d. All of these options are correct.
97. Which of the following is a FALSE statement about corporate governance? a. Governance is used to establish order between parties whose interests may be in conflict. b. Corporate governance mechanisms sometimes fail to monitor and control top managers' decisions. c. Corporate governance mechanisms can be in conflict with one another. d. Corporate governance is best achieved with a board of directors with strong ties to management.
d. Corporate governance is best achieved with a board of directors with strong ties to management.
98. Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures? a. Firms pursuing a related linked strategy should implement a competitive structure with a competitive culture and centralized strategic-planning activities. b. Firms pursuing an unrelated diversification strategy should use an SBU structure with a small corporate staff, emphasize the R&D function, and integrate divisions to achieve synergies. c. Firms pursuing a related linked strategy should use an SBU structure, emphasize interdependence among divisions, and manage the strategic planning function from the central office. d. Firms pursuing a related constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.
d. Firms pursuing a related constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.
53. Which of the following is TRUE? a. Organizations tend to change structure too frequently, which erodes their competitive advantage. b. Large organizations can retain a simple structure as long as they have a focus strategy. c. Flexibility in structure is more important than stability. d. Strategy has a more important influence on structure than structure has on strategy.
d. Strategy has a more important influence on structure than structure has on strategy.
116. Agricultural Chemicals, Inc., was the target of a hostile takeover 6 months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following is most likely to be TRUE? a. Hostile takeover attempts are so common that they do not reflect negatively on the firm's performance. They are more a function of general market conditions. b. The fact that a hostile takeover has occurred is proof that the firm was under-performing. c. Research shows that once a hostile takeover has been defeated, the firm is safe from other hostile takeover attempts for many years. d. The CEO and top executives should not consider their jobs secure.
d. The CEO and top executives should not consider their jobs secure.
