MGMT 493 ch 9-12

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) advantage. a. economic b. collusive c. alliance d. relational

d. relational

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.

Firms participate in strategic alliances for all the following reasons EXCEPT to a. create value that they could not develop by acting independently. b. enter competitive markets more quickly. c. gain access to resources. d. retain tight control over intangible core competencies.

d. retain tight control over intangible core competencies.

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.

In some countries, the only legal way for foreign firms to invest in the country is through a. acquisitions. b. mergers. c. greenfield ventures. d. strategic alliance with a local firm.

d. strategic alliance with a local firm

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT a. laws. b. culture. c. trade policies. d. technology

d. technology

Monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firms top managers. d. the board of directors.

d. the board of directors

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.

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 managers 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

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy? a. the loss of unexpected opportunities b. the cost of extensive monitoring mechanisms c. the costs of writing detailed contracts d. the prevention of opportunistic behavior by the partner(s)

d. the prevention of opportunistic behavior by the partner(s)

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

. the market for corporate control

Which of the following is TRUE of trends in Japans 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.

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.

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.

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

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's a. brand name. b. capital resources. c. access to a consolidated market. d. geographic locations

a. brand name.

Dynamic alliance networks work best in industries a. characterized by frequent product innovations and short product life cycles. b. that are mature and stable in nature. c. where the coordination of product and global diversity is critical. d. that are characterized by predictable market cycles and demand

a. characterized by frequent product innovations and short product life cycles.

A cooperative strategy helps the firm diversify in terms of products offered, markets served, or both. a. corporate-level b. business-level c. national-level d. industry-level

a. corporate-level

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the management approach. a. cost minimization b. trust but verify c. opportunity maximization d. pragmatic realism

a. cost minimization

The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the ___________approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Opening Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures. a. cost minimization; opportunity maximization b. opportunity maximization; cost minimization c. cost maximization; opportunity minimization d. bureaucratic; organic

a. cost minimization; opportunity maximization

The two basic approaches to successfully manage cooperative strategic alliances involve and . a. cost minimization; opportunity maximization b. monitoring systems; multiple management approaches c. contractual systems; financial systems d. equity approaches; nonequity approaches

a. cost minimization; opportunity maximization

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.

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are a. engaging in tacit collusion. b. following uncertainty reducing strategies. c. monitoring business competitors for opportunistic behaviors. d. following a competitive response strategy.

a. engaging in tacit collusion.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n) a. equity strategic alliance. b. joint venture. c. nonequity strategic alliance. d. cooperative arrangement.

a. equity strategic alliance

The repurchase at a premium of the target firms 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.

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

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 Sierras core industry.

a. increased diversification of Sierra Infusion.

Reduction of competition can be accomplished through all of the following EXCEPT a. predatory alliances. b. explicit collusion. c. tacit collusion. d. mutual forbearance.

a. predatory alliances.

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.

In a cross-border alliance, the local partner is often a useful source of information about a. sources of capital. b. the strengths of the foreign firm's technology. c. market synergies. d. long-term planning.

a. sources of capital.

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) alliance because it allows the firms to share resources and capabilities across multiple functions. a. synergistic b. opportunistic c. horizontal d. diversifying

a. synergistic

All of the following are business-level cooperative strategic alliances EXCEPT a. synergistic strategic alliances. b. uncertainty reduction strategic alliances. c. complementary strategic alliances. d. competition response strategic alliances.

a. synergistic strategic alliances

Boards of directors are now becoming more involved in a. the strategic decision-making process. b. selecting new CEOs. c. the firms tax issues. d. governmental relations.

a. the strategic decision-making process.

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT a. to enhance the compensation packages of top managers. b. to leverage core competencies in new markets. c. to operate within government restrictions in the local country. d. to escape limited domestic growth opportunities.

a. to enhance the compensation packages of top managers.

The two types of complementary strategic alliances are a. vertical and horizontal. b. macro and micro. c. outsourcing and insourcing. d. network and complementary

a. vertical and horizontal.

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) strategy. a. vertical complementary b. horizontal complementary c. uncertainty reduction d. network

a. vertical complementary

Stable alliance networks will most often a. be used to enhance a firm's internal operations. b. appear in mature industries where demand is relatively constant and predictable. c. emerge in industries with short product life cycles. d. emerge in declining industries as a way to increase process innovations.

b. appear in mature industries where demand is relatively constant and predictable.

Which of the following statements is TRUE? a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies. b. As many as 50 percent of cooperative strategies fail. c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources. d. Problems with international cooperative strategies usually concern financial-system differences between the partners.

b. As many as 50 percent of cooperative strategies fail.

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 firms 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 CamCells 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.

129. is an important influence in Japanese corporate governance structures. a. Innovation b. Consensus c.Competition d.Individualism

b. Consensus

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.

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. Abercrombies specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombies 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. Abercrombies specialty because these skills are already practiced at a high level.

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 firms 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 firms employees.

Mutual forbearance is a. illegal in the United States. b. a type of competition-reducing strategy. c. a variety of risk-sharing by firms in highly fragmented industries. d. exercised when alliance partners refrain from opportunistic behaviors.

b. a type of competition-reducing strategy.

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 CEOs 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 firms earning above-average returns, he has been displaying a tendency toward personal extravagance at the firms 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 firms 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.

. strategic alliances have stronger focus on value creation than do alliances. a. competition reducing; complementary b. complementary; competition reducing c. uncertainty reducing; complementary d. collusive; uncertainty reducing

b. complementary; competition reducing

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

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of resulting from an alliance. a. explicit collusion b. economies of scale c. opportunistic behavior d. distribution opportunities

b. economies of scale

Firms entering into synergistic strategic alliances expect to attain a. technological complexity. b. economies of scope. c. monopolistic market power. d. learning curve efficiencies

b. economies of scope.

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.

Managers may decide to invest_________in products that are not associated with the firms current lines of business to b. free cash flows c. marginal profits d. frozen assets

b. free cash flows

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to a. get venture capital from Pet Resort. b. gain access to Pet Resort's tacit knowledge. c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta. d. join in a vertical complementary alliance with Pet Resort.

b. gain access to Pet Resort's tacit knowledge.

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.

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

Generally, a board member who is a source of information about a firms day-to-day activities is classified as a(n)____________director. a. lead independent b. inside c. related d. encumbered

b. inside

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 teams interests and the owners interests are aligned.

b. internal controls have failed.

A cooperative strategy a. is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. b. is a strategy in which firms work together to achieve a shared objective. c. is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. d. specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

b. is a strategy in which firms work together to achieve a shared objective.

. Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross-border alliance, this partnership can be called a(n) a. nonequity strategic alliance. b. joint venture. c. horizontal complementary alliance. d. equity strategic alliance.

b. joint venture.

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a , which is effective at transferring a. nonequity strategic alliance; explicit knowledge. b. joint venture; tacit knowledge. c. joint venture; explicit knowledge. d. equity strategic alliance; tacit knowledge

b. joint venture; tacit knowledge.

Which type of strategic alliance is best at passing tacit knowledge between firms? a. primary cooperative strategic alliances b. joint ventures c. equity strategic alliances d. nonequity strategic alliances

b. joint ventures

In the United States, cooperative strategies to reduce competition may result in if they are explicit. a. increased tax liabilities b. litigation c. government takeover of the firms d. dissolution of the firm

b. litigation

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.

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.

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT a. a host nation may forbid a merger or acquisition. b. opportunistic behaviors are less likely. c. cooperative strategies require fewer resources. d. cooperative strategies allow greater flexibility in diversifying the firm's portfolio.

b. opportunistic behaviors are less likely.

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.

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.

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

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

Firms in markets cooperate to pool resources and gain market power. a. slow-cycle b. standard-cycle c. fast-cycle d. hyper-cycle

b. standard-cycle

The Renault Nissan alliance discussed in the Opening Case is an example of a_________in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. a. joint venture b. synergistic alliance c. horizontal complementary alliance d. dynamic alliance network

b. synergistic alliance

A_________is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance. a. joint venture b. synergistic strategic alliance c. diversifying strategic alliance d. dynamic alliance network

b. synergistic strategic alliance

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

In free-market economies,_______ must decide how rivals can collaborate with their competitors without violating established regulations a. the invisible hand b. the government c. consumers d. the business community

b. the government

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.

To increase the likelihood of success between partners assuming that trust exists, used to manage cooperative strategies. a. the cost minimization b. the opportunity maximization c. both the cost minimization and opportunity maximization d. None of the these options are correct.

b. the opportunity maximization

A nonequity strategic alliance exists when a. two firms join together to create a new company. b. two or more firms have a contractual relationship to share resources and capabilities. c. two partners in an alliance own unequal shares in the combined entity. d. the partners agree to sell bonds instead of stock in order to finance a new venture.

b. two or more firms have a contractual relationship to share resources and capabilities.

Of the various business-level strategic alliances,_____________alliances have the most probability of creating sustainable competitive advantage, and____________have the lowest. a. horizontal complementary; vertical complementary b. vertical complementary; competition reducing c. competition reducing; horizontal complementary d. uncertainty reducing; competition reducing

b. vertical complementary; competition reducing

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture? a. BPM will own more than 50 percent of the venture and a new company will be formed. b. J3 will own more than 50 percent of the venture and a new company will be formed. c. BPM and J3 will both own 50 percent of the venture and a new company will be formed. d. BPM and J3 will both own 50 percent of the venture but no new company will be formed.

c. BPM and J3 will both own 50 percent of the venture and a new company will be formed.

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.

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

c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms.

The separation between firm ownership and management creates a(n) relationship. a. governance b. control c. agency d. dependent

c. agency

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.

Firms in a standard-cycle market may form alliances in order to a. take advantage of opportunities in emerging market countries. b. more quickly distribute new products. c. capture economies of scale. d. share risky R&D investments.

c. capture economies of scale.

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 boards performance

c. compensating directors with stock options rather than with fixed remuneration

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n) a. collusive tactic. b. merger. c. cross-border strategic alliance. d. international acquisition.

c. cross-border strategic alliance.

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n) a. joint venture. b. network strategy. c. equity strategic alliance. d. nonequity strategic alliance

c. equity strategic alliance.

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.

Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type lighting in non-traditional style homes. Smith has invested 40 percent and Revelation has invested 60 percent into the new operation. This is an example of a(n) a. joint venture. b. nonequity alliance. c. horizontal complementary strategic alliance. d. vertical complementary strategic alliance.

c. horizontal complementary strategic alliance.

Which of the following is NOT a risk for firms engaged in cooperative strategies? a. misrepresentation of a partner's competencies b. partner acts opportunistically c. insufficient variation in firms' core competencies d. failure of partners to make complementary resources available to the partnership

c. insufficient variation in firms' core competencies

In a(n)_____________two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. a. equality-based strategic alliance b. non-equity strategic alliance c. joint venture d. equity strategic alliance

c. joint venture

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

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this? a. joint venture b. equity strategic alliance c. nonequity strategic alliance d. competition reduction alliance

c. nonequity strategic alliance

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will a. insist on excessively close monitoring of DDD's actions. b. gain access to DDD's core competencies and use them to become a future competitor. c. not fully share its intangible resources. d. not make equivalent investments to the alliance as does DDD.

c. not fully share its intangible resources.

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.

Agency costs reflect all of the following EXCEPT costs. a. monitoring b. enforcement c. opportunity d. incentive

c. opportunity

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.

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.

In the United States, a firm's key stakeholder(s) is(are) the a. government. b. executives. c. shareholders. d. customers.

c. shareholders.

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a___________means to enter markets in Europe and Asia. The steel industry is an example of a typically use alliances to gain market access. a. fast-cycle b. standard-cycle c. slow-cycle d. intermediate-cycle market in which firms

c. slow-cycle

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that a. firms will have to accept greater risks. b. trust will be eroded. c. spontaneous opportunities are minimized. d. power coalitions will still develop.

c. spontaneous opportunities are minimized.

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in a. excessive cooperation. b. joint ventures. c. tacit collusion. d. horizontal strategic alliances

c. tacit collusion.

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to a. learn about the brand and technology from the franchisee. b. test the franchisee for potential future acquisition. c. transfer to the franchisee knowledge and skills needed to compete at the local level. d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient.

c. transfer to the franchisee knowledge and skills needed to compete at the local level.

In managing cooperative strategies, research indicates that____________can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage. a. extensive capitalization b. stability c. trustworthiness d. Internet competency

c. trustworthiness

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 boards performance. c. Electing an lead director. d. All of these options are correct.

d. All of these options are correct.

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.

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement? a. Meredith will own a majority equity stake in the new venture. b. JaZz will own a majority equity stake in the new venture. c. Meredith or JaZz will own an equal equity stake in the new venture. d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

Which of the following statements is FALSE? a. Franchising is most appropriate in fragmented industries. b. Franchising provides corporate growth with less risk than do mergers and acquisitions. c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. d. Franchising agreements require more trust between firms than do other cooperative strategies.

d. Franchising agreements require more trust between firms than do other cooperative strategies.

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.

Why are alliances in the airline industry unstable? a. Unstable industries make for unstable alliances. b. The potential for firms to take opportunistic actions is too widespread. c. The industry is declining and profits are not sufficient to divide among alliance partners. d. The alliances require cooperation among firms that must also compete with one another.

d. The alliances require cooperation among firms that must also compete with one another.

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 executives 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.

Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is correct about this relationship? a. This is a joint venture because in licensing arrangements, a new company is created. b. This is an equity strategic alliance because licensing does not involve the creation of a new company, but does involve an equity commitment. c. The firms risk charges of collusion because most licensing relationships between competitors involve explicit collusion. d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.

d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.

are LEAST likely to involve potential or current competitors. a. Mutual forbearance strategies b. Tacit collusion strategies c. Horizontal complementary strategic alliances d. Vertical complementary strategic alliances

d. Vertical complementary strategic alliances

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT: a. Has AsiaFoods accurately represented its competencies? b. Will AsiaFoods make alliance-specific investments? c. Can Greentech expect opportunistic behavior from AsiaFoods? d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

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.

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.

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.

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.

The global airline industry is one in which a. national political interests prevent airlines from making international alliances. b. the fast-cycle nature of the industry mandates heavy use of alliances. c. most alliances tend to be vertical complementary. d. alliance versus alliance competition dominates firm versus firm competition.

d. alliance versus alliance competition dominates firm versus firm competition.

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.

A strategy in which firms work together to achieve a shared objective is a a. functional-level strategy. b. business-level strategy. c. corporate-level strategy. d. cooperative strategy.

d. cooperative strategy.

When using cooperative strategies, firms most frequently develop strategic alliances that a. enhance the firm's reputation in the marketplace. b. are long-lived. c. will reduce the firm's political risk. d. create a competitive advantage.

d. create a competitive advantage.

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.

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with a. low-cost labor production facilities in another country. b. similar products who could help the firm establish economies of scale. c. access to franchises in new markets. d. excess resources for investing.

d. excess resources for investing.

The alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an ________________alliance in a new products and services. a. slow-cycle market b. medium-cycle market c. standard-cycle market d. fast-cycle market

d. fast-cycle market

McDonald's, Hilton International, and Subway all heavily rely on the strategy. a. transnational b. network cooperative c. cross-border alliances d. franchising cooperative

d. franchising cooperative

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should a. avoid future cooperative alliances because they lack the skills needed to manage them successfully. b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent opportunistic behavior by the alliance partner. c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance partner in the future. d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

The use of strategic alliances a. is unlikely to yield success if partnering firms are headquartered in the same country. b. may be too restrictive to facilitate entry into new markets. c. usually increases the investment necessary to introduce new products. d. is more frequent than other types of cooperative strategies.

d. is more frequent than other types of cooperative strategies.

The risks of being accused of collusion are MOST likely under what type of alliance? a. equity-based vertical complementary alliance b. equity-based horizontal complementary alliance c. nonequity-based vertical complementary alliance d. nonequity-based horizontal complementary alliance

d. nonequity-based horizontal complementary alliance

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breech of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here? a. having a true perception of the partner's trustworthiness b. failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy c. the partner misrepresenting competencies it can bring to the partnership d. opportunistic behavior

d. opportunistic behavior

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.

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.

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 companys value

d. reduce their employment risk; increase the companys value