SM - EXAM 2

1. When PepsiCo's management was considering the divestiture of a group of fast-food restaurant businesses (KFC, Pizza Hut, and Taco Bell), the following question was most likely asked: "Do we need to do the math to achieve 1 + 1 = 3 outcomes from these diversified businesses?" "Did we miss the opportunity to milk these cash cows?" "Why couldn't we derive a parenting advantage with these businesses?" "If we were not in this business today, would we want to get into it now?" "Will these three businesses pass the 'cost-of-exit' test?"

"If we were not in this business today, would we want to get into it now?"

Integrated social contracts theory maintains that Answers: all ethical standards are determined by societal norms and individuals have an implied social contract to live up to these standards. "first order" universal ethical norms always take precedence over "second order" local ethical norms. there should be no absolute limits put on what is ethically or morally right. few nations or cultures have common moral agreement on what is ethically right and wrong. each country/culture/society has commonly held views about what constitutes ethically appropriate actions/behaviors that all individuals in that country/culture/society are obligated to observe.

"first order" universal ethical norms always take precedence over "second order" local ethical norms.

1. The most long-lasting strategic alliances aim at teaming up with world-class suppliers or else companies with world-class know-how in product innovation. are those whose purpose is helping a company master a new technology. are those formed to enable the partners to be consistent first movers or fast followers. (1) involve collaboration with suppliers or distribution allies, or (2) conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging. aim at insulating the partners against the impacts of the five competitive forces and industry driving forces.

(1) involve collaboration with suppliers or distribution allies, or (2) conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging.

1. Which of the following does NOT accurately describe entering a new business via acquisition, internal development, or a joint venture? The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for a successful company or to buy a struggling company at a bargain price. Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up. Acquisition is the most popular means of diversifying into another industry, has the advantage of being quicker than trying to launch a brand-new operation, and offers an effective way to hurdle entry barriers. Joint ventures are an attractive way to enter new businesses when the opportunity is too complex, uneconomical, or risky for one company to pursue alone, when the opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its own, and/or when it aids entry into a foreign market. The big drawbacks to entering a new industry via internal development include the costs of overcoming entry barriers, building an organization from the ground up, and the extra time it takes to build a strong and profitable competitive position.

Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up.

1. Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct? Observing and following the lead of local competitors is the sole guarantee of success in developing markets. Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. Entering an emerging market should always involve a best-cost strategy. Standardized products are typically more successful in emerging country markets. Profitability always comes quickly to entrants into developing markets because of global branding.

Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. Standardized products are typically more successful in emerging country markets.

1. Which of the following is NOT a typical option that companies have to consider in order to tailor their strategy to fit the circumstances of developing country markets? Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals. Prepare to compete on the basis of low price. Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding). Try to change the local market to better match the way the company does business elsewhere. Stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.

Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals.

1. Which one of the following statements concerning the impact of fluctuating exchange rates on companies competing in foreign markets is not true? Fluctuating exchange rates pose significant risks to a company's competitiveness in foreign markets. Exchange rate shifts can produce sometimes favorable and sometimes unfavorable effects on a company's competitiveness. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made. Exporters win when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries to which goods are being exported. If the exchange rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has grown weaker.

Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

Which of the following statements is accurate concerning a company's environmental sustainability strategy? Answers: Environmental sustainability consists of a corporate commitment to address the unmet noneconomic needs of society. Environmental sustainability consists of deliberate actions to protect the environment, provide for the longevity of natural resources, and maintain ecological support systems for future generations. Environmental sustainability consists of striking a balance between (1) the economic responsibility to reward shareholders with profits, (2) the legal responsibility by the company to laws in countries where it operates, (3) the ethical responsibility to abide by society's moral norms, and (4) the discretionary philanthropic responsibility to contribute to the noneconomic needs of society. Environmental sustainability consists of developing the resource strengths necessary to develop a sustainable competitive advantage. Environmental sustainability consists of business practices that meet the needs of the future by rationing what is provided to present-day customers.

Environmental sustainability consists of deliberate actions to protect the environment, provide for the longevity of natural resources, and maintain ecological support systems for future generations.

Which one of the following is not a part of the business case for why companies should act in a socially responsible manner? Answers: Acting in a socially responsible manner is in the overall best interest of shareholders. Acting in a socially responsible manner can generate internal benefits (as concerns employee recruiting, workforce retention, training, and improved worker productivity). To the extent that a company's socially responsible behavior wins applause from consumers and fortifies its reputation, a company may win additional patronage. Acting in a socially responsible manner reduces the risk of reputation-damaging incidents. Every business has a moral duty to be a good corporate citizen.

Every business has a moral duty to be a good corporate citizen.

1. Véronique is the CEO of a wind power energy company headquartered in Toulouse, France. Identify which company model she would emulate to craft a multidomestic strategy. Tiffany & Co., an American luxury jewelry and specialty retailer, controls its general market approach from its headquarters in New York. Intel, headquartered in California's Silicon Valley, strongly encourages its trading partners to use the UN/EDIFACT ISO standard ISO 9735 for syntax and data exchange. Vueling, a low-cost carrier based in Spain, adapts its price to competitive pressures from Norwegian Air, RyanAir, and EasyJet. Headquartered in Liverpool, England, Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets. Ford Motors, headquartered in Dearborn, Michigan, establishes its own ride-sharing business in Mumbai, India.

Headquartered in Liverpool, England, Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets.

1. Which of the following is not a strategic disadvantage of vertical integration? It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs. Vertical integration increases a firm's capital investment in the industry. Integrating into more industry value chain segments increases business risk if industry growth and profitability sour. Vertically integrated companies are often slow to embrace technological advances or more efficient production methods when they are saddled with older technology or facilities. Integrating backward potentially results in less flexibility in accommodating shifting buyer preferences when a new product design doesn't include parts and components that the company makes in-house.

It greatly reduces the opportunity for capturing maximum scale economies and achieving the lowest possible operating costs.

Business process reengineering is a tool for Answers: a. expediting the development of an important new competitive capability. b. pulling the pieces of strategy-critical activities out of different departments and unifying their performance in a single department or cross-functional work. c. boosting the quality of a company's product and the caliber of its customer service. d. reducing the size of a company's managerial bureaucracy. e. remodeling and refreshing a strategy-critical core competence.

b. pulling the pieces of strategy-critical activities out of different departments and unifying their performance in a single department or cross-functional work

1. Which one of the following statements explaining why merger and acquisition strategies typically fail is true? Merger and acquisition strategies typically fail due to the development of effective integration plans conducive to employee satisfaction. Merger and acquisition strategies typically fail due to the creation of management-employee programs intended to foster better communication. Merger and acquisition strategies typically fail due to a misinterpretation of the cultural differences, like employee disenchantment and low morale, because of differences in management styles and operating procedures, and due to unforeseen challenges in integrating operations. Mergers and acquisition strategies typically fail due to an execution of functional and integration activity, while sustaining and capitalizing on the combined sources of revenue. Mergers and acquisition strategies typically fail due to misleading advertising messages detailing the merger announcement.

Merger and acquisition strategies typically fail due to a misinterpretation of the cultural differences, like employee disenchantment and low morale, because of differences in management styles and operating procedures, and due to unforeseen challenges in integrating operations.

1. Which of the following is not an example of a company pursuing a blue ocean strategy? Starbucks in the coffee house industry FedEx in overnight package delivery Nordstrom in the retail industry Cirque de Soleil in the live entertainment industry eBay in the online auction industry

Nordstrom in the retail industry

1. Which of the following instances does not exemplify when a late-mover advantage arises? Answers: Property rights protections in the form of patents, copyrights, and trademarks prevent the ready imitation of initial moves. Rapid market evolution gives fast followers the opening to leapfrog a first mover's products with more attractive next-version products. Market uncertainties make it difficult to ascertain what will eventually succeed. Products of an innovator are simple, do not need a high customer understanding, and easily penetrate the market. Pioneering helps build a firm's reputation with buyers and creates brand loyalty.

Property rights protections in the form of patents, copyrights, and trademarks prevent the ready imitation of initial moves.

1. Experience indicates that strategic alliances Answers: have a high "divorce rate." are generally successful. work well in cooperatively developing new technologies and new products but seldomm work well in promoting greater supply chain efficiency. work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies. are rarely useful in helping a company win the race for global industry leadership and establish positions in industries of the future.

have a high "divorce rate."

1. Economies of scope are derived from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic area. have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain. stem from cost-saving strategic fits along the value chains of related businesses. refer to the cost savings that flow from being able to combine the value chains of different businesses into a single value chain. are like economies of scale and arise from being able to lower costs via a larger volume operation.

stem from cost-saving strategic fits along the value chains of related businesses.

Which of the following help in changing an unhealthy or problematic company culture? Answers: a. Management needs to be quickly and aggressively striving to ingrain new behaviors and work practices that will enable first-rate strategy execution, which may take a longer period of time. b. Managers need to learn the weaknesses of their subordinates to begin the change process. c. The strategy has to be changed as rapidly as possible to regain harmony with cultural norms. d. Management needs to go on the offensive to reinterpret the culture and explain to company personnel why there really is good overall cultural fit with the strategy. e. Company personnel need to cling to familiar practices, be wary of change, and blame top management for any shortfalls in performance.

a. Management needs to be quickly and aggressively striving to ingrain new behaviors and work practices that will enable first-rate strategy execution, which may take a longer period of time.

Which one of the following is not a part of the business case for why companies should act in a socially responsible manner? Answers: A strong commitment to socially responsible behavior reduces the risk of reputation-damaging incidents. The aggressive pursuit of market share, revenues, and profits always puts the company in jeopardy of violating society's social responsibility expectations. Social responsibility strategies work to the advantage of shareholders. Socially responsible actions yield internal benefits (particularly for employee recruiting, workforce retention, and training costs) and can improve operational efficiency. Socially responsible actions can lead to increased buyer patronage.

The aggressive pursuit of market share, revenues, and profits always puts the company in jeopardy of violating society's social responsibility expectations.

According to the triple bottom line, which of the following statements is NOT accurate? Answers: The three dimensions of performance are often referred to in terms of the "three pillars" of people, planet, and profit. The term "planet" refers to the company's overriding legal obligation to incorporate protection of the environment into its mission. The term "people" refers to various social initiatives such as charitable contributions, serving endeavors, and engaging in broader philanthropic initiatives. The term "profit" not only encompasses the profit earned for its shareholders but also the economic impact that the company has on society more generally. The triple bottom line refers to three types of performance metrics: economic, social, and environmental.

The term "planet" refers to the company's overriding legal obligation to incorporate protection of the environment into its mission.

Which one of the following falsely describes a centralized approach to decision making? Answers: a. Hierarchical command-and-control structures speed an organization's responses to changing conditions because top-level managers are in a position to quickly review the situation and make a final decision. b. Little discretionary authority is granted to frontline supervisors and rank-and-file employees. c. Top executives retain authority for most strategic and operating decisions. d. There is an assumption that front line personnel have neither the time nor the inclination to direct and properly control the work they are performing, and that they lack the knowledge and judgment to make wise decisions about how best to do their work. e. Tight control by a few senior managers makes it easy to fix accountability when things do not go well.

a. Hierarchical command-and-control structures speed an organization's responses to changing conditions because top-level managers are in a position to quickly review the situation and make a final decision.

1. Architects of mergers and acquisition strategies typically set sights on which of the following objectives? revamping a company's value chain facilitating the employment of both offensive and defensive strategies creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new product categories gaining quick access to new technologies or other resources and competitive capabilities, and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities Two answers are correct: creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new productcategories, and gaining quick access to new technologies or other resources and competitive capabilities, and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities

Two answers are correct: creating a more cost-efficient operation, expanding a company's geographic coverage, and extending a company's business into new productcategories, and gaining quick access to new technologies or other resources and competitive capabilities, and leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities

1. Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous when high transportation costs make it expensive to operate from central locations. whenever buyer-related activities are best performed in locations close to buyers. if economies of scale are essential to achieving acceptable production costs. Two answers are correct: when high transportation costs make it expensive to operate from central locations; and whenever buyer-related activities are best performed in locations close to buyers. if trade barriers and transportation costs fall, making it more profitable to operate from a central location in the company's home market.

Two answers are correct: when high transportation costs make it expensive to operate from central locations; and whenever buyer-related activities are best performed in locations close to buyers.

On August 1, 2018, Reddit, an American social news aggregation, web content rating, and discussion website reported that it had been hacked. A spokesperson for Reddit said publicly, "think about whether there's anything on your Reddit account that you wouldn't want associated back to that address." The company also included instructions for users to remove their Reddit data. Do Reddit company managers have an obligation to observe ethical norms when crafting and executing a strategic response to this breach of data security and potential loss of consumer privacy? Answers: No, because ethics in business are generally less stringent than the ethical principles for society at large. No, because ethics in business only concern the rules each company's top management and board of directors make about "what is right" and "what is wrong." No, because ethics in business deal chiefly with the actions and behaviors required to operate companies in a socially responsible manner. Yes, because ethics in business are generally more stringent than the ethical principles for society at large. Yes, because ethics in business are not materially different from ethical principles in general.

Yes, because ethics in business are not materially different from ethical principles in general.

1. The procedure for evaluating a diversified company's strategy involves all of the following steps except checking whether the firm's resources fit the requirements of its present business lineup. assessing the competitive strength of each business the company has diversified into and determining which ones are strong or weak contenders in their respective industries. ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses. checking the competitive advantage potential of cross-business strategic fit among the company's various business units. a determination of the degree of risk involved with each business unit.

a determination of the degree of risk involved with each business unit.

1. Which of the following is not an example of unrelated diversification? a homebuilder acquiring a forest products company a manufacturer of golf shoes acquiring a retailer of fishing rods and lures a producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans) a steel producer acquiring a hardware store an online merchandiser acquiring a retail supermarket that specializes in natural and organic foods

a producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans)

A company's strategy needs to be ethical because Answers: of the potential for embarrassment to top management if the company's unethical behavior is publicly exposed. unethical strategies are inconsistent with or weaken the corporate culture. ethics watchdogs are sure to blow the whistle on the company's unethical behavior. of the risks of prosecution by governmental authorities if an unethical strategy is disclosed. a strategy that is unethical not only damages the company's reputation, but it also can have costly consequences.

a strategy that is unethical not only damages the company's reputation, but it also can have costly consequences.

Management's most powerful tool for mobilizing employee commitment to competent strategy execution and operating excellence is Answers: a. a properly designed reward structure. b. making the company a great place to work in terms of pay scales, fringe benefits, and employee perks. c. effective screening of job applicants such that only the most motivated and energetic people are hired. d. business process reengineering. e. total quality management.

a. a properly designed reward structure.

Recruiting and retaining capable employees are Answers: a. important because the quality of an organization's people is always an essential ingredient of successful strategy execution—knowledgeable, engaged employees are a company's best source of creative ideas for the nuts-and-bolts operating improvements that lead to operating excellence. b. easily the most critical aspect in building competitively valuable core competencies and capabilities. c. usually much more important to good strategy execution than is assembling a capable top management team. d. more easily done by large multinational corporations because of their deep financial resources and stimulating job assignments. e. largely a function of the skills and capabilities of the company's human resources staff.

a. important because the quality of an organization's people is always an essential ingredient of successful strategy execution—knowledgeable, engaged employees are a company's best source of creative ideas for the nuts-and-bolts operating improvements that lead to operating excellence.

Total quality management (TQM) Answers: a. is a philosophy of managing a set of business practices that emphasizes continuous improvement in all phases of operations, 100 percent accuracy in performing tasks, involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction. b. involves convincing employees that superior product quality is the most reliable key to competitive success in the marketplace. c. is incompatible with the ambidextrous organization. d. is a philosophy of managing that involves convincing employees that superior product quality is the most reliable key to competitive success in the marketplace. e. involves managing company operations in a manner calculated to quickly and efficiently make quantum gains in the quality and effectiveness with which production activities are performed.

a. is a philosophy of managing a set of business practices that emphasizes continuous improvement in all phases of operations, 100 percent accuracy in performing tasks, involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction.

A change in strategy nearly always entails budget reallocations because Answers: a. units important in the prior strategy but having a lesser role in the new strategy may need downsizing, while units and activities that now have a bigger and more critical strategic role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets. b. of corresponding changes in the company's organizational structure and budgetary requirements. c. new strategic initiatives can be costly or capital intensive. d. adopting best practices and pushing for continuous improvement tend to reduce costs and reduce overall resource requirements. e. the accompanying policy revisions and compensation incentives tend to require different levels of funding than before.

a. units important in the prior strategy but having a lesser role in the new strategy may need downsizing, while units and activities that now have a bigger and more critical strategic role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets.

Which of the following is not generally on a company's menu of actions to consider in crafting a strategy of social responsibility? Answers: efforts to employ an ethical strategy and observe ethical principles in operating the business actions to provide suppliers, distributors, and other value chain partners with handsome profit margins making charitable contributions, supporting community service endeavors, engaging in broader philanthropic initiatives, and reaching out to make a difference in the lives of the disadvantaged actions to build a workforce that is diverse with respect to gender, race, national origin, and other aspects that different people bring to the workplace actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities

actions to provide suppliers, distributors, and other value chain partners with handsome profit margins

Companies committed to environmental sustainability Answers: make major contributions to local civic and charitable organizations. consider the commitment to the environment as a "first order" priority, commitment to employees as a "second order" priority, and commitment to shareholders as a "third order" commitment. believe it is essential to strike a balance between shareholder interests and the interests of stakeholders such as suppliers, customers, employees, and the communities in which they operate. develop and market only products that are "environmentally friendly." adopt sustainable business practices that meet the needs of the present without compromising the ability to meet the needs of the future.

adopt sustainable business practices that meet the needs of the present without compromising the ability to meet the needs of the future.

1. The strategic appeal of related diversification is that it allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities. is less capital intensive than unrelated diversification because related diversification emphasizes getting into cash cow businesses (as opposed to cash hog businesses). involves diversifying into industries having the same kinds of key success factors. is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses. facilitates the achievement of greater economies of scale since the company only enters those businesses that serve the same types of buyer groups and/or buyer needs.

allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities.

1. Bonobos's Guideshop store concept enables men to have a personalized shopping experience in which they can try on clothing in any size or color and then have it delivered the next day to their home or office. This fashion retail concept is a good example of an offensive strategy to leapfrog competitors by being the first adopter of next-generation technologies or being first to market with next-generation products. an offensive strategy to offer an equally good or better product at a lower price. an offensive strategy to seek uncharted waters and compete in blue oceans. a defensive strategy to minimize the competitive advantages of rivals. a defensive strategy to capture occupied territory by maneuvering around rivals.

an offensive strategy to seek uncharted waters and compete in blue oceans.

Ethical principles in business Answers: concern the behavioral guidelines a company's top management and board of directors set for company personnel regarding "what is right" and "what is wrong" in conducting the company's business. deal chiefly with the actions and behaviors required to operate companies in a socially responsible manner. are arrived at by picking and choosing among the consensus ethical standards of society to come up with a set of ethical standards that apply directly to operating a business. are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct. involve behavioral guidelines for balancing the interests of non-owner stakeholders (customers, employees, suppliers, and the communities in which the company has operations) against the interests of company shareholders.

are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct.

Notions of right and wrong, fair and unfair, moral and immoral, ethical and unethical Answers: ultimately depend on a person's own values and beliefs. ultimately depend on the circumstances: nothing is really black or white when it comes to ethical standards. are governed mainly by religious views held in different geographic regions of the world. are present in all societies, organizations, and individuals. vary enormously from country to country across the world.

are present in all societies, organizations, and individuals.

1. The advantages of manufacturing goods in a particular country and exporting them to foreign markets are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country. are greatest when local consumers prefer products manufactured inside the country's borders. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. are largely unaffected by tariffs or quotas.

are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold.

1. The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to determine which business unit has the greatest number of resources, competencies, and competitive capabilities and which one has the least. assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender. rank each business unit's strategic fit from highest to lowest. rank each business unit's resource fit from highest to lowest. rank each business unit's strategy from best to worst.

assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender.

Aimée, owner of The Discerning Equestrian, a local apparel, tack, and equipment outlet, is facing growing competition from online retailers such as Equestrian.com. She has sought your student consulting team's advice about the staffing component in the managerial task of executing strategy. What would you not be likely to advise her to do? Answers: a. strive to retain talented, high-performing employees via promotions, salary increases, performance bonuses, stock options and equity ownership, fringe benefit packages, and other perks b. hire only people below the age of 35 who have college degrees and a grade point average of B or better c. coach average performers to improve their skills and capabilities, while weeding out underperformers d. provide promising employees with challenging, interesting, and skill-stretching assignments e. foster a stimulating and engaging work environment such that employees will consider the company a great place to work

b. hire only people below the age of 35 who have college degrees and a grade point average of B or better

Six Sigma quality control Answers: a. is the best practice for managing manufacturing and assembly activities. b. is based on three principles: (1) all work is a process, (2) all processes have variability, and (3) all processes create data that explain variability. c. consists of a disciplined, statistics-based system aimed at producing not more than 2.5 defects per million iterations. d. is a disciplined, statistics-based approach to manufacturing or assembling a product and results in five defects per million iterations when implemented properly. e. is a tool that is superior to TQM in achieving top-notch quality in manufacturing a product.

b. is based on three principles: (1) all work is a process, (2) all processes have variability, and (3) all processes create data that explain variability.

Leading the effort to instill a spirit of high achievement into Goldman Sachs's culture and putting constructive pressure on the organization to achieve good results in a successful manner was primarily contingent Answers: a. on the extent to which top management emphasizes a positive rather than a negative reward system. b. treating employees with dignity and respect, celebrating individual, group, and company successes, and setting stretch objectives. c. on the degree to which lower-level managers and supervisors were good practitioners of MBWA. d. on top executives making operating excellence the company's only core value. e. on top executives stressing the adoption of best practices, pushing for continuous product innovation, and providing employees with a stream of suggestions for improving company operations.

b. treating employees with dignity and respect, celebrating individual, group, and company successes, and setting stretch objectives.

1. The multidomestic strategy of "think local, act local" is most appropriate when the need for local responsiveness is low. avoids host country ownership requirements and import quotas. facilitates the transfer of a company's capabilities, knowledge, and other resources across country borders. is the only global market entry strategy conducive to building a single worldwide competitive advantage. becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.

becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.

1. Which of the following is not an advantage of outsourcing the performance of certain value chain activities to outsiders? being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's website allowing a company to reduce costs if the activity is not crucial to the firm's ability to achieve sustainable competitive advantage and won't hollow out its capabilities, core competencies, or technical know-how improving organizational flexibility and speeding time to market allowing a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best being able to reduce the company's risk exposure to changing technology and/or buyer preferences

being able to reduce distribution costs by eliminating the use of wholesale distributors and retail dealers and, instead, selling direct to end-users at the company's website

Which of the following statements about matching organizational structure to strategy execution is not correct? Answers: a. As firms grow, their structural form is likely to evolve. b. Simple structures are best matched to small firms and entrepreneurial startups. c. Functional structures are common among companies pursuing some form of diversification strategy. d. Matrix organizational structures are most suitable when there is a need for cross-unit communication, collaboration, and coordination. e. The type of organizational structure that is most suitable for a given firm will depend on the firm's size and complexity, as well as its strategy.

c. Functional structures are common among companies pursuing some form of diversification strategy

Which of the following is not a characteristic of a compensation and reward system designed to help drive successful strategy execution? Answers: a. not skirting the system to find ways to reward effort rather than results b. having incentives that extend to all managers and all workers, and generously rewarding people who turn in outstanding performances c. keeping performance incentives and bonuses to less than 15 percent of total compensation d. making the performance payoff a major, not minor, piece of the total compensation package e. making sure the time between achieving the target performance outcome and the payment of the reward is as short as possible

c. keeping performance incentives and bonuses to less than 15 percent of total compensation

Which one of the following is not something that shapes and helps define a company's culture? Answers: a. work practices and behaviors that define "how we do things around here": the company's standards of what is ethically acceptable and what is not, along with the legends and stories that people repeat to illustrate and reinforce the company's core values, traditions, and business practices b. a company's approach to managing people and its style of operating c. the strategy and business model that the company has adopted d. core values, beliefs, business principles, and traditions that permeate the workplace e. the "chemistry" that permeates its work environment

c. the strategy and business model that the company has adopted

For an enterprise to execute its strategy in truly proficient fashion and approach operating excellence, Answers: a. the CEO must gather information firsthand and demand progress from mid-level managers. b. the management must be creative in establishing policies and procedures that will instill high standards of operating excellence. c. top executives must take the lead in the implementation/execution process and personally drive the pace of progress. d. all employees must be very personable, effective communicators, and be skilled in the empowerment of company personnel. e. mid-level executives must be charismatic, be decisive decision makers, and make inspiring speeches at company events.

c. top executives must take the lead in the implementation/execution process and personally drive the pace of progress.

1. Using domestic plants as a production base for exporting goods to selected foreign country markets is usually a superior approach to competing in international markets. can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country. can be an excellent initial strategy to pursue international sales. is usually a weak strategy when competitors are pursuing licensing strategies. can be a powerful strategy because the company is not vulnerable to tariffs or quotas.

can be an excellent initial strategy to pursue international sales.

1. Which of the following strategic business units generate operating cash flows over and above internal requirements, thereby providing financial resources that may be used to finance new acquisitions, fund share buyback programs, or pay dividends? cash hogs cash cows star businesses stars cash dogs

cash cows

The thesis that because different societies and cultures have divergent values and standards of what is "ethically right" and "ethically wrong," it is appropriate to judge behavior as ethical/unethical in the light of local customs and social mores Answers: is the basis for the theory of ethical variation. defines what is meant by "integrated social contracts theory." characterizes the school of ethical relativism. accounts for why there is no such thing as ethical standards for business enterprises. is the reason codes of ethical and social morality have been established country by country.

characterizes the school of ethical relativism.

1. In order to use location to build competitive advantage when competing on domestic and international level, a company must transfer company expertise to cross-border markets and initiate actions to contend on an international level. pursue blue ocean opportunities both in the company's home country market and in global markets. use acquisition and rapid-growth strategies to better defend against expansion-minded international rivals. try to change the local market to better match the way the company does business elsewhere. consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations, and (2) determine in which countries it should locate particular activities.

consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations, and (2) determine in which countries it should locate particular activities.

Which of the following is an intangible or invisible cost that companies incur when ethical wrongdoing is disclosed? Answers: legal and investigative costs incurred by the company costs of taking corrective actions sharp and sudden drops in the company's stock price civil penalties arising from class-action lawsuits and other litigation aimed at punishing the company for its offense and the harm done to others costs of complying with often harsher government regulations

costs of complying with often harsher government regulations

1. A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when customer preferences vary significantly from country to country. it is necessary to delegate strategy making to local managers with firsthand knowledge of local conditions. plants need to be scattered across many countries to avoid high shipping costs. country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy. host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.

country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.

Of the following examples of value chain activities, which is unlikely to be a primary building block in the company's organizational structure? Answers: a. In a discount stock brokerage the critical value chain activities are fast access to information, accurate order execution, and good customer service. b. In specialty chemicals the critical value chain activities are R&D, product innovation, and getting new products on the market quickly. c. For a ski apparel manufacturer, the critical value chain activities are styling and design and marketing and advertising. d. In automobile manufacturing the critical value chain activities include raw materials procurement, offshore sourcing, and customer service. e. In apparel retailing critical value chain activities include apparel design, supply chain activities, marketing and advertising, and in-store customer service.

d. In automobile manufacturing the critical value chain activities include raw materials procurement, offshore sourcing, and customer service.

The hallmarks of a high-performance corporate culture include Answers: a. a shared willingness to adapt core values and ethical standards to fit the changing requirements of an evolving strategy, use of a balanced scorecard approach to tracking company performance, and a gung-ho approach to discovering best practices. b. strong inclinations to adopt a wait-and-see posture, carefully analyze several alternative responses, learn from the missteps of early movers, and then move forward cautiously and conservatively with initiatives that are deemed safe. c. charismatic managerial leadership, a lean management bureaucracy, and a must-be-invented-here mind set. d. a "can-do" spirit, pride in doing things right, no-excuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat objectives. e. considerable political infighting that typically consumes a great deal of organizational energy, often with the result that what's best for the company takes a backseat to political maneuvering.

d. a "can-do" spirit, pride in doing things right, no-excuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat objectives.

Which of the following is one of the eight principal managerial components associated with the process of implementing and executing strategy? Answers: a. shifting from decentralized to centralized decision making so as to give senior executives more authority and control in driving cultural change b. staffing solely with personnel below the age of 35 who have college degrees and a grade point average of 3.0 or better c. adopting best practices and business processes to drive continuous improvement in activities that encompass strategy execution d. allocating ample resources to strategy-critical activities e. implementing a management development plan to groom future executives

d. allocating ample resources to strategy-critical activities

Company strategies and value-creating processes can't be effectively executed without internal operating systems that include Answers: a. benchmarking and best practices. b. up-to-date competitor strength assessments. c. PCs, servers, web applications, and e-business solutions. d. customer data, employee data, supplier/partner data, operations data, and financial performance data. e. TQM, reengineering, and Six Sigma programs.

d. customer data, employee data, supplier/partner data, operations data, and financial performance data.

Areena is the diversity program manager in tech recruiting at Facebook. To nurture an adaptive culture that is sufficiently flexible to respond rapidly to changing business conditions, what are the most important characteristics of prospective employees that Areena needs to take into consideration? Why? Answers: a. conducting an employee survey to determine the organization's cultural norms and what company personnel like and dislike about the current culture b. hosting company outings to help build camaraderie among employees and support for the culture change c. drawing up an action plan to change the present culture and then persuading company personnel why this plan of action is good and will be successful d. identifying which aspects of the present culture are supportive of good strategy execution and which ones are not e. selecting a team of rank-and-file employees to lead the culture change effort

d. identifying which aspects of the present culture are supportive of good strategy execution and which ones are not

1. Which of the following is the biggest strategic issue when competing in the markets of foreign countries? determining whether to standardize or customize the company's offerings. learning about the regulation processes and political and capital requirements of each country market selecting among global, transnational, or international entry strategies deciding which price strategy to follow avoiding the risks posed by fluctuating exchange rates

determining whether to standardize or customize the company's offerings.

1. Which of the following is not a typical reason that many alliances do not live up to expectations? inability of partners to work well together emergence of more attractive technological paths changing conditions make the purpose of the alliance obsolete disagreement over how to divide the added market share and profits gained from joint collaboration diverging objectives and priorities

disagreement over how to divide the added market share and profits gained from joint collaboration

Teresa is reconfiguring the structure, staffing, and reporting relationships within the editorial department in her online publishing company. Which of the following organization-building actions is Teresa undertaking? Answers: a. instilling a corporate culture for good strategy execution b. assembling a critical mass of talented managers who can function as agents of change and further the cause of first-rate strategy execution c. strengthening key resources for a strategy change d. choosing managers who have the same core values and ethical standards e. building an organization—consisting of the capabilities, people, and structure needed to execute the strategy successfully

e. building an organization—consisting of the capabilities, people, and structure needed to execute the strategy successfully

1. Assessing the competitive advantage potential of cross-business strategic fit among the company's various business units involves examining a company's costs relative to the costs of its chief rivals in the industry. evaluating how much benefit a diversified company can gain from cross-business value chain matchups and resource sharing. considering what competitive value can be generated from a strategic fit. determining if there are opportunities to exploit outsourcing opportunities by a diversified company's lineup of businesses. evaluating a diversified company's profitability relative to its competitors.

examining a company's costs relative to the costs of its chief rivals in the industry.

1. A "think local, act local" multidomestic type of strategy focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business. always makes a company vulnerable to rivals employing "think global, act global" strategies. protects a multinational firm against fluctuating exchange rates. is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy. employs essentially the same basic competitive strategy theme in all country markets.

focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business.

1. Social media giant Facebook Inc. decided to expand outside its home U.S. market in order to gain access to new customers for the company's products/services. increase its business risk by competing with local social media providers such as WeChat. achieving differentiation through economies of scale, experience, and increased purchasing power. match its core competencies and capabilities with rival social media companies such as Snapchat and Instagram. identify new and stronger resources and capabilities in its home market.

gain access to new customers for the company's products/services.

1. The primary reasons that companies opt to expand into foreign markets are to boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.

gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.

1. Companies striving for global market leadership pursue strategic alliances or collaborative partnerships with foreign companies in order to revamp the global industry value chain, raise needed financial capital from foreign banks, and wage price wars against foreign competitors. exercise better control over efforts to revamp the global industry value chain and combat the bargaining power of foreign suppliers. exercise better control over efforts to revamp the global industry value chain, insulate a company from the impact of the five competitive forces, and use the brand names of their partners to make sales to foreign buyers. increase the bargaining power of foreign suppliers and help defend against the competitive threat of substitute products produced by foreign rivals. get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations.

1. The advantages of using a franchising strategy to pursue opportunities in foreign markets include being particularly well-suited to the international expansion efforts of companies with global strategies. having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees. helping build brand awareness in international markets. being well suited to companies that employ cross-market subsidization. gaining support from local governments in the form of subsidies and meeting local content requirements.

having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees.

1. Which of the following makes acquisition an attractive approach to diversifying into another industry? if it is not time-consuming and allows the firm to realize great profits and a sustainable competitive advantage only if it is less expensive, less risky, and more effective than launching a new startup operation if it satisfies all three diversity tests (industry attractiveness test, cost-of-entry-test, better-off test) to grow shareholder value over the long term if it is quicker than trying to launch a brand-new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry if due diligence and integration can be done easily and at low cost

if it is quicker than trying to launch a brand-new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry

1. The Nine-Cell Industry Attractiveness-Competitive Strength Matrix is a valuable tool for ranking a company's different businesses from best to worst based on strategic fit. shows which of a diversified company's businesses have a good or poor resource fit. indicates which businesses have the highest or lowest economies of scale and which have the highest or lowest economies of scope. involves assigning quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix; the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness. d. pinpoints which of a diversified company's businesses are resource-rich cash cows and which are resource-poor cash hogs.

involves assigning quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix; the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness.

In July 2018, the Papa John's pizza chain decided to distance itself from John Schnatter, its founder and pitchman, after it was reported that he had used a racial slur in a comment about black people. Mr. Schnatter apologized and resigned as chairman. The company said Mr. Schnatter's image, a fixture on its marketing materials, would be removed as the "first of several key steps to rebuild trust from the inside-out." Papa John's suddenly faced the tricky task of disentangling itself from its founder and convincing its customers and investors to move on, and also began considering whether or not to rebrand itself. Papa John's strategy needs to be ethical because Answers: of the dangers that Papa John's top management will become embarrassed if no actions are taken by the company. it is good business and in the best interest of shareholders. everyone in the media is an ethics watchdog and somebody is sure to blow the whistle on the company's unethical behavior. of the inevitable risks of being boycotted by customers of major corporate affiliates including Major League Baseball and the National Football League if an unethical strategy is used. unethical strategies boost long-termism in corporate culture.

it is good business and in the best interest of shareholders.

1. The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that a "think global, act local" approach involves charging much different prices in the various country markets where the company competes. a "think global, act local" approach involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets. a "think global, act local" approach involves considerably less adherence to utilizing the same capabilities, distribution channels, and marketing approaches worldwide. local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions. a "think global, act global" approach involves selling under a single brand worldwide, whereas a "think global, act local" approach involves the use of multiple brands (often a local brand for each local market).

local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions.

According to the school of ethical universalism Answers: what behaviors are "ethically right" and "ethically wrong" vary across religions, but the boundaries of what is ethical or not are universal within religions. concepts of right and wrong universally apply to all business situations within a given country but can vary across countries or cultures. ethical guidelines exist only when there is universal agreement as to what behaviors are "ethically right" and "ethically wrong"; anything not universally viewed as unethical is thus within the bounds of what is ethically permissible. all societies and countries have some definition of what is ethically permissible (in this sense, ethics are universal); however, the definitions of what is ethically permissible vary according to the prevailing religious doctrines in each country. many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances.

many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances.

1. Which of the following is not a potential advantage of backward vertical integration? adds to a company's differentiation capabilities and perhaps achieves a differentiation-based competitive advantage lessens a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity spares a company the uncertainty of being dependent on suppliers for crucial components or support services offers enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality

offers enhanced R&D capability, better opportunity to establish a core competence in supply chain management, more flexibility in incorporating state-of-the-art parts and components, and better overall product quality

1. Relying heavily on alliances and cooperative strategies can be most difficult when partners in the alliance will not divide profits in an equitable manner. strategic allies and partners become rivals in the marketplace. a company's own priorities and strategies must be compromised in reaching agreements with partners. excessive administrative expenses associated with engaging in collaborative efforts are incurred. one partner becomes dependent on one or more partners for essential expertise and capabilities.

one partner becomes dependent on one or more partners for essential expertise and capabilities.

1. Companies like Amazon, Apple, Facebook, and Google employ all but one of the following offensive actions to complement and supplement the choice of one of the five generic competitive strategies. Which is not an example of an offensive move? Answers: focusing on building competitive advantages employing the element of surprise as opposed to doing what rivals expect and are prepared for pursuing a market share leadership strategy displaying a strong bias for swift, decisive, and overwhelming actions to overpower creating and deploying company resources to cause rivals to defend themselves

pursuing a market share leadership strategy

Companies that adopt the principle of ethical relativism in providing ethical guidance to company personnel Answers: are able to comply with the varying ethical standards of the world's different cultures. have no fair way to judge the ethical correctness of the conduct of company personnel. quickly find themselves on a slippery slope with no ethical standards or principles of their own. have a uniform code of ethical standards that is applied globally. end up allowing each company employee to determine what set of ethical standards to observe.

quickly find themselves on a slippery slope with no ethical standards or principles of their own.

1. Among the purposes of defensive strategies are to aggressively retaliate against rivals pursuing offensive strategies and prevent price wars. restrict a competitive attack by a challenger, weaken the impact of any attack that occurs, and influence challengers to aim their offensive efforts at other rivals. guard against adverse changes in the company's macro-environment and insulate the company from the impact of industry-driving forces. strengthen a company's competitive advantage and reduce its exposure to business risk. eliminate a company's resource weaknesses and competitive deficiencies, thereby making it invulnerable to competitive attack from would-be challengers.

restrict a competitive attack by a challenger, weaken the impact of any attack that occurs, and influence challengers to aim their offensive efforts at other rivals.

1. Calculating quantitative attractiveness ratings for the industries a company has diversified into involves determining the strength of the five competitive forces in each industry, calculating the ability of the company to overcome or contend successfully with each force, and obtaining overall measures of the firm's ability to compete successfully in each of its industries. determining each industry's average profit margins, calculating how far the firm's profit margins are above or below the industry averages, and then using these values to draw conclusions about industry attractiveness. rating the attractiveness of each industry's strategic and resource fit, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not. selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group. identifying each industry's average price, rating the difficulty of charging an above-average price in each industry, and deciding whether the company's prospects for being able to charge above-average prices make the industry attractive or unattractive.

selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

1. Once a firm has diversified and established itself in several different businesses, then its main strategic alternatives include all but which one of the following? broadening the firm's business scope by diversifying into additional businesses shifting from a multiple-country to a global strategy restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup sticking closely with the existing business lineup and pursuing the opportunities these businesses present divesting some businesses and retrenching to a narrower base of business operations

shifting from a multiple-country to a global strategy

1. Ranking a diversified company's businesses in terms of priority for resource allocation and new capital investment should be done chiefly on the basis of appealing industry attractiveness and resource fit and secondarily on the basis of competitive strength and strategic fit with other businesses. entails arraying the various businesses from the biggest cash hog down to the biggest cash cow; big cash hogs get the highest priority for resource allocation and big cash cows get the lowest priority. should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits. should be based chiefly on relative market share, recent profitability, and potential for achieving cash cow status. should be based primarily on cross-business resource fit considerations, each business unit's relative market share, and each business's projected ability to cover its debt payments and generate positive cash flows.

should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits.

1. A hit-and-run or guerrilla warfare type of offensive strategy involves random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals. undertaking surprise moves to secure an advantageous position in a fast-growing and profitable market segment; usually the guerrilla signals rivals that it will use deep price cuts to defend its newly won position. tactics that work best if the guerrilla is the industry's low-cost leader. pitting a small company's own competitive strengths head-on against the strengths of much larger rivals. surprising moves by small challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.

surprising moves by small challengers that have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders.

1. The defining characteristic of unrelated diversification (as opposed to related diversification) is the presence of cross-business resource fit (whereas the defining characteristic of related diversification is the presence of cross-business strategic fit). that the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities). the presence of cross-business strategic fit (whereas the defining characteristic of related diversification is the presence of cross-business resource fit). that the company's businesses are in different industries. the presence of cross-business financial fit.

that the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities).

1. Which of the following is NOT an advantage of utilizing a licensing strategy to participate in foreign markets? the ability to shift the costs and risks to the licensee the ability to generate income from royalties the ability to enter international markets even though the company lacks international organizational capabilities and the resources to do so the ability to avoid risks of committing resources to country markets that are unfamiliar or otherwise risky the ability to safeguard the company's technical know-how or patents

the ability to safeguard the company's technical know-how or pat

Business ethics can be defined as Answers: applying general ethical principles and standards to the various stakeholders of businesses. rules that each company makes about "what is right" and "what is wrong" for top management and the board of directors. the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel. special standards and codes of conduct that are only present in business situations. adopting or rejecting various societal ethical standards to arrive at a set of standards for operating a business.

the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.

1. To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests: the attractiveness test, the barrier-to-entry test, and the growth test. the strategic fit test, the resource fit test, and the profitability test. the barrier-to-entry test, the growth test, and the shareholder value test. the attractiveness test, the cost-of-entry test, and the better-off test. the resource fit test, the strategic fit test, the profitability test, and the shareholder value test.

the attractiveness test, the cost-of-entry test, and the better-off test.

The theory of corporate social responsibility concerns Answers: a company's duty to maximize shareholder value. the blending of shareholder interests and employee interests. a company's duty to establish socially acceptable core values and to have a strictly enforced code of ethical conduct. the responsibility that top management has for ensuring that the company's actions and decisions are in the best interest of society at large. the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen.

the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen.

According to integrated social contracts theory, Answers: the views and principles of the school of ethical universalism are definitely wrong; the correct view is that ethics is a matter of personal responsibility, not a matter of management concern. the ethical standards a company should try to uphold are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations, and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not; however, universal ethical norms take precedence over local ethical norms. the standards of what is ethically permissible and what is not should be based on a code of ethical and moral conduct that each society/country/culture adopts and then enacts into law. the standards of what is ethically permissible should be determined by the terms of an "ethics contract" that each company employee signs as a condition of employment. the only valid ethical standards are those that are universal-and then only if the standards are not absolute and provide some wiggle room according to the circumstances of each situation.

the ethical standards a company should try to uphold are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations, and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not; however, universal ethical norms take precedence over local ethical norms.

1. Imagine that you are advising the CEO of a of a diversified corporate event-planning business that is considering broadening the company's business scope, for example, by building positions in new related or unrelated businesses such as providing corporate campus food services and corporate conference facilities. You would advise the CEO to pursue a diversification strategy for all of the following reasons except the company has or can develop the specific resources and competitive capabilities needed to be successful in each of its businesses. the parent company has enough cash hog businesses to supply capital to its cash cow businesses. lines of business targeted for diversification would adequately contribute to achieving companywide performance targets. other recently acquired businesses are already acting to strengthen the company's resource base and competitive capabilities. the company possesses adequate financial strength to fund the needs of its various businesses and maintain a healthy credit rating.

the parent company has enough cash hog businesses to supply capital to its cash cow businesses.

1. The defining characteristic of related diversification (as opposed to unrelated diversification) is a. that the diversified businesses are utilizing similar competitive strategies. b. the presence of cross-business value chain relationships and strategic fits. c. that each business the company has diversified into has very similar core competencies and competitive capabilities. d. that the company has about the same number of cash cow businesses as it has cash hog businesses. e. the existence of cross-industry resource fits and similar key success factors from industry to industry.

the presence of cross-business value chain relationships and strategic fits.

If one adopts the thinking of the school of ethical relativism, then Answers: there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another. there is a "one-size-fits-all" set of authentic ethical standards. the preferred set of ethical standards is the one that society at large has put in place in the form of laws and regulations. the prevailing ethical standards are the product of a system of "integrated social contracts." no ethical standards are ever truly "authentic"-they exist only to the extent that there is a temporary shared conviction among company managers and company personnel that a particular behavior is either ethically permissible or ethically impermissible.

there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another.

1. Multinational competitors tend to concentrate activities in a limited number of locations when prices and competitive conditions are strongly linked across country markets to form a world market. there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. the risk of fluctuating exchange rates is very high. host-country governments can be persuaded to erect high tariff barriers to protect the company's operations from foreign competitors and when it is not imperative to be responsive to buyer needs and competitive conditions in each country. competitive conditions make it infeasible to employ a profit sanctuary strategy or an export strategy.

there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages.

1. As long as a single-business company can achieve profitable growth opportunities in its present industry, it needs to avoid putting all of its "eggs" in one industry basket. it will face diminishing market opportunities and stagnating sales in its principal business. its opportunities are limited to leverage existing competencies and capabilities by expanding into businesses where these same resources are key success factors and valuable competitive assets. it has diminished prospects to lower costs by entering closely related businesses and/or an opportunity to transfer a powerful and well-respected brand name to the products of other businesses and thereby increase the sales and profits of these newly entered businesses. there is no urgency to pursue a diversification strategy.

there is no urgency to pursue a diversification strategy.

1. Which of the following is typically the strategic impetus for forward vertical integration? to charge lower retail prices and thereby attract a bigger, more loyal clientele of customers to make it easier to expand the company's product line to gain better access to end users and better market visibility to achieve greater control over advertising and in-store retail merchandising to gain better access to greater economies of scale

to gain better access to end users and better market visibility

1. In which of the following situations is being first to initiate a particular move not likely to result in a positive payoff? when potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover when pioneering helps build up a firm's image and reputation with buyers when first-time buyers remain strongly loyal to a pioneering firm in making repeat purchases when moving first can constitute a preemptive strike, making imitation extra hard or unlikely when moving first can result in a cost advantage over rivals

when potential buyers are skeptical about the benefits of a new technology or product being pioneered by a first mover

1. First-mover advantages are unlikely to be present in which one of the following instances? when first-time customers remain strongly loyal to pioneering firms in making repeat purchases when rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products when moving first can constitute a preemptive strike, making imitation extra hard or unlikely when pioneering helps build a firm's image and reputation with buyers when early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals

when rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products

1. Imagine that you are the CEO of a multinational corporate consumer food company. What would make it attractive to you to consider related diversification via acquisition rather than unrelated diversification into a new industry, such by forming an internal startup subsidiary to enter and compete in the target industry? when adding new production capacity will not adversely impact the supply demand balance in the industry by creating oversupply conditions when internal entry for your company is cheaper than entry via acquisition when the incumbent industry enables your company to create strategic fits with the acquired firm in order to exploit cross-business value chain activities and resource similarities that could lead to more efficient production, distribution, and sale of profitable processed food products when your company possesses the skills and resources to overcome entry barriers and there is ample time to launch the business and compete effectively when rival incumbent consumer food companies are likely to be slow or ineffective in combating a new entrant's efforts to crack the market

when the incumbent industry enables your company to create strategic fits with the acquired firm in order to exploit cross-business value chain activities and resource similarities that could lead to more efficient production, distribution, and sale of profitable processed food products

1. Companies tend to concentrate their activities in a limited number of locations where the costs of manufacturing or other activities are significantly higher. where there are significant scale diseconomies. when there is a steep learning curve associated with performing an activity. when certain locations have inferior resources or allow for poorer coordination of related activities. where sophisticated production facilities or highly trained local personnel are unavailable.

when there is a steep learning curve associated with performing an activity.

1. Which one of the following is not a strategic choice that a company must make to complement and supplement its choice of one of the five generic competitive strategies? whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position, or to go on the defensive which value chain activities, if any, should be outsourced whether to employ a low-cost strategy, a differentiation strategy, or a hybrid strategy whether to integrate forward or backward into more stages of the industry value chain whether to enter into strategic alliances or collaborative partnerships

whether to employ a low-cost strategy, a differentiation strategy, or a hybrid strategy

1. One of the biggest strategic challenges to competing in the international arena is whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers. determining how many foreign firms to license to produce and distribute the company's products. whether to pursue a global strategy or an international strategy. whether to offer a product at a priced based on the median income of the population. whether to charge the same price in all country markets.

whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.