Strategic Management Final Exam

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The training of future strategic leaders yields a competitive advantage for a firm, in part because knowledge and skills are necessary for successful execution of strategy.

The worldwide geographic area structure differs from the worldwide product divisional structure in the level of centralization of decision-making.

The worldwide product divisional structure has centralized decision-making authority in the worldwide division headquarters to coordinate and integrate decisions and actions among business units.

There are three variations of the multidivisional structure.

To implement a related constrained strategy, firms should use the cooperative form of the multidivisional structure.

To implement a related-linked strategy, a firm usually needs an SBU structure.

To properly execute strategic controls in firms using related diversification, the executives must have a deep understanding of each unit's business-level strategy.

Top management team members and CEOs who have long tenure on the team and in the organization have greater influence in board decisions.

Transformational leadership is the most effective strategic leadership style.

When the new CEO is from inside the firm and a heterogeneous top management team is in place, the strategy may not change, but innovation is likely to continue.

Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders. a. True b. False

Recent emphasis on corporate governance stems mainly from the failure of corporate governance mechanisms to adequately monitor and control top-level managers' decisions. a. True b. False

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

Incremental changes to a firm's culture can be used to implement strategies effectively.

The strategic direction of a firm usually focuses on the coming three to five years.

The most effective defense against a hostile takeover is the poison pill strategy. a. True b. False

A top-level manager's reputation is a dependable predictor of his/her future behavior. a. True b. False

In most cases, the focus strategy is best managed using a ____ structure. a. simple b. functional c. multidivisional d. vertical

A firm's ____ specifies the work to be done and how to do it given the firm's strategy or strategies. a. structure b. controls c. culture d. strategy

A heterogeneous top management team is composed of individuals with a. different functional backgrounds, experience, and education. b. similar commitments to the organization's core ideology and culture. c. a high level of education and industry expertise. d. long tenure in the organization who have held various functional positions.

Actions that effective strategic leaders can take to develop an ethical organizational culture include all of the following EXCEPT a. relying on the fundamental goodness of individuals. b. using reward systems that recognize acts of courage. c. communicating goals that describe the firm's ethical standards. d. creating a work environment where individuals are treated with dignity.

After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to a. reduce transaction costs. b. increase negotiating leverage with suppliers. c. become less dependent on its suppliers. d. move toward horizontal alliances with its suppliers.

Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to a. make the partners' true loyalties and intentions unclear. b. make the role of the strategic center firms more critical to alliance success. c. distribute the alliances along several segments of the airline industry value chain. d. be most effective when the alliances are with airlines headquartered in different nations.

An organization's ____ is composed of the key individuals who are responsible for selecting and implementing the firm's strategies. a. top management team b. board of directors c. keiretsu d. governance circle

Andermeyer Jewelers has been in existence since the 1870s. It specializes in high-end jewelry using both colored precious stones and diamonds. Generations of wealthy families have patronized Andermeyer. Andermeyer has been owned and managed by the Andermeyer family since its founding, and has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the ____ structure. a. simple b. functional c. matrix d. network

Billy Kroghmen is the son of a very prominent Fortune 500 CEO. Billy has had troubles. He failed out of multiple colleges, universities, and correspondence schools. He finally received his undergraduate degree from a university with only a post office box for an address. He then enrolled in the school's combined graduate accounting and law school programs, graduating with honor with degrees in both areas. After graduation, he twice failed both the CPA and bar exams, managing to set record low scores on the ethics portions of both. Despite these academic setbacks, Billy's career now seems to be thriving. He has been appointed to a number of "blue ribbon" government committees, is on the board of directors of two corporations and one prestigious not-for-profit organization. In at least one instance, a donor credited Billy with the idea for making a large contribution to the not-for-profit. Widespread speculation is that his career advancement is based largely on social relationships through friends and family. We would classify Billy as ____ on ____ capital, and ____ on ____ capital. a. high; social; low; human b. high; human; high; social c. high; human; low; social d. none of these are correct.

Christina is evaluating Maximum Brands as an investment opportunity. She is very concerned about future financial performance by Maximum Brands. Christina does not believe that the CEO can act as a steward. Christina will probably be most concerned if a. there is CEO duality. b. many of the members of the board of directors are outsiders. c. the positions of chairman of the board and CEO are held by different persons. d. there is an independent board leadership structure.

Firms needing to change their strategies should a. create more heterogeneous top management teams. b. focus on their core customer base. c. implement transformational leadership. d. emphasize the training and development of internal managerial talent.

IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as __________ and the appropriate organizational structure to implement this strategy is the __________ structure. a. transnational; combination b. global; worldwide product divisional c. multidomestic; worldwide geographic area d. competitive; strategic business unit multidivisional

Implementing the multidomestic strategy requires decentralization a. to facilitate the tailoring of products to the demand in local markets. b. to develop economies of scale. c. in order to achieve economies of scope. d. to reduce bureaucracy and speed up decision-making.

In the balanced scorecard framework, ____ controls are used to assess the organization's success in creating a climate that supports change and innovation. a. learning and growth b. financial c. operational d. innovational

In the competitive form of the multidivisional structure, the focus of headquarters is on all the following EXCEPT a. integration. b. performance appraisal. c. resource allocation. d. long range planning.

Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience a. coordination and control problems. b. bureaucratic inefficiencies. c. excessive competition among division managers. d. limited communication among functional specialists.

Organizational controls provide a. the parameters within which strategies are to be implemented. b. goals and objectives that must be achieved. c. information on action steps to be taken to implement the corporate strategy. d. managers with guidelines on how to treat employees.

Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.

The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE? a. Amos should consider adopting the multidivisional structure. b. Mr. Ball has insufficient power to change the structure of the organization. c. Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes. d. These businesses are too disparate to coordinate within one corporate structure.

The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all-important at Transector. Transector probably uses the ____ structure. a. competitive form of the multidivisional b. SBU form of the multidivisional c. worldwide geographic area d. distributed strategic network

The CEO/chairman of PharmaPacifica was recently killed in an airplane crash. This tragedy has thrown PharmaPacifica into turmoil as there is no one in the organization qualified to step into the former CEO's shoes. This is an example of a. a failure of succession management. b. managerial hubris. c. the risk inherent in CEO duality. d. excessive reliance on the internal managerial labor market.

The ability to attract and manage ____ may be the most important skill a strategic leader must have. a. human capital b. financial resources c. responses to competitors' actions d. investment strategies

The firm of Bergeron has existed for hundreds of years, having made exquisite clocks and watches. In its advertising it refers to clocks the firm made for such past royalty as Marie Antoinette and the Czars of Russia. Employees are constantly reminded of the firm's rich history and its long tradition of excellence of design and execution. Bergeron is motivating its employees through its a. core ideology. b. envisioned future. c. organizational culture. d. business strategy.

The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____. a. cooperative; economies of scope b. competitive; cost efficiencies c. functional; sensitivity to cultural diversity d. SBU; quick response to local customer needs

The integrated cost leadership/differentiation strategy is difficult to implement mostly because a. different primary and support activities are emphasized when using cost leadership and differentiation strategies. b. this strategic approach demands more flexibility than most firms can manage. c. the dual reporting relationships required for this strategy slow organizational decision-making. d. the cost leadership strategy requires less structured job roles than does the differentiation strategy.

The more heterogeneous the top management team, the a. more difficult it will be for the team to implement strategies. b. more likely it is that the team will be cohesive. c. less innovative the team's decisions will tend to be. d. less diverse the team membership will be.

The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits? a. aligning the corporate structure with the demands of global expansion b. more accurate monitoring of the performance of each business c. facilitation of comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance

The premise of the balanced scorecard is that firms jeopardize future performance possibilities when they a. overemphasize financial controls and neglect strategic controls. b. overemphasize strategic control and neglect financial controls. c. overemphasize strategic and financial controls and neglect ethical controls. d. neglect short-term controls of all kinds in favor of long-term strategic controls.

Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with whom Toyota has contracts for services. This results in the suppliers and the Toyota (the strategic center firm) being more a. interdependent. b. rivalrous. c. creative. d. complementary.

Walmart's effective strategy/structure configuration is a. cost leadership/functional. b. differentiation/functional. c. related-constrained/multidivisional. d. related-linked/multidivisional.

When a corporation pursues a related-constrained diversification strategy, financial controls may not add value to strategy implementation efforts since it is difficult to a. use them without reducing cooperation among divisional managers. b. transfer capital between units. c. maintain an arms-length relationship between headquarters and the divisions. d. identify which objective criteria to monitor.

When the top management team is homogeneous and a new CEO is selected from inside the firm, it is a. unlikely that the current strategy will change. b. likely that product innovation will continue. c. likely there will be a change in strategy. d. unlikely the new CEO will have a long tenure.

Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO? a. Internal hiring results in an increased level of innovation. b. Insiders are familiar with the firm's products, markets, technologies, and operating procedures. c. Use of the internal labor market reduces turnover among existing employees. d. Insiders are more familiar with a firm's operating procedures.

Which of the following is NOT one of the four perspectives in the balanced scorecard framework? a. entrepreneurial b. financial c. customer d. learning and growth

____ is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification

____ provide information about the results of past actions, but do not communicate the drivers of the firm's future performance. a. Financial controls b. Accounting information systems c. Policies and procedures d. Strategic feedback systems

An example of the external labor market is the situation where a. an assessment center operated by an external consulting firm evaluates company managers for promotion potential. b. a new vice president of marketing is hired from a competitor. c. the senior vice president of finance is promoted to CEO. d. a vice president of human resources is sent to a university executive MBA program for professional development.

A multidomestic strategy would be associated with a. high levels of coordination. b. informal coordination among units. c. many integrative mechanisms. d. interdependent divisions.

A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems and the top administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the organizational ____ structure. a. network b. strategic business unit multidivisional c. functional d. matrix

All of the following are external environmental sources that affect managerial discretion EXCEPT a. industry structure. b. corporate culture. c. market growth rate. d. potential for product differentiation.

Firms seeking to compete on the basis of cost leadership particularly need support from the ____ and ____ functions. a. finance, accounting b. manufacturing, process R&D c. product R&D, marketing d. management information, finance

Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the ____ structure. a. matrix b. competitive multidivisional c. hybrid combination d. horizontal complementary strategic alliance

Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the ____ strategy. a. network b. multidomestic c. global d. transnational

In an SBU structure, ____ is/are evaluated using strategic controls, whereas ____ is/are evaluated using financial controls. a. each SBU, divisions within the SBUs b. divisions within the SBUs, each SBU c. managers of the SBUs, headquarters staff d. headquarters staff, managers of the SBUs

It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.

Leslie is a newly-graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a ____ structure. a. simple b. functional c. multidivisional d. network

McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(an): a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.

Megaline, Inc., follows the competitive form of the multidivisional structure. It has five divisions. One division has not met the rate-of-return goals for the past year. One division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office is making decisions about where to allocate capital in the next year. Which scenario is the MOST likely? a. The poorest performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year. b. The highest performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year. c. The average performing divisions which met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements. d. All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.

Monahegan Plasma Company is facing a performance downturn and realizes that a major rethinking of its strategy is in order. Under these circumstances, Monahegan Plasma would benefit from a a. internal CEO with short tenure. b. external CEO with a heterogeneous top management team. c. dual CEO/chairperson with a homogenous top management team. d. CEO with long tenure who has a strong sense of hubris.

Normally, the more involved a board of directors is in shaping the firm's strategic direction, the a. more balanced the organization is. b. higher the corporation's performance is. c. more rapidly executive decisions can be make. d. more difficult it becomes to make effective executive decisions.

Omicron Artificial Intelligence has a core competency of being able to respond quickly to competitors' actions and to opportunities in the marketplace. This is an example of competitive a. agility. b. speed. c. flexibility. d. responsiveness.

Successful implementation of the differentiation strategy requires a structure that a. has specialized jobs. b. decentralizes decision-making. c. focuses on the finance function. d. is dominated by the operations function.

The ____ structure is the most appropriate structure for implementing the integrated cost leadership /differentiation strategy. a. simple b. functional c. multidivisional d. strategic business unit

The board of directors for TundraPro, Inc., is searching for a new CEO. The firm is in need of new direction after suffering several years of declining performance and increasingly demoralized management and employees. The board has decided it needs a CEO who can be a transformational leader. To this specific end, the board needs to identify applicants who have a. high levels of honesty, trustworthiness, and integrity. b. high emotional intelligence. c. excellent analytical skills. d. low tolerance for ambiguity.

Which of the following is a TRUE statement about organizational structures for implementing business-level strategies? a. A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles. b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions. c. An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision-making, and vertical coordination. d. A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

The effective development and management of the firm's ____ may be its only sustainable competitive advantage. a. capital base b. human capital c. technology d. organizational culture

The fewest integrative devices are used in the ____ structure. a. simple b. competitive multidivisional c. SBU d. network

The need for the organization to combine local responsiveness and efficiency is most critical in a ____ strategy. a. multidomestic b. transnational c. global d. focus

To successfully implement a cost leadership strategy, there is a need for a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.

Typically, an organization using a simple structure would be a. large. b. small. c. of any size if the firm is privately held. d. a family-owned-and-managed firm of any size.

Which of the following factors most encourages stability in a firm's strategy? a. A new CEO hired from outside the firm but within the industry. b. Internal CEO succession and a homogeneous top management team. c. External CEO succession and a heterogeneous top management team. d. A new CEO hired from outside the industry.

Which of the following is NOT a variation of the multidivisional structure? a. competitive form b. regional form c. cooperative form d. strategic business unit form

Which of the following is NOT one of the five dimensions thought to characterize an employee's entrepreneurial mind-set? a. autonomy b. reactivity c. risk taking d. innovativeness

____ capital increases cooperation among individuals inside and outside the firm. a. Human b. Social c. Visionary d. Cultural

____ is the degree to which decision making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification

Evidence demonstrates that large firms with well-funded R&D operations are more effective at innovation than are smaller firms.

b. False

A CEO gains power from all of the following circumstances EXCEPT a. when many of the outside directors are appointed by the CEO. b. when the CEO is also the chairman of the board. c. when tenure of the top management team is shorter than the tenure of the board. d. the fact that inside board members report to the CEO.

A CEO's breadth of knowledge base is constrained by a. his or her relationship with the board of directors. b. whether he or she is also the chairperson of the board of directors. c. his or her long tenure with the firm. d. the level of social capital in the firm.

A characteristic of the manager that may affect managerial discretion is his/her a. amount of industry experience. b. level of education. c. tolerance for ambiguity. d. length of tenure.

A firm pursuing a related-constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards based on division financial performance. d. temporary teams or task forces formed around specific projects.

A firm pursuing an unrelated diversification strategy will utilize a ____ structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional

A worldwide geographic area structure is an organizational form in which a. multiple alliances across the globe link complementary businesses. b. standardized products are offered across country markets. c. national interests dominate and management adapts to local or cultural differences. d. responsiveness to local demand is combined with economies of scale.

Four perspectives are integrated to form the balanced scorecard framework. The financial perspective focuses on the view of the firm by the a. customer. b. employee. c. shareholder. d. general society.

An important lesson from the Chapter 11 Opening Case about Borders is that a. Borders did a good job of implementing its strategy but its structure was wrong. b. structures rarely evolve in response to strategic change. c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy. d. Borders' decentralized structure led to poor decision making.

Criteria for reevaluating internal business processes using the balanced scorecard include all of the following EXCEPT a. asset utilization improvements. b. improvements in employee morale. c. increases in employee skills. d. changes in turnover rates.

Determining the strategic direction of a firm involves a. implementation of a balanced scorecard. b. developing an entrepreneurial mind-set. c. specifying the vision and the strategy to achieve that vision over time. d. exploiting and maintaining core competencies.

Exploiting and maintaining core competencies is part of the key strategic leadership action "Effectively Managing the Firm's Resource Portfolio." Which of the following is most important for developing and using core competencies? a. extensive financial assets. b. transformational leadership. c. high-quality human capital. d. an ethical organizational culture.

Faced with declining enrollment and increased competition from not-for-profit organizations offering inexpensive art courses for new hobbyists, the for-profit Delta Academy of Art has steadfastly stayed true to its mission of offering high-quality classical art instruction for both beginners and advanced artists at high tuition. Delta has been noted for the excellence of its artistic training for decades. This is an example of a. competitive agility. b. lack of an envisioned future. c. competence becoming a liability. d. failure to have a clear core ideology.

Financial controls are most important in the ____ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary

Firms seeking to differentiate particularly need support from the ____ and ____ functions. a. finance, accounting b. engineering, operations c. product R&D, marketing d. management information, finance

Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership. b. differentiation. c. related constrained diversification strategy. d. single or dominant business corporate strategy.

GE performed exceptionally well under Jack Welch, the former CEO of GE. Jeffery Immelt, the current CEO, has made changes to the firm's corporate-level strategy and structure. These changes were necessary because the competitive landscape had shifted significantly. Immelt's actions resulted in a. a smooth transition to the new organizational strategy because of the organizational slack generated by Jack Welch. b. replacement of the entire top management team because once individuals commit to a core ideology and an envisioned future, they are unlikely to change. c. some resistance by organizational stakeholders who are accustomed to Jack Welch and the high performance which he brought to GE. d. acceptance by GE's stakeholders as Immelt inherited the "iconic aura" surrounding Jack Welch.

Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules a. use integrative mechanisms to share core competencies among themselves. b. compete with one another in Olympia's internal capital markets. c. are not necessarily related to one another in terms of products or markets. d. are network member firms while Olympia is the strategic center firms.

In the ____ multidivisional structure there is complete independence among the firm's divisions. a. cooperative b. matrix c. competitive d. SBU

In the ____ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets. a. functional b. cooperative c. competitive d. SBU

One of the primary disadvantages of the global strategy and worldwide product divisional structure is that a. it is difficult to achieve economies of scale. b. the firm must develop centers to offer after-sales service to customers. c. it is difficult to respond effectively to local market needs and preferences. d. achieving economies of scale with this strategy/structure combination is nearly impossible.

Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible? a. cooperative structure; no bonus due to failure to meet divisional target. b. competitive structure; no bonus due to failure to meet divisional target. c. cooperative structure; a bonus for increasing organizational performance. d. competitive structure; a bonus for increasing organizational performance.

Shaping and reinforcing a new organizational culture requires all of the following EXCEPT a. effective communication. b. effective performance appraisals. c. adherence to the firm's traditional core values. d. an appropriate reward system.

Some experts consider the ____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional

Strategic control focuses on the ________ of strategic actions whereas financial controls focus on the _____ of strategic actions. a. revenues; costs b. long-term financial outcomes; short-term financial performance c. content; outcomes d. outcomes; content

The CEO of Icon Image Associates wishes to radically change the corporate culture of the firm. She knows that she must convince others at Icon Image of the necessity for the culture change and gain their active support. The CEO knows that the key players in energizing the culture change and fostering alignment with the new strategic vision are a. the members of the board of directors. b. top management team members. c. the CEO, top managers, and middle managers. d. rank-and-file employees.

The ____ is a framework firms can use to verify that they have established both strategic and financial controls to assess their performance. a. managerial model b. holistic control system c. balanced scorecard d. internal auditing system

The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to a. an emerging professional management philosophy. b. the increasing demand by consumers for both quality and low-price. c. coordination and control problems. d. a shift toward the global economy.

The primary responsibility for effective strategic leadership of the organization rests with the a. board of directors. b. top management team. c. CEO. d. stakeholders.

The top management team is composed of the a. heterogeneous group of advisors selected by the CEO. b. CEO and chairperson of the board. c. key individuals who are responsible for selecting and implementing a firm's strategy. d. officers listed in a firm's annual report and the board of directors.

To successfully implement a firm's strategy, the workforce must be viewed as a a. variable cost. b. depreciating asset. c. resource to be maximized. d. renewable asset.

Typically, a successful firm pursuing a differentiation strategy will a. have a very hierarchical structure. b. require a structure which is very formal. c. use cross-functional development teams. d. develop free-standing business units.

Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure? a. increasing diversification b. coordination and control issues c. need for knowledge-sharing among specialists d. greater amounts of data and information to process

Which of the following is NOT a factor that determines the amount of a manager's decision discretion? a. characteristics of the manager b. characteristics of the organization c. cohesiveness of the board of directors d. the external environmental

Which of the following is NOT a preliminary task of the strategic center firm in a strategic network? a. strategic outsourcing b. encouraging friendly rivalry among network members c. allocating internal capital d. supporting development of new core competencies

Which of the following is NOT associated with heterogeneous top management teams? a. higher firm performance b. innovation and strategic change c. diminished debate among top managers d. better strategic decisions

Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy? a. competitive form with related constrained strategy b. cooperative form with unrelated strategy c. SBU form with related linked strategy d. competitive form with related linked strategy

Which of the statements about CEO duality is FALSE? a. CEO duality is associated with high CEO power. b. CEO duality has been blamed for slow response to change by the organization. c. CEO duality is relatively rare in the U.S. except in large Fortune 500 firms. d. If the CEO acts a steward, CEO duality facilitates effective decisions and actions.

Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance? a. Functional structure b. Cooperative M-Form c. SBU Form d. Competitive M-Form

____ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units. a. Strategic b. Managerial c. Financial d. Environmental

Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms Adams' company should a. be the strategic center firm in a network structure. b. have a specialized multidivisional structure. c. develop alliances with firms with complementary competencies. d. have a highly centralized, functional structure.

Alfred Chandler found that firms grow in a predictable pattern, and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory? a. functional b. simple c. vertically integrated d. multidivisional

CEO duality refers to a. firms where there is both a president and a CEO. b. CEOs who sit on the board of directors of other firms. c. CEOs who hold office in more than one company. d. the situation where the CEO is also chairperson of the board of directors.

Clarita Cosmetics is confronting a decline in sales due largely to a general economic downturn. The top management team is debating whether to lay off employees. In the debate, the following statements are made. Which of the statements is FALSE? a. If Clarita Cosmetics lays off a large number of employees, there will be a significant loss of human capital that will cause further downturns in the firm's performance. b. A moderate-sized layoff at Clarita Cosmetics will probably improve firm performance. c. If Clarita Cosmetics restructures, it ought to increase investments in training and development. d. A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the increased number of errors employees may make until they learn their new tasks.

Competitive aggressiveness describes a firm's a. tendency to engage in new ideas and creative processes. b. willingness to allow employees to take actions free of organizational constraints. c. ability to be a leader in the marketplace. d. propensity to take actions that allow it to outperform rivals consistently and substantially.

Executive headhunters have approached Charles about taking the position of senior vice president of marketing for a well-known company. Although this company has been highly successful since 1995, Charles has heard persistent rumors of overly aggressive marketing tactics, questionable reporting of sales data, and an atmosphere of intolerance of criticism. The CEO is a powerful and charismatic individual, who built the company from a small regional firm to an international powerhouse in only a decade. The other top managers have been hand-picked by the CEO, as have a number of the members of the board of directors. The salary for this position is very high and includes generous stock options. It would be a major step up in Charles's career and would position him to move to CEO of another company in the future. Charles has prided himself on his high moral values and is viewed as an exceptionally ethical person by his peers. What should Charles do? a. Charles should take the job because he can effect real change in the culture of the organization, and take advantage of the personal financial and career opportunities. b. Charles should realize that personal moral values and the realities of the corporate world differ in both quality and degree. Consequently, he can take a job in an ethically borderline company without tainting his personal moral standing. c. Charles should not rely on rumors to dissuade him from making an advantageous career decision. d. Charles should not take the job because the culture of the organization is set by the CEO and other top managers. He would have little influence on the organizational culture as one of many top managers.

Human capital refers to a. the net present value of the future competencies of the workforce. b. the amount of money purchasers of the firm would pay for the continuing employment of the present workforce. c. the value-added that the firm's workforce contributes to each product produced or service rendered. d. knowledge and skills of the firm's work force.

Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the ____ organizational structure. a. horizontal complementary strategic alliance b. competitive multidivisional c. strategic business unit multidivisional d. hybrid combination

In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with whom it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.

Managerial actions that support development of an ethical organizational culture include all of the following EXCEPT a. establishing a code of conduct. b. disseminating the code of conduct to all stakeholders to inform them of the firm's ethical standards and practices. c. creating a work environment in which people are treated with dignity. d. disciplining whistle-blowers.

One disadvantage of the functional structure is that a. career paths and professional development are limited. b. dual reporting relationships blur lines of authority. c. the CEO cannot coordinate and control the efforts of functional level employees. d. communication and coordination are difficult among organizational functions.

One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so a. indicates to competitors that the firm is vulnerable to a hostile takeover. b. will only lead to inefficiencies. c. requires the firm undertake multi-year restructuring period that will delay retirement. d. suggests that their previous choices were not the best ones.

Recently, Sony selected Sir Howard Stringer as CEO. Sir Howard is not Japanese and he was not a Sony employee before his selection. Which of the following statements is FALSE? a. Sony's top management team will be more heterogeneous with the addition of Sir Howard. b. Sir Howard will have a broader perspective of the firm and its competitive environment than would a Sony insider. c. If Sony's top management team is homogeneous, Sir Howard's future impact on Sony's strategy is ambiguous. d. The decision-making process on Sony's top management team will be smoother and faster with the addition of Sir Howard.

Research shows that ____________ is the most effective means of ensuring that employees comply with the firm's ethical requirements. a. a written code of ethics b. a statement in the firm's mission statement c. a speech on ethics by the CEO of the company d. a value-based culture

Strategic controls allow corporate-level managers to a. evaluate business-level performance on objective criteria. b. concentrate on day-to-day corporate operations. c. assess performance of employees and managers in each business unit. d. examine the fit between what the firm might do and what it can do.

Structural stability affects the organization's ability to: a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. consistently and predictably manage its daily work routines.

The BEST multidivisional structure to use a. is the competitive form. b. is the SBU form. c. is the cooperative form. d. depends on the degree of diversification.

The CEO of CLEO, Inc., in all her communications to employees consistently refers to her dream of CLEO becoming the company of choice for employee assistance programs. She keeps this theme uppermost and it is reflected in the firm's motto, the title of its Web newsletter, and even on the company t-shirts and mugs. This is an example of the firm's a. core ideology. b. organizational culture. c. strategy. d. envisioned future.

The Enron employee who reported the financial manipulations at the company to her superiors can be considered to have engaged in a. managerial opportunism. b. white-collar crime. c. vindictive disloyalty. d. an act of courage.

The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization. a. functional b. worldwide geographic area c. network d. matrix

The __________ structure is best for implementing the related constrained diversification strategy. a. functional b. competitive form of the multidivisional c. SBU form of the multidivisional d. cooperative form of the multidivisional

The benefits of a simple structure include all of the following EXCEPT a. ease of coordination within the organization. b. no need for sophisticated information systems. c. active involvement by the owner-manager. d. specialists can develop deep expertise.

The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. is a structure organized around both functional specialization and business projects. d. is a structure requiring heavy use of horizontal integrative devices.

The failure of organizations to use the pool of managerial talents held by women can best be termed a. deliberate policy of discrimination. b. lack of assertiveness by women managers. c. managerial isolation from social trends. d. an opportunity cost for firms.

The goal of investing in human capital is to a. increase the number of employees in the firm. b. reduce organizational slack. c. maximize current productivity per employee. d. develop a workforce capable of continuous learning.

The most centralized and most costly form of the multidivisional structure is the a. integrated. b. competitive. c. SBU. d. cooperative.

The most effective leadership style is ____ leadership. a. pragmatic b. charismatic c. inspirational d. transformational

The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited a. centralization. b. coordination across divisions. c. ability to meet local market needs. d. potential for global efficiency.

The three structural characteristics which differ between organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.

The top management team at Ingenuity, Inc., has assigned a team of scientists to a multi-year project to investigate the viability of growing large amounts of fur from cloned cells of minks and foxes to produce no-kill fur products for coats and other clothing items. This idea would satisfy all the dimensions of the entrepreneurial orientation EXCEPT a. innovativeness. b. risk taking. c. proactiveness. d. competitive autonomy.

Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer term contracts with suppliers, and enables engineers in the supplier company to have better communication with Toyota. This is an example of a(an): a. worldwide product divisional structure. b. functional structure. c. SBU multidivisional structure. d. strategic network.

Two key strategic leadership actions include a. monitoring the hiring of key employees and focusing on growth but not learning initiatives. b. designing and then implementing the balanced scorecard. c. setting appropriate financial targets and establishing an effective business level synergy. d. determining strategic direction and establishing balanced organizational controls.

Which key strategic leadership action plays a key role in influencing how the firm conducts its business and regulates and controls employees' behavior? a. Effectively Managing the Firm's Resource Portfolio. b. Determining Strategic Direction. c. Regulating and Controlling Employees. d. Sustaining an Effective Organizational Culture.

Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration

Which of the following is NOT related to a CEO having long tenure in his or her position? a. more effective strategic control b. greater influence on board decisions c. more limited perspective d. a broader knowledge base

Which of the following is TRUE? a. Organizations tend to change structure too frequently, which erodes their competitive advantage. b. Large organizations can retain a simple structure as long as they have a focus strategy. c. Flexibility in structure is more important than stability. d. Strategy has a more important influence on structure than structure has on strategy.

Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures? a. Firms pursuing a related-linked strategy should implement a competitive structure with a competitive culture and centralized strategic planning activities. b. Firms pursuing an unrelated diversification strategy should use an SBU structure with a small corporate staff, emphasize the R&D function, and integrate divisions to achieve synergies. c. Firms pursuing a related-linked strategy should use an SBU structure, emphasize interdependence among divisions, and manage the strategic planning function from the central office. d. Firms pursuing a related-constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.

Which of the following statements is TRUE regarding effective organizational cultures? a. Once a corporate culture is developed, strategic leaders can focus on other activities. b. A strategy that is historically new for a firm should be implemented by incremental changes in the organization's culture. c. A central task of strategic leaders is to revise the corporate culture on an annual basis after analyzing the changes occurring in the competitive environment. d. Organizational culture can be a source of competitive advantage because it influences employee behavior and how the firm's conducts its business.

Which of the following will increase the probability that a lower-level manager will become a successful strategic leader? a. appointing many outside board members. b. increasing the firm's sales. c. increasing the homogeneity of the top management team. d. training and development programs.

Alliances of organizations in the same position on the value chain are known as vertical alliances.

An emphasis on strategic controls encourages managers to be risk averse.

Centralized and formalized procedures allow for greater flexibility, an important factor for firms using a cost leadership strategy.

Companies and business units of large diversified firms using the cost leadership strategy should use strategic controls.

Companies and business units using the differentiation strategy should emphasize financial rather than strategic controls.

Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions characterizing the entrepreneurial mind-set.

Evidence suggests that women are a qualified source of talent as strategic leaders that have been fully utilized especially given the current competitive landscape.

Financial controls provide feedback about the outcomes of the firm's past actions and predictions about the results of the firm's future actions.

Firms switch from a functional structure to a multidivisional structure because greater levels of environmental complexity and uncertainty make it necessary for the firm to develop cooperative relationships with its stakeholders.

Firms using the differentiation strategy need to respond quickly to environmental opportunities and threats. The structural features that are best for these requirements are centralization, specialization, and many rules and procedures.

For 15 years, Edward was a compensation specialist at a mid-sized firm. He was laid off when the firm experienced financial setbacks. Edward has decided to open his own business as a compensation consultant to small firms. He can expect that his main source of human capital will be a bank line of credit.

For firms in a vertical complementary alliance (such as between Toyota and its suppliers), it is more difficult to identify the strategic center firm than in a horizontal complementary alliance (e.g., airline alliances).

GM's newest CEO, Dan Akerson, is building new capabilities in technology development and marketing, especially in customer service. This is an example of a CEO developing a dynamic capability as part of the key leadership action " Developing Human Capital and Social Capital."

If firms band together in a large number of vertical complementary strategic alliances, there is a danger that the government will suspect them of illegal collusive activities.

Organizational culture is a complex set of ideologies, symbols, and core values that are shared throughout the firm, but its development is so subtle and poorly understood that top managers cannot influence its content.

Organizational inertia often prompts top management to initiate structural change when organizational performance levels drop.

Research has consistently shown that there is one best way to structure all organizations, regardless of competitive strategy.

Research shows that structure has a more important influence on strategy than the reverse and hence the emphasis of the chapter on the subject of structure.

Selection of an insider as a new CEO indicates a firm's desire to encourage innovation and strategic change.

Specialization refers to the extent to which authority for decision-making is retained at higher managerial levels.

The experience that results from long tenure in a firm is known to extend the breadth of an executive's knowledge base.

The functional structure is most appropriate for large firms with very high levels of diversification.

The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.

The more homogeneous a top management team, the more likely those managers will be innovative and willing to pursue strategic change.

The three multidivisional structures that are used to implement a diversification strategy are the competitive form, the strategic business unit form, and the integrated form.

The underlying premise of the balanced scorecard is that firms jeopardize their future performance possibilities when strategic controls are emphasized at the expense of financial controls.

To influence employees' judgment and behavior, ethical practices must shape the firm's decision-making process, but should be a peripheral part of organizational culture.

Typically, a vice president would NOT be considered to hold a high enough position to be included in the top management team of an organization.

When a new CEO is selected from outside the firm, a change of strategy is likely, especially if the top management team is homogenous and highly cohesive.

With a related diversification corporate-level strategy, financial controls are used by corporate leaders to verify the sharing of appropriate strategic factors such as knowledge, markets, and technologies across businesses.

(Refer to Case Scenario 2). The idea for the software product came about via induced strategic behavior.

False

(Refer to Case Scenario 3). Facing the risk that its technology supplier, Mats, will not renew its licensing arrangement, Bunnywac's CEO is exploring the possibility of developing its core battery technology in-house. If the license is not renewed, it is likely that the technology will be developed at Bunnywac via the autonomous strategic behavior approach.

False

High levels of formalization of rules and procedures which often emanate from the centralized staff are a characteristic of the structure used to implement the cost leadership strategy.

In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational structure and reward systems of a firm.

In the hybrid form of the combination structure, some divisions are oriented toward products while others are oriented toward market areas.

In the past, companies had a preference for insiders to fill top-level management positions because of the desire for continuity and a continuing commitment to the firm's current vision, mission, and chosen strategies.

Including talent from both the internal and external labor markets increases the likelihood that the firm will be able to form an effective top management team.

A CEO may gain power by holding the titles of both CEO and Chairman of the Board.

A firm's ability to act in a variety of competitively relevant ways is termed competitive agility.

A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all activities, while the staff merely serves as an extension of the manager's supervisory authority.

A strategic network can be characterized as a loose federation of partners revolving around a strategic center firm.

According to Michael Dell, an overemphasis on financial controls to produce attractive short-term results contributed to performance difficulties at Dell, Inc. This point emphasizes the importance of properly balancing the use of strategic and financial controls.

An SBU structure consists of at least three levels: the top level, the corporate headquarters; the next level, the strategic business units (SBUs); and the final level, SBU divisions.

Arnold Schwartz, CEO and founder of Schwartz Engineering, has repeatedly rebuffed efforts by other firms to draw Schwartz Engineering into strategic alliances. Schwartz Engineering has built its highly-successful business around proprietary processes invented by Mr. Schwartz in the 1980s. Mr. Schwartz is concerned that his firm will be required to share the sources of its competitive advantage with alliance partners. This is a reasonable fear.

As a firm grows, it typically shifts from a simple structure to a functional structure.

As the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive advantage.

Because of the challenges top executives face, they often are more effective when they operate as top management teams.

Because of the current changing competitive landscape and varying levels of performance, an increasing number of boards of directors are turning to insiders to succeed CEOs.

Board members with substantive expertise in the firm's core functions and businesses aids the effectiveness of the top management team.

Compared to homogeneous top management teams, heterogeneous top management teams are more likely to change their firm's strategies when necessary and to support innovation.

Criteria such as asset utilization improvements and changes in employee turnover rates are part of the internal business processes perspective of the balanced scorecard.

Distributed strategic networks are the organizational structure used to manage international cooperative strategies.

Effectively managing the firm's resource portfolio (financial, human, social, and organizational capital) may be the most important strategic leadership task.

Employees usually have a strong preference for firms to use the internal managerial labor market when selecting top management team members and the CEO.

External environmental factors that may affect managerial discretion include industry structure, rate of market growth, and degree to which products an be differentiated.

External social capital is increasingly critical to firm success as few if any companies have all the resources to successfully compete against their rivals.

Firm size, firm age, the executive's tolerance for ambiguity, and his or her commitment to strategic outcomes are all factors that may affect managerial discretion.

Firms implementing the multidomestic strategy often attempt to isolate themselves from global competitive forces by establishing protected market positions or by competing in industry segments that are most affected by differences among local countries.

Internal competition for corporate resources is effective for companies with an unrelated diversification strategy, but dysfunctional for companies with a related-constrained strategy.

Internal labor markets consist of the career opportunities for managers within the firm for which they currently work.

Organizational controls guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable.

Organizational structures must be both stable and flexible.

Over time, large and complex organizations must customize their structure to fit their unique strategic needs.

Rewarding those who use proper channels and procedures to report observed wrongdoings is an example of an action that should be taken by a strategic leader to develop an ethical organizational culture.

RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize strategic controls over financial controls.

Strategic control focuses on the content of strategic actions rather than their outcomes.

Strategic controls are largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company's competitive advantages.

Strategic leaders are most likely to integrate ethical values into their decisions when the company has explicit ethics codes which are integrated into the business through extensive ethics training.

Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

Strategy has a more important influence on strategy, although once in place, structures influence strategy.

The CEO is the individual with primary responsibility for effective strategic leadership within an organization.

The CEO of YorkMark, Inc., has an exceptional amount of power in the organization. It is likely the board of directors is composed of sympathetic outside members and insiders who report to the CEO.

The advantages of long tenure (firm-specific human and social capital, knowledge, and power) seem to outweigh the disadvantages of rigidity and maintaining the status quo.

The balanced scorecard focuses on both financial and non-financial controls.

The balanced scorecard's perspective on learning and growth is intended to improve the firm's ability to innovate.

The competitive form of the M-form structure is characterized by complete independence among the form's divisions. Unlike the divisions included in the cooperative structure, divisions that are part of the competitive structure do not share common strengths.

The cooperative form is an M-form structure in which horizontal integration is used to bring about interdivisional cooperation.

The decision making discretion of top-level managers is determined partly by external environmental factors such as the industry structure, the industry's rate of growth, and the degree to which products can be differentiated.

The divisions within each SBU are related in terms of shared products or markets, but the divisions of one SBU have little in common with the divisions of the other SBUs.

The firm's core ideology motivates the firm's employees through the company's heritage.

The integrated cost-leadership/differentiation strategy needs structural features that are partially centralized and partially decentralized, jobs that are semi-specialized, and rules and procedures that call for some formal and some informal job behavior.

The marketing and R&D functions are emphasized in the differentiation strategy's functional structure.

The matrix organization has a dual structure combining functional specialization and business product or project specialization.

The most critical ability of a strategic leader is the ability to attract and then manage human capital.

The organizational structure for an internationally diversified firm requires trade-offs between global integration and local market responsiveness.

The selection of an organizational structure for an internationally diversified firm should consider the international corporate level strategy the firm is using.

The simple structure is used by owner-managed firms which are characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems.

(Refer to Case Scenario 2). Sharon Kline approached the CEO of CI with a business proposal to take an in-house software program and develop it as a leading-edge commercial product. There is some risk in the idea because CI has never launched a product before and software is a very different product than the clinical trials services the company currently offers. This new product, if successful, would be considered a radical innovation.

True

The likelihood of success of FearNot is increased because both Wim Vijkland and Cathy Liu to have international backgrounds.

True

Historically, ________ have been at the center of German corporate governance structure. a. banks b. institutional shareholders c. public pension funds d. government agencies

A powerful CEO would oppose the appointment of a lead director on the board of directors. a. True b. False

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

Agency costs include incentives for executives, monitoring, enforcement costs, and any individual financial losses incurred by principals. a. True b. False

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

An advantage of severance packages is that they may encourage top-level managers to accept takeover bids that are attractive to shareholders. a. True b. False

An agency relationship exists when one or more persons (the principal or principals) hire another person or persons (the agent or agents) as decision-making specialists to perform a service. a. True b. False

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

As globalization grows, adequate corporate governance is becoming an important requirement for doing business with a foreign firms and in foreign countries. a. True b. False

Attitudes toward corporate governance in Japan are affected by the concepts of obligation, family, and consensus. a. True b. False

Awareness by top managers of the existence of external investors in the form of individuals (e.g., Carl Icahn) and groups (e.g., hedge funds) often positively influences them to align their interests with shareholders. a. True b. False

Because of recent ineffective performance, boards of directors are experiencing increasing pressure from shareholders, lawmakers, and regulators to be more effective in preventing managers from acting in their own interest. a. True b. False

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

Boards with many members from the firm's top management team tend to have weak monitoring and control systems for managerial decisions. a. True b. False

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

Corporate governance involves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest. a. True b. False

Corporate governance is a means to establish harmony between parties (the firm's owners and its top-level managers) whose interests may conflict. a. True b. False

Corporate governance is the set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of an organization. a. True b. False

Corporate governance mechanisms are designed to ensure that top managers make strategic decisions that best serve the interests of the entire group of stakeholders. a. True b. False

Critics advocate reforms to ensure that independent outside directors represent a significant majority of the total membership of the board. But outsider-dominated boards may emphasize the use of financial as opposed to strategic controls. The risk of reliance on financial controls is that they may encourage managers to make decisions to maximize their interests and reduce their employment risk. a. True b. False

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests. a. True b. False

Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentive compensation such as stock awards and options. a. True b. False

Failures of corporate internal controls and inadequate internal control systems allowed unethical executives at such companies as Enron and WorldCom to act in their own self-interest. a. True b. False

Hedge funds, as part of the market for corporate control, identifies a firm that is underperforming and then invests in it with the goal of improving that firm's performance. a. True b. False

If a stakeholder is dissatisfied with a firm, it will withdraw its support and give it to another firm. a. True b. False

In a large number of family owned firms, ownership and managerial control are not separated. a. True b. False

In modern corporations—especially those in the United States and United Kingdom—a primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders. a. True b. False

In recent years, the number of individuals who are large-block shareholders have declined and been replaced by institutional owners such as mutual funds and pension funds. a. True b. False

In the United States, the primary goal of a firm is to maximize profits to provide a financial gain to shareholders. a. True b. False

In the modern U.S. corporation, the ownership and managerial control of the firm are separated. a. True b. False

Large German firms must include employees, union members, and shareholders in the formal governance structure. a. True b. False

Large-block shareholders typically own at least 5 percent of a corporation's issued shares. a. True b. False

Long-term incentives facilitates the firm's efforts through the board of directors' pay-related decisions to avoid potential agency problems by linking managerial compensation to the wealth of common shareholders. a. True b. False

One of the changes to enhance the effectiveness of the board of directors is the creation of a "lead director" role that has strong powers with regard to the board agenda and oversight of nonmanagement board member activities. a. True b. False

Research suggests that institutional activism may not have a strong direct effect on firm performance but may indirectly influence the targeted firm's strategic decisions, including those concerned with international diversification and innovation. a. True b. False

Scandals at Enron, WorldCom, and HealthSouth illustrate the negative effects of poor ethical behavior on a firm's efforts to satisfy stakeholders. a. True b. False

Stock option repricing where the strike price value of the option has been lowered from its original position sometimes happens when firm performance is poor. a. True b. False

The Dodd-Frank Wall Street Reform and Consumer Protection Act is the most sweeping set of financial and regulatory reforms in the United States since the Great Depression. a. True b. False

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.

The market for corporate control is composed of individuals and firms that buy ownership positions or take over potentially undervalued corporations and make changes to those corporations, including the replacement of the top managers. a. True b. False

The market for corporate control may not be as efficient as a governance device as theory suggests because takeover targets are not always low performers with weak governance. a. True b. False

The performance of individual board members and entire boards are being evaluated more formally and with greater intensity than in years past. a. True b. False

The primary role of the board of directors is to monitor and control top-level executives to protect owners' interests. a. True b. False

The repurchase at a premium of the target firm's shares that were acquired by the aggressor firm in a hostile takeover in exchange for an agreement that the aggressor will no longer target the company for takeover is called a. greenmail. b. a standstill agreement. c. crossing the palm with silver. d. a poison pill

The separation of the positions of CEO and chairperson of the board of directors reduces the power of the CEO over firm governance practices. a. True b. False

The top management of RavenCrest, Inc. have significant stock options in RavenCrest. They are therefore more likely to gain in making an agreement to be acquired, especially if they have golden parachutes. a. True b. False

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra's core industry

The use of executive compensation as a governance mechanism is more challenging to firms implementing international strategies than those strictly operating domestically. a. True b. False

Usually, large-block shareholders are considered to be those shareholders with at least _______ percent of the firm's stock. a. 5 b. 25 c. 50 d. 75

Which of the following is TRUE of trends in Japan's corporate governance structure? a. Compensation of CEOs in both private and public companies is being tied more closely to observable performance goals. b. Increased regulation in the financial sector has increased the cost of mounting hostile takeovers. c. Banks' influence over corporations is increasing. d. The gap in compensation between CEOs in public and private companies is increasing

While the implementation of the Sarbanes-Oxley Act in 2002 has been controversial to some, most believe that it has had positive results in terms of protecting stakeholders and certain stockholder interests. a. True b. False

____ is(are) critical in order for a firm to gain access to resources from partners in a cooperative alliance.

a. Complementary strategic goals

____ involves internally developed incremental and radical innovations that result from deliberate efforts.

a. Internal corporate venturing

Isidore Security Services is a national provider of guard and security services for businesses. It has been in business for over 90 years, having been founded by one of Teddy Roosevelt's Rough Riders (Isidore O'Malley). Lately it has been losing clients to more aggressive and innovative firms offering remote security monitoring systems instead of a guard-based approach. The board of directors of Isidore Security Services is concerned that this downward trend may threaten the existence of this venerable firm and the jobs of its employees.

a. This is an example of an established firm neglecting the opportunity-seeking aspect of strategic entrepreneurship.

A innovation developed through autonomous strategic behavior will probably take the firm into new markets not addressed by its current strategy.

a. True

A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally.

a. True

A society's cultural characteristics influence a nation's rate of entrepreneurship and its related practices.

a. True

Acquisitions are a means of extending the company's product line and increasing revenues. The capital market values growth. Therefore, some firms make acquisitions to improve their standing in the capital markets.

a. True

An entrepreneurial mind-set, cross-functional product development teams, and shared values/leadership are the three ways that firms implement internal innovations.

a. True

An organization engaging in strategic entrepreneurship focuses on identifying opportunities that it can exploit through innovations.

a. True

As a process, entrepreneurship results in the "creative destruction" of existing products (goods or services) or methods of producing them and replaces them with new products and production methods.

a. True

Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market.

a. True

Entrepreneurial opportunities exist because of competitive imperfections in the markets and among the factors of production.

a. True

Entrepreneurial ventures often produce more radical innovations than do their larger, more established counterparts.

a. True

Entrepreneurship is the economic engine driving national economic growth in many nations.

a. True

If the company's workers have scant existing knowledge, their "absorptive capacity" to learn new knowledge will be limited.

a. True

Innovation is the means by which the entrepreneur creates wealth.

a. True

Joseph Schumpeter suggested that firms engage in three types of innovative activity when managing the innovation process: imitation, invention, and innovation.

a. True

Larger, established firms, mainly those competing globally, use their R&D labs to create disruptive technologies and products.

a. True

Most innovations are incremental, not radical.

a. True

Political activity that is centered on the allocation of resources to the different functions may limit the effective use of cross-functional teams.

a. True

Research has shown that internationally diversified firms are generally more innovative.

a. True

Rosalie has become totally preoccupied by her idea for creating a business leasing horses to riders on the same principle as time-shares on condominiums. Rosalie is researching the legal, financial, and insurance aspects of her idea and is preparing a prospectus to take to banks to ask for a business loan. Rosalie's significant other is complaining that she "sleeps, eats, and drinks" this concept. Rosalie has the entrepreneurial characteristic of passion.

a. True

Some of the new products to be produced by the joint venture between Intel and Nokia integrating smartphones and computers would be considered radical innovations.

a. True

The iPod likely resulted from autonomous strategic behavior at Apple, though the iPhone was more the result of induced strategic behavior.

a. True

Toyota's Prius, the first mass-produced hybrid-electric car is an example of a radical innovation as changed the industry by providing new functionalities for users.

a. True

Women are the fastest-growing group of entrepreneurs in Africa and Asia.

a. True

Value creation through internal innovation originates with

a. an entrepreneurial mind-set.

When used effectively, cross-functional teams will often bring about

a. faster product development processes.

Panera Bread has innovated to improve the quality of its distribution system, to improve the quality of its bread dough, and to introduce new menu items. These are examples of

a. incremental innovation.

A successful ___ innovation will be less risky but less profitable than a successful ___ innovation.

a. incremental; radical

Cross-functional teams are useful in developing and commercializing new products because each team member brings his or her special competencies to the project. Each team member brings his/her point of view from his/his experience and background. On the other hand, these _____ may cause barriers to effective communication among team members.

a. independent frames of reference

Blixin Concrete Products, an established firm, is seeking a technologically advanced partner for a strategic alliance. If the potential partner is a new entrepreneurial venture, the main benefit the Blixin Concrete can offer is probably

a. investment capital.

One of the distinguishing differences between the two sources of internal corporate venturing (autonomous strategic behavior and induced strategic behavior) is whether the innovation process

a. is encouraged through a bottom-up or top-down process.

Entrepreneurship is the process by which individuals or groups identify and pursue ____ without being immediately constrained by the ____ they currently control.

a. opportunities; resources

The idea that it is "vital to sell the ideas to others in the organization so that innovations will be commercialized" is the rationale behind the use of

a. product champions.

Pet Care Companion Connection (PCCC) is an organization that trains persons with mild-to-moderate mental disabilities to care for pets in a pet boarding facility. This organization has been successful in providing a quality service for pet owners and a supportive training environment for their trainees. The tuition charged to trainees is only somewhat higher than the fee, which day-care providers would charge for these individuals. Graduates of the program are qualified for employment by commercial kennels. PCCC is an example of

a. taking advantage of a need in the marketplace.

To be successful, an autonomous process for developing new products relies on

a. the diffusion of tacit knowledge.

Knowledge must be transferred to others in the firm to enhance the entrepreneurial competence of the firm. This requires that

a. the receiving party have adequate absorptive capacity to learn.

A board composed primarily of outside directors will have better insights as to the firms intended strategic initiatives, the reasons for the initiatives, and the outcomes expected from them than will inside directors. a. True b. False

Amelia Smith is the sole owner of the successful restaurant chain, Amelia's Café. Ms. Smith has taken a no- interest loan from the company in order to build a luxurious seaside house for herself in Carmel, California. This constitutes a classic agency problem. a. True b. False

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

As a rule, shareholders prefer more product diversification than do managers because shareholders wish to reduce risk and maximize wealth. a. True b. False

As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions a. increases. b. decreases. c. remains constant. d. is eliminated

Because top management decisions are usually complex and nonroutine, determining the quality of executive performance is beyond the power of boards of directors. a. True b. False

Both top executives and owners of the firm wish to diversify the firm to reduce risk. a. True b. False

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

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

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

DDD MetalWorks plans to go public in the next 2 years. In order to be listed on the New York Stock Exchange, the firm will need to restructure its present board of directors, which is made up of a majority outside independent directors to a board of directors that is dominated by insiders and related outsiders. a. True b. False

Executive compensation is considered an external corporate governance mechanism because it determined in part by market forces. a. True b. False

For top-level managers, board acceptance of the acquiring firm's offer usually leads to job loss as the acquiring firms wants new leadership. If the offer is refused, however, the job loss risk is minimal. a. True b. False

Foreign investors are playing a relatively minor role in the governance of firms in many countries. a. True b. False

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

Generally, the board of directors can be classified as insiders, unrelated insiders, outsiders, and unrelated outsiders. a. True b. False

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

In general, when governance mechanisms are strong, managers have free rein in their decisions. a. True b. False

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.

In the United States, the members of the board of directors are a firm's key stakeholders and a company's legal owners. a. True b. False

Individual shareholders with small ownership percentages are less dependent on the board of directors to represent their interests than are large block shareholders. a. True b. False

Institutional owners, despite their size, are usually unable to discipline ineffective top managers and cannot influence a firm's choice of strategies and overall strategic direction. a. True b. False

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

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

James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be TRUE? a. Mr. Abercrombie will have a large market in Japan because the culture highly values consensus decision making. b. Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level. c. German firms will not be interested in Mr. Abercrombie's services because the German system of decision making is based on authority and few conflicts emerge. d. Mr. Abercrombie should find significant need for his services in companies in transitional economies

Managers in firms that have been subjects of hostile takeovers usually find that their value to the new firm has been enhanced because of their in-depth insider knowledge. a. True b. False

Managers in the United States receive ______ compensation than managers in the rest of the world. a. equivalent b. higher c. lower d. more variable

Managers may decide to invest ______ in products that are not associated with the firm's current lines of business to increase the firm's level of diversification and decrease their employment risk. a. unsubstantial profits b. free cash flows c. marginal profits d. frozen assets

More intense application of governance mechanisms such as mandated by Sarbanes Oxley and Dodd-Frank may cause firms to take on fewer risky projects and thus increase potential shareholder wealth. a. True b. False

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

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders. a. True b. False

Simon Leagreet, the Chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA A majority of the directors are concerned that while Mr. Leagreet has been responsible for the firm's earning above-average returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to a. elect an insider as the lead director. b. appoint another individual as chairperson of the board of directors. c. require Mr. Leagreet to personally certify the firm's financial reports. d. reduce the size of the stock option package provided to Mr. Leagreet

The CEO of Skyco, a publicly-traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be indication of a. reasonably compensating a CEO. b. a weak board of directors. c. the laxity of institutional investors. d. the difference in risk propensity between owners and managers

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions related to consumer protection, systemic risk oversight, capital requirements for banks, but not for executive compensation. a. True b. False

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

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true? a. This plan will be very attractive in luring candidates for the CEO position. b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan. c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell. d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability

The increased use of the market for corporate control has decreased the sophistication and variety of managerial defense tactics that are used in takeovers. a. True b. False

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

The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team's interests and the owners' interests are aligned

The separation of ownership and control is the most effective means used by firms to prevent managerial opportunism. a. True b. False

The three internal corporate governance mechanisms are ownership concentration, board of directors, and the market for corporate control. a. True b. False

The way that U.S. corporate boards of directors are presently structured, they have little influence on the unethical behavior of top management. a. True b. False

Well-designed stock option-based compensation plans should have the option strike prices substantially lower than the current stock prices. a. True b. False

When the option strike prices in an executive stock option-based compensation plan have been lowered it is usually a defense to a hostile takeover. a. True b. False

Which of the following statements is about corporate governance in Germany is FALSE? a. The Vorstand (management board) of a German corporation makes decisions about strategy and management. b. The Vorstand is elected by the firm's employees. c. Employees, union members, and shareholders appoint members to the Aufsichsrat (the supervisory tier of the board). d. Large institutional investors such as pension funds, and insurance companies are relatively insignificant owners of corporate stock

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

A company with a need for immediate, large returns should invest in research and development.

b. False

A product champion should come from outside the organization in order to ensure that the entrepreneurial vision has the objective support it needs.

b. False

Acquisitions are a low-risk approach to producing and managing innovation.

b. False

Autonomous strategic behavior results in internal innovations that are highly consistent with the firm's current strategy.

b. False

Bill Kroganski is the owner of a moderately successful industrial services firm. His reaction to the introduction of a new process technology that could be a direct competitor to the process his firm utilizes is fear. He spends his time considering ways to isolate his firm from this new technology. Bill has characteristics consistent with the entrepreneurial mind-set.

b. False

Corporate entrepreneurship describes the opportunity seeking and exploitation of innovations in new start-up enterprises.

b. False

Cross-functional work teams are best supported by vertical organizational structures.

b. False

Firms that continually change their strategic context and strategies because of the continuous changes in the current competitive landscape are in danger of losing sight of their main competitive strengths.

b. False

For firms to be entrepreneurial, they must stress individualism in their employees above all other characteristics.

b. False

Given the rapid rate of technological change, patents are not a useful gauge of a firm's entrepreneurial prowess.

b. False

In order to be successful, a new entrepreneurial enterprise should be sheltered from the global environment until it is firmly established in domestic markets.

b. False

Induced strategic behavior does not result in true innovation because it is a top-down process rather than a bottom- up process.

b. False

Innovations can only be produced by actions and activities within the firm.

b. False

Invention is defined as the adoption of a similar innovation by different firms.

b. False

Larger and well-established firms often have more resources and capabilities to produce more radical innovations than do smaller entrepreneurial firms.

b. False

Most large, complex firms innovate through cooperative strategies or strategic alliances, but not through internal activities.

b. False

The entrepreneurial mind-set is found primarily among managerial and scientific employees.

b. False

The essence of entrepreneurship is to capture most of the existing markets from less aggressive and innovative competitors.

b. False

While both incremental and radical innovations can create value, incremental innovations have the potential to contribute more significantly to a firm's efforts to earn above-average returns.

b. False

While smaller firms must use cooperative strategies as a means of producing innovations, larger firms with large R&D units such as P&G and 3M can produce most if not all innovations internally.

b. False

Research suggests that ___ is needed to encourage entrepreneurial behavior.

b. a balance between individualism and cooperative behavior

QuadroVax is investing heavily in research and development on new methods of vaccine development that would speed up the creation of vaccines for newly emerging viruses and to get these vaccines to the market rapidly. QuadroVax's shareholders can expect

b. a long wait for an uncertain payoff.

Since it replaces existing products and methods of production, entrepreneurship is a process of

b. creative destruction.

AgroPharm is searching for a top-level executive. AgroPharm has marketed its products only to U.S. farmers and agribusinesses in the past. Now, the company plans to expand operations to Mexico and Central America in the next 2 years. To maximize the chances of success it is critical that the new executive

b. have international experience.

In the implementation of internal innovations, formal and informal processes are best supported through ____ organizational structures.

b. horizontal

GreenBox, a company that recycles paper products to make cardboard cartons, has introduced a new product that resists damage by moisture. GreenBox can expect that

b. its investors will react positively to the introduction of the new product because of the potential for higher returns.

Research shows that internationally diversified firms tend to be ____ than domestic-only firms.

b. more innovative

Through the work of cross-functional teams, product development stages are grouped into ___ processes.

b. parallel or overlapping

The development of the original personal computer (PC) was a(n) ____ innovation at the time, whereas adding a different kind of whitening agent to a soap detergent in an example of a(n) _______ innovation.

b. radical; incremental

Successfully creating innovations through internal means requires

b. significant spending on R&D.

A negative effect of acquiring other firms for the purpose of innovation is

b. the effect it can have on the firm's own ability to produce innovations.

The new abrasive, Cubitron II, was developed through cooperative relationships among 3M business units. As such, Cubitron II is an example of

b. the use of induced strategic behavior.

Why have large pharmaceutical companies been forming alliances with biotechnology companies?

b. to develop new products and bring them to market

Induced strategic behavior as a form of internal innovation is a(n) ____ process.

b. top-down

Charles is a customer service representative for a home improvement store. He has creative ideas about how to increase customer satisfaction. Charles's talents will be most likely to be used in a firm that

b. uses the autonomous strategic behavior form of internal corporate venturing.

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

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

Complete the following: In small firms, managers often own a________ percentage of the firm, which means there is ________ separation between ownership and managerial control. a. small; small b. small; large c. large; small d. large; large

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

Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated? a. moving toward having directors from different backgrounds b. strengthening the internal management and accounting control systems c. compensating directors with stock options rather than with fixed remuneration d. establishing and using formal processes to evaluate the board's performance

If the market for corporate control were efficient as a governance device, then only ______ would be targets for takeovers. a. firms with unethical top executives b. firms earning above-average returns c. poorly performing firms d. over-valued firms

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

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

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

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

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

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

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

Which of the following is FALSE about corporate governance in China? a. The Chinese governance system may be tilting toward the Western model. b. With increasing frequency, the compensation of top executives of Chinese companies is closely related to prior and current financial performance of the firm. c. The state still uses direct and/or indirect controls to influence the strategies employed by most firms. d. Firms with higher state ownership tend to have lower market value and more volatility in those values over time

____ is one of the reasons for the differences in rates of entrepreneurship among different countries.

c. Culture

____ exist(s) when there is a need in the market that can be satisfied by new goods or services.

c. Entrepreneurial opportunities

____ are individuals, acting independently or as part of an organization, who see an opportunity and then take risks to develop an innovation to exploit it.

c. Entrepreneurs

Which of the following is true? For firms to be entrepreneurial, they require a culture with

c. a balance of individualism and collectivism.

PracticalSolutions is a small firm providing employee assistance programs for companies with troubled employees. PracticalSolutions frequently partners with other consulting firms to provide creative solutions for companies with personnel problems. This history of partnering exemplifies

c. alignment of complementary assets.

3M's Cubitron II, described as "an industrial abrasive that cuts faster, lasts longer, sharpens itself, and requires less elbow grease than any other abrasive on the market" is an example of

c. an incremental innovation.

Induced strategic behavior is a process that fosters product innovations that

c. are aligned closely with current strategy and structure.

Innovation creates a(n)

c. commercial product.

According to Peter Drucker,the primary goal of innovation is to

c. create wealth.

If the firm's current employees are well-trained in their jobs, but also have other knowledge, skills, and abilities, these employees have

c. high absorptive capacity to learn.

Products developed through ____ are often offered at lower prices without as many features than products developed through _____

c. imitation; innovation

The three types of innovative activity include all of the following EXCEPT

c. implementation.

A major barrier to the use of cross-functional teams is

c. independent frames of reference of team members.

WayWard Products has a deliberate strategy to encourage internal innovations. It has established processes to support autonomous strategic behavior as well as induced strategic behavior. WayWard Products is involved in

c. internal corporate venturing.

Innovations that involve significant technological breakthroughs and create new knowledge

c. involve substantial uncertainty and risk.

The competition for resources among those representing different organizational functions within a firm often leads to

c. organizational politics.

The level of entrepreneurial activity in a nation is _____ the nation's level of economic development.

c. positively related to

Entrepreneurs tend to have all the following characteristics EXCEPT

c. preference for certainly about projects.

Panera Bread develops and produces its own dough-based products, but it works with manufacturing partners to create new soups. Panera Bread is therefore

c. pursuing innovation through both internal and cooperative strategies.

The firm's culture promotes unity of purpose for cross-functional work teams through

c. shared values.

Internal corporate venturing does NOT involve

c. strategic alliances.

The dimensions on which functional departments can vary include all the following EXCEPT _____ orientation.

c. technological

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

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to _____, whereas owners wish to diversify the firm to ______. a. generate free cash flows; reduce the risk of total firm failure b. increase the price of the firm's stock; increase the dividends paid out from free cash flows c. reduce the risk of total firm failure; reduce their total portfolio risk d. reduce their employment risk; increase the company's value

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

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

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

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

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

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

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

Product diversification provides two benefits to managers that do not accrue to shareholders: ______m and ______. a. greater experience in a wider range of industries; lessening of managerial employment risk b. the manager frequently invests in the acquired firm, which allows him or her extensive profits; the manager can frequently buy excess assets divested by the acquired firm c. the manager's supervisory needs are lowered; the manager is allowed greater time to oversee a wider range of activities d. the opportunity for higher compensation through firm growth; a reduction in managerial employment risk

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

The CEO and Chairman of the board of directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. What would you recommend? a. Requiring that the directors own stock in the company. b. Establishing a formal process to evaluate the board's performance. c. Electing an lead director. d. All of these options are correct

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

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

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

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

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

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation? a. The decisions made by top-level managers are typically complex and nonroutine. b. An executive's decisions often affect firm performance only over the long run. c. A number of factors intervene between top-level management decisions and firm performance (e.g., unpredictable economic, social, or legal changes). d. The compensation committee may not have comprehensive firm performance data

Autonomous strategic behavior is ____ a(n) process in which product champions pursue new ideas.

d. bottom-up

The use or application of entrepreneurship within an established firm is called

d. corporate entrepreneurship.

A cross-functional work team is having difficulties in operating smoothly and friction has developed among some of the members. Many of the strongest complaints are from the representatives of management who complain that the research scientists are disorganized, haphazard, and undisciplined. Managers complain the scientists do not adhere to any fixed rules or procedures. On the other hand, the research scientists complain that the managerial representatives are excessively rule-oriented bureaucrats, and have no flexibility or spontaneity. The main problem with this team seems to be centered around differences in

d. formality of structure.

New entrepreneurial firms are better than larger established firms at

d. identifying entrepreneurial opportunities.

Regarding partnering in cooperative alliances, entrepreneurial new companies may seek _____ while more established companies may need

d. investment capital; new technological knowledge.

The number of patents held by an organization is a rough guide to the

d. level of innovation in a firm.

Which of the following is one of the barriers to effectiveness when using cross-functional teams to integrate organizational functions?

d. organizational politics

Roland has developed and patented an inexpensive and organic way to enhance the fertility of clay soils without the addition of chemical fertilizers. But established agricultural chemical companies have rejected his proposals. After 6 months of promoting his invention during his time off from his regular job, Roland has decided to set his dream aside. Roland lacks a key characteristic of successful entrepreneurs, which is

d. passion for his invention.

A cross-functional product development team has been examining a proposed new product intensively for 6 months. The team has decided that although the product is unique and technologically advanced, the cost of production will exceed the price that the consumer would be willing to pay. At this point, the product development team should

d. recommend that the project be set aside.

Independent frames of reference and organizational politics are the two primary barriers to cross-functional team integration. Two methods to facilitate cross-functional integration are _________ and

d. shared values; effective leadership.

The risks of international entrepreneurship include all the following EXCEPT

d. strong "buy-domestic" programs.

Firms develop innovations in all the following ways EXCEPT

d. via divestiture of low-performing units.

The main risk in a strategic alliance is that

one partner will use the other partner's knowledge and use it to enhance its own competitive abilities

Strategic Management Final Exam

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