Exam 3 - Quiz Questions

A corporate-level strategy is about how to:

a. compete w/ industry competitors

b. compete across multiple industries

c. compete in global markets

d. partner w/ industry competitors

b.

Managers use corporate-level strategy to identify which countries a company should compete in to maximize long-run profitability. (T/F)

False

Which of the following corporate-level strategies is not covered in this chapter (chp 9)?

a. horizontal integration

b. vertical integration

c. strategic outsourcing

d. diversification

d.

A number of studies have suggested that many mergers and acquisitions do not create value and some even destroy value. (T/F)

True

Horizontal integration may be accomplished by acquisitions or mergers. (T/F)

True

All of the following are benefits of horizontal integration except:

a. increased product differentiation

b. reduced risk of coming into conflict w/ the FTC

c. reduced industry rivalry

d. reduced cost structure

b.

A company pursuing a strategy of vertical integration may expand its operations.

a. backwards into an industry that produces inputs for the company’s products

b. by making specialized investments jointly with its competitor

c. laterally into an industry that competes with the company’s products

d. by merging w/ industry competitors

a.

Staying in a single industry allows a company to

a. replicate its success in other industries

b. deter potential competitors from entering the industry

c. focus its resources in one area

d. change its product line from time to time

c.

mergers and acquisitions are

a. conceptually different but can be used interchangeably

b. means to realize horizontal integration

c. popular corporate strategy to grow the company’s size and mtkt power

d. all of the above

d.

Which of the following companies uses forward vertical integration to enhance their product differentiation advantage?

a. mcdonalds

b. apple

c. Whole Foods

d. walmart

b.

company-owned suppliers lack incentives to reduce costs therefore develop a higher cost structure than those of the independent suppliers. (T/F)

True

An automobile company enters into a long-term contract w/ two suppliers for the same automobile tool. This is to ensure the company is protected in the event of one of the suppliers adopting an uncooperative attitude. Which of the following concepts is illustrated in this scenario?

a. outsourcing

b. vertical integration

c. horizontal integration

d. parallel sourcing

d.

Strategic outsourcing is the decision to allow one or more of a company’s value chain activities or functions to be performed by independent companies. (T/F)

True

Diversification is the process of a company entering new industries distinct from its core industry, using a multi business model. (T/F)

True

Diversification strategy is used only by large corporations. (T/F)

False

If a company’s core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy. (T/F)

False

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

a. a technology acquisition strategy

b. related diversification

c. total diversification

d. taper diversification

b.

leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create:

a. a new business unit in the same industry

b. a new business unit in a different industry

c. differentiation in various business units

d. new customers in the same industry

b.

Diversification strategy is:

a. a business-level strategy

b. a corporate-level strategy regarding the company’s decision to enter one or more new industries

c. a single industry strategy

d. a generic competitive strategy

b.

In the example of Philip Morris, which competency was transferred between Morris and Miller Brewing?

a. manufacturing

b. r&d

c. materials management

d. marketing

d.

The main difference between leveraging and transferring competencies is that

a. leveraging competencies does not occur very often

b. leveraging competencies requires an entirely new business to be created internally

c. leveraging competencies begins after transferring competencies

d. leveraging competencies does not involve the R&D function

b.

Economies of scale arise when one or more of a diversified company’s business units are able to realize cost-saving or differentiation advantages because they can more effectively pool, share, and utilize resources or capabilities. (T/F)

False

The condition to achieve economies of scope is that:

a. the resources and capabilities that are being shared should be generic

b. there should be sufficient commonalities between one or more value-chain functions

c. the company must have unrelated business units or product divisions

d. the company must be competing in a labor-intensive industry

b.

General organizational competencies

a. transcend individual functions or business units

b. involve the capabilities residing w/ upper level managers

c. allow diversification strategy to increase profitability of each business unit

d. all of the above

d.

Which of the following is not a general organizational competency?

a. entrepreneurial capabilities

b. capabilities in organizational design

c. superior strategic capabilities

d. innovation capabilities

d.

Firms may pursue both related and unrelated diversification simultaneously. (T/F)

True

Internal new ventures are a preferred entry strategy when:

a. a company is to enter a newly emerging or embryonic industry

b. a company possesses distinctive competencies that can be leveraged or recombined to enter a new industry

c. a company tries to avoid any integration problems

d. all of the above

d.

Acquisitions are a preferred strategy when:

a. a company lacks the competencies necessary to compete in a new industry

b. a company is to enter an industry that is protected by high barriers to entry

c. a company needs to move fast to establish a presence in a new industry

d. all of the above

d.

When developing and implementing strategies a company must consider the claims of its

a. shareholders

b. customers

c. employees

d. stakeholders

d.

A union and the general public are examples of internal stakeholders. (T/F)

False

Stockholders receive a return on their investment in a company’s stock from dividend pmts and capital appreciation. (T/F)

True

Which of the following is true of stakeholders?

a. creditors are examples of internal stakeholders

b. stakeholders do not engage in an exchange relationship with their company

c. stockholders are internal stakeholders that provide an enterprise with risk capital

d. the goals of different stakeholder groups within a company are the same, and therefore do not lead to any conflicts

c.

Agency theory is used to explain the relationship between stockholders and corporate mangers, and between upper-level managers and the lower-level managers they supervise. (T/F)

True

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called

a. on-the-job consumption

b. greenmail

c. information asymmetry

d. profit maximization

a.

Which of the following is not correct in a principal-agent relationship?

a. agent is the person that delegates decision-making authority or control over the other person

b. agent is the person to whom authority is delegated

c. agents may make decisions on behalf of principals

d. agents may have and pursue goals that are different from those of principals

a.

Corporate governance is primarily concerned with the agency relationship between

a. employees and customers

b. suppliers and creditors

c. governments and unions

d. stockholders and managers

d.

Which of the following statements is not true regarding the board of directors?

a. they are elected by stockholders to represent the interests of stockholders

b. they are charged with the responsibility to oversee and control the behavior of top managers

c. they usually consist of a large number of outside members and a small number of inside members

d. CEO duality is the most effective way to use the board of directors as a governance mechanism

d.

In the article “Self-dealing at computer associates” the behavior conducted by the three top managers

a. benefitted the company’s shareholders

b. enriched the three executives themselves

c. was an effective way to use stock based compensation

d. likely benefitted all the stakeholders of the company

b.

To make sure that managers do not misrepresent their firm’s financial information, the SEC requires that the accounts be audited by an independent and accredited accounting firm. However, the auditor is not independent from the firm if

a. the auditing firm has other business dealings with the client firm at the same time

b. the auditing firm’s CEO also serves as the chairperson of the auditing firm’s board

c. the client firm’s CEO also serves as the chairperson of the client firm’s boarrd

d. all of the above

a.

Strategic control systems are the primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management. (T/F)

True

To combat internal agency problems, companies may use internal governance mechanisms including

a. strategic control systems

b. employee incentives

c. balanced score cards

d. all of the above

d

The unethical behavior of environmental degradation violates the interest of

a. stockholders

b. employees

c. customers

d. local communities

d.

The unethical behavior of substandard working conditions violates the interest of

a. stockholders

b. employees

c. suppliers

d. local communities

b.

The purpose of organizational structure is to provide managers with specific feedback on how well an organization and its members are performing a building competitive advantage. (T/F)

False

Span of control refers to the number of subordinates who report directly to one another. (T/F)

True

The purpose of a(n) _____ is to provide managers with incentives for employees as well as feedback on how the company performs.

a. control system

b. adaptive culture

c. organizational design

d. hierarchy of authority

a.

Organizational structure can be defined as

a. the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency , quality, innovation, and responsiveness to customers

b. the blueprint that states how managers intend to use organizational resources to most efficiently achieve organizational goals

c. the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization

d. the degree to which a company specifies how decisions are to be made so that employees behavior becomes predictable

a.

Standardization is a form of

a. output control

b. financial control

c. organizational culture

d. behavior control

d.

The process of deciding ho wa company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully is referred to as

a. organizational behavior

b. organizational norm

c. organizational design

d. organizational ecology

c.

An organizational structure

a. defines the reporting relationships between members in an organization

b. assigns employees to specific value creation tasks and roles

c. specifies ways to integrate and coordinate the efforts of all employees

d. all of the above

d.

Strategic control systems

a. provide incentives to motive employees

b. allow managers to evaluate the performance of employees at all levels

c. provide performance feedback so that corrective action can be taken if needed

d. all of the above

d.

An organizational culture

a. is a collection of values, norms, beliefs, and attitudes shared by members within an organization

b. is an example of an organizational structure

c. is most effective in large est. corporations

d. all of the above

a.

Which integrating mechanism provides the longest time frame for collaborations?

a. direct contact

b. liaison roles

c. teams

c.

In the product structure, the centralized support functions may contain product-specific teams that focus on the specific need of one particular product group. (T/F)

True

Which of the following industries may face different needs from regional customers?

a. home improvement

b. retail clothing

c. food services

d. all of the above

d.

A function in an organizational is

a. a collection of people who work together and perform similar tasks or hold similar positions

b. a set of incentives for employees

c. the number of employees supervised by managers at each level

d. the way in which decisions are made

a.

Which of the following strategies allow a company to compete in multiple industries?

a. vertical integration

b. related diversification

c. unrelated diversification

d. all

d.

In a firm with multidivisional structure, corporate managers oversee the actions of divisional managers. (T/F)

True

different divisions in a firm with a multidivisional structure are not given authority to adopt their own organizational structures. (T/F)

False

Transfer pricing may lead to divisional battles in a multidivisional company. (T/F)

True

Which of the following is an advantage of the multidivisional structure?

a. it provides the duplication of functional resources

b. it provides scope for corporate managers to easily allocate skills or resources from one division to another

c. it eliminates the scope for information distortion

d. it makes it easier for the corporate office to evaluate divisional performance

d.

Which of the following corporate strategies results in the highest bureaucratic costs?

a. vertical integration

b. related diversification

c. unrelated diversification

d. strategic outsourcing

b.

A division in the multidivisional structure

a. is self-contained with a full set of value chain functions

b. operates independently and separately from other divisions

c. can choose an appropriate strategy as well as organizational structure that suits the business

d. all of the above

d.

A corporate head office or hq is not responsible for

a. corporate strategic planning

b. overseeing all divisions

c. evaluating each division’s financial performance

d. day to day operations of each division

d.

Which of the following statements is incorrect?

a. the multidivisional structure usually is adopted by large and complex corporations such as diversified and multinational companies

b. the multidivisional structure enhances the company’s internal efficiency and allows the company to grow into large sizes

c. divisional managers and corporate managers share responsibilities of strategy making at the business level

d. the multidivisional structure allows corporate managers to allocate financial resources to divisions based on financial performance

c.

pursuing which corporate level strategy is most likely to cause the transfer pricing problem?

a. unrelated diversification

b. vertical integration

c. horizontal integration

d. related diversification

b.

it is important for the strategy of unrelated diversification to have corporate wide culture (T/F)

False

In a vertically integrated company, a commonly used pricing rule for transferred resources allows the selling division to add an appropriate markup to the cost incurred in the manufacturing process. This policy can be considered as a

a. personal control

b. horizontal control

c. vertical control

d. behavior control

d.

Which global structure is compatible with the global strategy of localization?

a. global area structure

b. global division structure

c. global product group structure

d. global matrix structure

a.

The global area structure is a multidivisional structure? (T/F)

True

A ____ structure in which horizontal differentiation proceeds along 2 dimensions: product division and geographic area.

a. global matrix

b. global division

c. global area

d. global product group

a.

In mergers and acquisitions potential integration problems could come from

a. the difficulty in merging two companies’ management hierarchies and establishing a new line of authority

b. different culture that two companies may have

c. different strategic control systems and financial reporting systems of two companies

d. all of the above

d.

Match the global strategies to the global structures:

Strategies:

• localization

• global standardization

• international

• transnational

Global structures:

• global-area

• global product group

• global division

• global matrix

• localization: global area

• global standardization: global product group

• International: global division

• transnational: global matrix

Adam’s boss tells him that their company is pursuing a strategy of horizontal integration, which means that the company will:

a. buy one of its rivals

b. reorganize into fewer business units

c. begin to distribute its own products

d. acquire one of its suppliers

a.

Agency theory would not be useful in understanding the relationship between

a. a CEO and his/her top management team

b. top-level executives and middle managers

c. managers at the same organizational level

d. stockholders and the CEO

c.

Companies invest in specialized assets because these assets allow them to

a. lower their cost structure

b. charge excessive prices for their products

c. better differentiate their products

d. both a and c

d.

Which of the following strategies results in the highest bureaucratic costs?

a. localization

b. international

c. global standardization

d. transnational

d.

Within a firm, a function is made up of workers who

a. perform the same types of tasks or hold similar positions

b. are paid the same amount of compensation

c. work at the same hierarchal level

d. have the same background and education

a.

Companies can maintain market discipline over suppliers by

a. outsourcing

b. demanding hostages

c. attaining a credible commitment

d. parallel sourcing

d.

Horizontal integration may be thought of as

a. moving into a new unrelated industry

b. giving control to suppliers

c. gaining control of distributors

d. staying inside the industry in which the company currently operates

d.

A diversification strategy based on resource sharing

a. entails a company creating value by applying the distinctive competencies it developed in one line of business to another line of business

b. requires the development of new business-level strategies

c. can help a company to realize economies of scope

d. is a valid way of supporting the generic business-level strategy of differentiation

c.

Ethics may best be thought of as

a. legal prescriptions for conduct

b. standards of right or wrong

c. cultural mores

d. desirable but unattainable behaviors

b.

A company’s stockholders provide a company with

a. emotional and intellectual support

b. risk capital

c. free advertising

d. advice on new product lines

b.

The purpose of governance mechanisms in corporations is to

a. keep employees in line

b. reduce the scope and frequency of the agency problem

c. satisfy the requirements of the SEC

d. none of the above

b.

The wasteful duplication of functional resources is most likely to arise with a

a. functional structure

b. geographic structure

c. matrix structure

d. multidivsiional structure

d.

The relationship between an enterprise and its stakeholders is essentially what type of relationship?

a. exchange

b. master-servant

c. bailor-bailee

d. supply and demand

a.

The role of managers in corporate-level strategy is to

a. identify markets or industries in which a company should compete to maximize long-term profitability

b. invent products that ensure the long-run success of the company

c. use their corporate power to ensure the profitability of functional-level strategies

d. all of the above

a.

General organizational competencies are found

a. in the skills of a company’s top managers and functional experts

b. at low levels in the organization

c. among technology professionals

d. within a company’s strategic core

a.