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
Resources are the source of capabilities, some of which lead to the development of core
competencies; in turn, some core competencies may lead to competitive advantage.
a. True
b. False
A private university is made up of various ‘schools,” such as the School of Journalism,
the School of Business, the School of Law, the School of Arts and Sciences, and so
forth. The university is experiencing some financial problems, so the administration has
decided to have each school of the university become a profit center. This scheme is
somewhat parallel to the _________ organizational structure.
a. network
b. strategic business unit multidivisional
c. functional
d. matrix
The acquisition of Sun Microsystems (a computer hardware producer) by Oracle
Corporation (a software firm) is an example of a(n)
a. vertical acquisition.
b. unrelated acquisition.
c. horizontal acquisition.
d. merger of equals.
The three parts of the external environment which affect a firm’s strategic actions are
a. economic, political, and legal.
b. general, industry, and competitor.
c. industry, business, and product.
d. local, national, and global.
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.
Research evidence suggests that horizontal acquisitions of firms with dissimilar
characteristics result in higher performance levels.
a. True
b. False
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.
The rate of growth of Internet-based applications could be affected by the possibility of
Internet service providers charging users for downloading those applications.
a. True
b. False
In order to meet and exceed customer’s expectations, firms must
a. constantly manipulate customers’ perceptions of their needs.
b. answer the questions: who, what, when, where, how, and why as they apply to
customers.
c. continuously improve, innovate, and upgrade their core competencies.
d. successfully defend their established core competencies from imitation by
competitors.
The “conglomerate discount” occurs in large, highly diversified businesses and results
from analysts not knowing how to value the vast array of large businesses with complex
financial reports.
a. True
b. False
Hewlett-Packard licenses some of its intellectual property through strategic alliances.
Which of the following is correct about this relationship?
a. This is a joint venture because in licensing arrangements, a new company is created.
b. This is an equity strategic alliance because licensing does not involve the creation of
a new company, but does involve an equity commitment.
c. The firms risk charges of collusion because most licensing relationships between
competitors involve explicit collusion.
d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique
capabilities.
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
Firms such as Textron Inc. that frequently acquire and divest other firms are most likely
to use the ______ structure.
What are a firm’s vision and mission? What is the value to the firm of having a
specified vision and mission?
What are the managerial motives to diversify?
Identify and explain the seven reasons firms engage in an acquisition strategy.
Define capabilities and how they affect the firm’s strategic success.
CaseScenario2:ERPInc.
ERP Inc. is a leading provider of enterprise integration software (EIS). EIS allows a
firm to connect and integrate processes across all aspects of its business, regardless of
where they are located around the world. ERPI is a product-focused company, whereas
most competitors in its market space, such as Oracle, operate as ‘solutions companies.”
Oracle and Microsoft have begun to devote considerable resources to the development
of and acquisition of products to compete in the EIS space. Despite these recent threats,
one benefit of its product-focused strategy is that ERPI’s proprietary product is
generally recognized as being 200 percent to 300 percent better than competitors’
software. ERPI estimates it will take two to three years for competitors to develop the
capabilities needed to bring a competing product to market. ERPI invests a considerable
percentage of its profits in basic R&D to support its core products. As evidence of this,
among its competitors the firm maintains the largest in-house programming staff
dedicated solely to the development of advanced enterprise integration software.
Installation and related consulting for EIS typically cost between $100 million and $200
million, with the ERPI software component accounting for about 20 percent of the
installed cost (the remaining 80 percent is spent on the actual installation, not counting
the value of the customer’s time). ERPI’s target market consists of the world’s largest
manufacturing and industrial firms, and it currently enjoys a 60 percent market share.
Imagine that ERPI’s historical growth strategy has focused on making one sale and then
moving on to the next target company. After several years of building market share
using this approach, what new resources has ERPI developed?
CaseScenario3:Zachary,Wesley&Partners.
Zachary, Wesley & Partners (ZW&P) is a leveraged buyout (LBO) firm that specializes
in friendly buyouts of mid- sized U.S. retailing and manufacturing firms. ZW&P shuns
turnarounds and hostile takeovers; its typical deals retain the existing management team
and provide extensive funding for what is perceived to be an already sound strategy. It
focuses on this type of firm because the partners have good contacts in retailing and
manufacturing and they are typically able to avoid bidding wars when the LBO is
negotiated. The firm has been immensely profitable over the years, in part due to the
very extensive and selective due diligence process used to winnow down the list of
prospective targets. Fewer than one out of one hundred candidates are even approached,
and only a fraction of these passes further screens in the LBO negotiations. The
resulting profitability has, in turn, given ZW&P a strong reputation in the financial
community for successful deals, and among managers for being able to put together
needed financing with good business plans.Where are these core resources likely to be
located in the firm?
What are the risks of an integrated cost leadership/differentiation strategy?
What are the advantages and disadvantages of being a first mover, second mover, and
late mover?