Most accounting measures of divisional performance focus on long-term benefits and
minimize the possibility of a short-term bias.
Answer:
In principle, only the CEO and the president report to the board of directors while other
senior managers report only to the CEO.
Answer:
A thinly traded market is a market where there are only a small number of buyers and
sellers, where information about the opportunities in this market is not widely known,
and where interests besides purely maximizing the value of a firm can be important.
Answer:
Although holdup is a form of cheating in strategic alliances, the threat of holdup can
also be a motivation for creating an alliance.
Answer:
The use of strategic alliances to manage economic exchanges has grown substantially
over the last several years.
Answer:
Alliances to facilitate entry into new industries are only valuable when the skills needed
in these industries are complex and difficult to learn.
Answer:
Once a firm has vertically integrated it has committed its organizational structure, its
management controls, and its compensation policies to a particular vertically integrated
way of doing business and it has enhanced its flexibility.
Answer:
If all a firm does is create value in the same way as its competitors, the best
performance it can ever expect to gain is competitive parity.
Answer:
In general, firms that use their resources and capabilities to exploit opportunities or
neutralize threats will see no increase in their net revenues nor a decrease in their net
costs compared to the situation where they are not using these resources and capabilities
to exploit opportunities or neutralize threats.
Answer:
A firm engages in an acquisition when it purchases a second firm.
Answer:
In a nonequity alliance, firms create a legally independent firm in which they invest and
from which they share any profits that are created.
Answer:
A product or service can be at different stages of its life cycle in different countries.
Answer:
The physical location of a firm cannot be a source of product differentiation.
Answer:
Unfriendly takeovers can generate anger and animosity among the target firm
management that is directed toward the management of the bidding firm.
Answer:
If a firm engages in vertical integration into a business activity where it does not
possess any of the valuable, rare, or costly-to-imitate resources it needs to gain a
competitive advantage, it may find itself at a competitive disadvantage to the extent that
some firms already have competitive advantages in these business activities.
Answer:
To the extent that differences in product complexity lead customers to conclude that the
products of some firms are more valuable than the product of other firms, then product
complexity can be a basis of product differentiation.
Answer:
The divisions in an M-form organization are true profit-and-loss centers.
Answer:
Differences in tastes can be a major challenge for firms looking to sell their products or
services outside the domestic market.
Answer:
A firm’s plant and equipment, its geographic location and its access to raw materials are
all examples of physical resources.
Answer:
If cost-leadership strategies can be implemented by numerous firms in an industry, or if
no firms face a cost disadvantage in imitating a cost-leadership strategy, then being a
cost leader does not generate a sustained competitive advantage for a firm.
Answer:
In new and uncertain environments it is not unusual for firms to develop numerous
strategic alliances.
Answer:
Learning-curve cost advantages are present when the cost of production falls with the
cumulative volume of production.
Answer:
The threat of rivalry is increased when low-cost firms set their prices equal to those of
higher cost competitors.
Answer:
One of the main reasons why bidding firms do not obtain competitive advantages from
acquiring strategically related target firms is that several other bidding firms value the
target firm the same way.
Answer:
Corporate level strategies are actions firms take to gain competitive advantages in a
single market or industry.
Answer:
To the extent that a firm exploits real economies of scope in implementing a
diversification strategy, it will be able to unambiguously evaluate the performance of
individual divisions in that firm.
Answer:
The search for low labor costs has led some firms to engage in international strategies
to gain access to low-cost labor.
Answer:
When a firm has high levels of production, it is often able to purchase and use
specialized manufacturing tools that cannot be kept in operation in small firms.
Answer:
Incumbent firms may have a whole range of cost advantages compared to new
competitors.
Answer:
In the structure-conduct-performance model, the term “performance” refers solely to the
performance of individual firms.
Answer:
In 2012, more than 50 percent of General Motor’s automobile sales came from outside
the United States.
Answer:
Within the five forces framework, when all five threats are very high, competition in the
industry begins to approach a monopoly.
Answer:
Firms pursuing a harvest strategy in a declining industry do not expect to remain in the
industry over the long term.
Answer:
Opportunism exists when a firm is unfairly exploited in an exchange.
Answer:
High quality objectives are tightly connected to the elements of a firm’s mission but
tend to be relatively difficult to measure and track over time.
Answer:
Firms should not vertically integrate into business activities where they do not possess
the resources necessary to gain competitive advantages.
Answer:
Firms with strategies that are unlikely to be a source of competitive advantage will
rarely provide the same career opportunities as firms with strategies that do generate
such advantages.
Answer:
The link between volume of production and the cost of building manufacturing
operations is particularly important in industries characterized by product
manufacturing, such as chemical and oil refining.
Answer:
Research on architectural competence in pharmaceutical firms suggests that
A) not only do some firms possess this competence, but that other firms do not; firms
without this competence have, on average, been able develop it with minimal
investment.
B) very few firms possess this competence, but firms without this competence, on
average, are able to develop it.
C) not only do some firms possess this competence, but also that other firms do not and
firms without this competence have, on average, been unable to develop it.
D) virtually every firm possesses this competence to some extent.
Answer:
The two types of measures of competitive advantage include
A) accounting measures and strategic measures.
B) strategic measures and economic measures.
C) accounting measures and economic measures.
D) qualitative measures and quantitative measures.
Answer:
The set of business activities in which a firm engages to develop, produce, and market
its products or services is known as its
A) value chain.
B) physical resources.
C) organizational resources.
D) human resources.
Answer:
Ratios that focus on the level of a firm’s financial flexibility, including its ability to
obtain more debt, are known as
A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) profitability ratios.
Answer:
At the beginning of 2001, Peach Computers competed exclusively in the computer
industry and generated approximately 96% of its revenue from the sales of computers
and computer-related software and approximately 4% of its revenues were generated
from sales of other peripherals. Further, of these revenues, 60% was from sales in the
U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other
areas. In October 2001, Peach entered the personal electronics industry by introducing a
new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach
Computers was able to use many of the same R&D facilities, suppliers, production
facilities, and distribution and sales outlets as the computers and software Peach
Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the
unit, and sales of songs on Peach Computers’ NectarTunes website accounted for 35%
of Peach Computers’ revenues.
If no other firm in the computer industry were using a diversification strategy similar to
Peach Computers’, this diversification strategy could be said to be
A) rare and costly to duplicate.
B) rare and less costly to duplicate.
C) common but costly to duplicate.
D) common and less costly to duplicate.
Answer:
Which of the following bases of product differentiation is generally viewed as the most
difficult to duplicate?
A) product features
B) reputation
C) linkages with other firms
D) location
Answer:
Broad changes in the political situation in a foreign country is an example of political
risk that affects the international strategies at the ________ level.
A) macro
B) micro
C) functional
D) cultural
Answer:
________ are resources required to successfully compete in an industry.
A) Strategically valuable assets
B) Technological leader strategies
C) Process innovations
D) Product innovations
Answer:
The most common organizational structure for implementing a corporate diversification
strategy is the ________ structure.
A) matrix
B) U-form
C) M-form
D) functional
Answer:
According to the capabilities-based explanations of vertical integration, which of the
following would be the most appropriate type of compensation to support strategy
implementation?
A) salary
B) cash bonuses for corporate performance
C) cash bonuses for individual performance
D) stock grants for individual performance
Answer:
When the probability of cheating in a cooperative relationship is greatest, a(n)
________ is the preferred form of cooperation.
A) equity agreement
B) licensing agreement
C) joint venture
D) distribution agreement
Answer:
________ firms typically raise money from numerous smaller investors, which they
then invest in a portfolio of entrepreneurial firms.
A) Business angel
B) Venture capital
C) Closely held
D) Private equity
Answer:
At the beginning of 2001, Peach Computers competed exclusively in the computer
industry and generated approximately 96% of its revenue from the sales of computers
and computer-related software and approximately 4% of its revenues were generated
from sales of other peripherals. Further, of these revenues, 60% was from sales in the
U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other
areas. In October 2001, Peach entered the personal electronics industry by introducing a
new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach
Computers was able to use many of the same R&D facilities, suppliers, production
facilities, and distribution and sales outlets as the computers and software Peach
Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the
unit, and sales of songs on Peach Computers’ NectarTunes website accounted for 35%
of Peach Computers’ revenues.
By 2003, Peach Computers’ diversification strategy was best characterized as
A) unrelated diversification.
B) related-constrained diversification.
C) related-linked diversification.
D) dominant-business diversification.
Answer:
Which one of the following is not a potential source of economies of scope for firms
pursuing international strategies?
A) to develop new core competencies
B) to manage corporate risk
C) to control countertrade
D) to gain access to low-cost factors of production
Answer:
According to ________ of when vertical integration creates value, vertical integration is
valuable when it reduces threats from a firm’s suppliers or buyers due to any
transaction-specific investments a firm has made.
A) firm capability explanations
B) opportunity-based explanations
C) flexibility-based explanations
D) opportunism-based explanations
Answer:
P&G is a leading consumer goods company in the United States that has grown its
business through a combination of international growth, alliances, acquisitions and
mergers. In 2003, P&G acquired the beauty care company Wella to acquire products
that would complement its current product. In 2004, P&G acquired AG-Hutchison Ltd
to establish a stronger presence in the Chinese consumer goods products market. In
2005, P&G acquired Gillette, another consumer goods company, in a deal worth
approximately $57 billion dollars.
If Gillette’s managers wanted to maximize the value that Gillette received from its
acquisition by P&G, they should
A) seek information from P&G about the value that P&G will receive from its
acquisition of Gillette.
B) not engage in negotiations with any bidder but P&G.
C) close the acquisition as quickly as possible.
D) stop the acquisition.
Answer:
The fact that it would be very costly for Digipics to alter its operations if the large
customer referred to in the previous question decided to stop doing business with
Digipics suggests that Digipics has ________ in this situation.
A) low flexibility
B) low opportunism
C) high flexibility
D) high opportunism
Answer:
The ________ is the rate of return that a firm promises to pay its suppliers of capital to
induce them to invest in the firm.
A) cost of debt
B) cost of advantage
C) cost of parity
D) cost of capital
Answer:
________ exist(s) when firms directly communicate with each other to coordinate their
levels of production and/or their prices.
A) Economies of scale
B) Explicit collusion
C) A learning race
D) Tacit collusion
Answer:
The role of corporate headquarters in a ________ is to constantly scan business
operations across different countries for resources and capabilities that might be a
source of competitive advantage for other divisions/country companies in the firm.
A) centralized hub
B) coordinated federation
C) decentralized federation
D) transnational structure
Answer:
Actions firms take to gain competitive advantages in a single market or industry are
known as
A) business level strategies.
B) corporate level strategies.
C) diversification strategies.
D) strategy implementation.
Answer:
If Hickory Divine were to open its own chain of furniture stores, this would be an
example of
A) complementors.
B) backward vertical integration.
C) consolidation.
D) forward vertical integration.
Answer:
When activity in an economy is relatively low for a short period of time, the economy is
said to be in a
A) recession.
B) depression.
C) prosperous cycle.
D) boom.
Answer:
The ________ explanations call for compensation that focuses on individual
employees, such as cash bonuses for individual performance.
A) capabilities-based
B) strategically-based
C) flexibility-based
D) opportunism-based
Answer:
SpandoCorp is a diversified firm that makes industrial, military and consumer products
from Spandex. SpandoCorp manages each of the businesses that it operates in as a
separate division and treats each as a true profit-and-loss center. In this organization,
Grace McKenna is responsible for deciding which set of businesses SpandoCorp will
operate in and for encouraging behavior that is consistent with this strategy, Wells
Tucker provides information to McKenna about the internal and external environments
that she uses in her decision making, and Kelly Rae is one of the individuals who is
responsible for evaluating the firm’s decision making to ensure that it is consistent with
the interests of equity holders.
If Todd Hienz were the chief operating officer for SpandoCorp, his responsibilities
would include
A) supervision of the board of directors in its monitoring role.
B) strategy implementation.
C) strategy formulation.
D) strategy control.
Answer:
Firms that seek to maximize their local responsiveness will tend to choose a ________
structure
A) transnational
B) centralized hub
C) decentralized federation
D) coordinated federation
Answer:
In general, first-mover advantages can arise from any of these sources except
A) technological leadership.
B) preemption of strategically valuable assets.
C) the creation of customer switching costs.
D) using an imitative strategy to introduce improved versions of competitors’ new
products.
Answer:
Sematech is a producer of computer chips. To gain an advantage over other computer
chip makers, Sematech focuses on reducing its costs below all of its competitors and
has aligned its value chain accordingly. Recently, several of Sematech’s competitors
have begun to reduce the company’s competitive advantage. In response to this threat,
Sematech has decided to add production capacity in an effort to lower costs. If
Sematech were to continue seeking methods to maintain the company’s cost-leadership
position that would be costly to duplicate, which of the following is most likely to be a
basis of cost leadership that may be costly to duplicate?
A) establishing economies of scale
B) exploiting learning-curve economies
C) purchasing new technological hardware
D) securing differential access to low-cost productive inputs
Answer:
SpandoCorp is a diversified firm that makes industrial, military and consumer products
from Spandex. SpandoCorp manages each of the businesses that it operates in as a
separate division and treats each as a true profit-and-loss center. In this organization,
Grace McKenna is responsible for deciding which set of businesses SpandoCorp will
operate in and for encouraging behavior that is consistent with this strategy, Wells
Tucker provides information to McKenna about the internal and external environments
that she uses in her decision making, and Kelly Rae is one of the individuals who is
responsible for evaluating the firm’s decision making to ensure that it is consistent with
the interests of equity holders.
Which organizational structure is SpandoCorp using?
A) U-form
B) matrix
C) M-form
D) functional
Answer:
________ economies are achieved by improving a firm’s performance relative to its risk
attributes or lowering its risk attributes relative to its performance.
A) Technical
B) Diversification
C) Pecuniary
D) Market
Answer:
As the volume of production in a firm increases, the average cost per unit decreases
until some optimal volume of production is reached, after which the average costs of
production begin to rise because of
A) diseconomies of scale.
B) economies of scope.
C) diseconomies of scope.
D) economies of scale.
Answer: