If a firm’s resources and capabilities are costly to imitate because imitating firms may
not understand the relationship between the resources and capabilities controlled by a
firm and that firm’s competitive advantage, this competitive advantage is said to be
protected from imitation by
A) path dependence.
B) causal ambiguity.
C) unique historical conditions.
D) social complexity.
Answer:
In an M-form organization, the management of day-to-day operations is delegated to
A) divisional general managers and corporate staff managers.
B) corporate staff managers and functional managers who report to corporate staff
managers.
C) divisional general managers and functional managers who report to division general
managers.
D) the board of directors and corporate staff managers who report to the board of
directors.
Answer:
In a perfectly competitive industry,
A) there are relatively few firms operating in the industry.
B) the products and services sold by firms in the industry are very different from each
other.
C) it is very costly for firms to enter the industry.
D) it is not very costly for firms to enter or exit the industry.
Answer:
Vertical integration is a type of
A) business strategy.
B) generic strategy.
C) differentiation strategy.
D) corporate strategy.
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.
In 2001, if Peach Computers did not want to employ a diversification strategy to enter
the personal electronics industry, it could use which substitute for diversification?
A) backward vertical integration
B) product differentiation
C) strategic alliances
D) forward vertical integration
Answer:
A marketing manager leading the marketing department is an example of a(n)
________ manager.
A) ambidextrous
B) divisional
C) functional
D) unitary
Answer:
High quality objectives are those that are
A) tightly connected to elements of a firm’s mission and are relatively easy to measure
and track over time.
B) difficult to measure and track over time.
C) non-existent.
D) not quantitative.
Answer:
In examining the question of whether the roles of CEO and chairman should be
combined, empirical research on this question suggests
A) that combining these roles is always positively related with firm performance.
B) that separating these roles is always positively related with firm performance.
C) that combining these roles is positively correlated with firm performance when the
firm operates in slow-growth and simple competitive environments.
D) that separating these roles is positively correlated with firm performance when the
firm operates in slow-growth and simple competitive environments.
Answer:
In a multidivisional company, one division “sells” its products or services to a second
division for a(n) ________, which is set by a firm’s corporate management to
accomplish corporate objectives.
A) allocation price
B) transfer cost
C) market price
D) transfer price
Answer:
In general, firms selling differentiated products face a demand curve that is
A) upward sloping.
B) horizontal.
C) vertical.
D) downward sloping.
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. By
employing a low-cost competitive strategy, Sematech has made itself
A) less able to withstand industry price wars.
B) more vulnerable to rivals.
C) less vulnerable to the power of suppliers.
D) more vulnerable to the power of buyers.
Answer:
From 1926 to 1995, visionary firms earned ________ returns compared to firms that
were not visionary firms.
A) substantially lower
B) substantially higher
C) marginally lower
D) equivalent
Answer:
When the cost of services from a shared activity is ________ the cost of comparable
services provided by a division itself or by an outside supplier than the division, general
managers have a strong incentive ________.
A) less than; to use the services of shared activities
B) greater than; to use the services of shared activities
C) less than; to use the services of an outside supplier
D) equal to; to use the services of an outside supplier
Answer:
The Bates Company has been producing tools for over fifty years. In that time the
company has been acknowledged as a producer of high quality tools at a reasonable
price. Bates’ competitive prices can be attributed to three factors. First, the company
recognized early in its development that tools made from specific blends of various
types of metal were less costly to produce and had superior performance compared to
traditional metals. Accordingly, Bates made investments in developing tools made for
specialty metals long before other competitors and has made a series of investments
over its operating history that have put it far ahead of its competitors in terms of
product development. Industry analysts believe that based on these investments it
would be difficult and extremely costly, if it were even possible, for rivals to catch up
with Bates. Second, in recognizing the importance of certain metals, Bates was able to
sign long-term contracts with suppliers of the metals that have provided Bates with a
lasting cost advantage. Finally, Bates maintains its cost advantages by using a thorough
budgeting and reporting system that allows it to closely control costs, and these systems
are supported by a frugal company culture and financial incentives that reward
employees for finding ways to save money throughout the company. The fact that it
would be would be difficult and costly for firms to match Bates’ capabilities in the tool
industry indicates that these capabilities are
A) imperfectly imitable.
B) causally ambiguous.
C) substitutable.
D) perfectly imitable.
Answer:
Civil wars, political coups, terrorism, wars between countries, famines, and country or
regional economic recessions are all examples of which element of the general
environment?
A) demographics
B) specific international events
C) economics
D) culture
Answer:
In order to create a cost advantage, the cost of acquiring low-cost productive inputs
must be ________ the cost savings generated by these factors.
A) greater than
B) equal to
C) less than
D) greater than or equal to
Answer:
Which of the following is not a potential source of diseconomies of scale?
A) physical limits to efficient size
B) worker de-motivation
C) distance to markets and suppliers
D) learning-curve economies
Answer:
If eBay were to acquire a smaller online auction company, this would be an example of
a ________ merger.
A) conglomerate
B) vertical
C) market extension
D) horizontal
Answer:
In a related acquisition, if there is one target firm and ten bidding firms, and the value
of each of the bidding firms as a stand-alone entity is $50,000 and the value of the
target firm as a stand-alone entity is $30,000, the market value of the combined entity
will be
A) $0.00.
B) less than $80,000.
C) $80,000.
D) more than $80,000.
Answer:
Firms that attempt to optimize both local responsiveness and international integration
will choose a ________ organizational structure.
A) centralized hub
B) transnational
C) coordinated federation
D) decentralized federation
Answer:
Which committee in a U-form organization meets monthly and usually consists of the
CEO and each of the heads of the functional areas included in a firm?
A) executive committee
B) functional committee
C) operations committee
D) managerial committee
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.
Kelly Rae’s position is SpandoCorp is best described as a(n)
A) institutional investor.
B) senior executive.
C) division general manager.
D) member of the board of directors.
Answer:
Rather than having profit-and-loss responsibilities, ________ are assigned a budget and
manage their operations to that budget.
A) profit centers
B) cost centers
C) operation centers
D) functional centers
Answer:
Which of the following is a source of diversification economies?
A) marketing
B) production
C) scheduling
D) portfolio management
Answer:
Under which of the following conditions is the product mix advantage as a basis of
product differentiation the least difficult to duplicate?
A) when the base of a product mix advantage is a common customer
B) when the mix of products is highly integrated with each other
C) if each of the products in a product mix has unique features
D) if a firm brings a series of products to market
Answer:
Thermacorp’s weighted average cost of capital is 13.5. If the average WACC in the
heating and cooling industry is 19, Thermacorp can be said to be earning
A) above normal economic performance.
B) above normal accounting performance.
C) below normal economic performance.
D) below normal accounting performance.
Answer:
Under which transfer pricing scheme is the transfer price set equal to the selling
division’s actual cost of production or set equal to the cost of production if the selling
division were operating at maximum efficiency?
A) exchange autonomy
B) mandated full cost
C) mandated market based
D) dual pricing
Answer:
In the computer technology-based industries, over ________ alliances were created
between 2001 and 2005.
A) 5,700
B) 1,200
C) 2,200
D) 3,100
Answer:
For multipoint competition to lead to mutual forbearance,
A) the threat of retaliation must be substantial and the firms pursuing this strategy must
have strong linkages among their diversified businesses.
B) the threat of retaliation must be low and the firms pursuing this strategy must have
strong linkages among their diversified businesses.
C) the threat of retaliation must be low and the firms pursuing this strategy must have
weak linkages among their diversified businesses.
D) the threat of retaliation must be substantial and the firms pursuing this strategy must
have weak linkages among their diversified businesses.
Answer:
A ________ is another bidding firm that agrees to acquire a particular target in the place
of the original bidding firm.
A) golden parachute
B) greenmail
C) white knight
D) crown jewel
Answer:
eBay, the online auction company, has an impressive portfolio of cooperative
agreements. This portfolio includes an agreement with the U.S. Postal Service to
facilitate the shipping of goods purchased through eBay auctions, an agreement to allow
MBNA to use eBay’s name on a credit card, and an agreement in an online auction
company in Korea that is supplemented with an investment by eBay in the Korean
partner. In addition, at one time eBay had formed an independent firm, called eBay
Australia and New Zealand, with an Australian company known as ecorp.
eBay’s former agreement with ecorp is best characterized as a(n)
A) joint venture.
B) equity alliance.
C) licensing agreement.
D) nonequity alliance.
Answer:
Currently, most scholars believe that exploiting economies of scope through corporate
diversification, on average,
A) destroyed about 25% of a firm’s market value.
B) had no impact on a firm’s market value.
C) destroyed about 55% of a firm’s market value.
D) increased a firm’s market value.
Answer:
________ is an example of a less costly-to-duplicate economies of scope.
A) Tax advantages
B) Core competencies
C) Internal capital allocation
D) Multipoint competition
Answer: