Increased worker specialization associated with higher levels of production can lead to
worker de-motivation and diseconomies of scale.
Answer:
While mergers typically begin as a transaction between equals, that is, between firms of
equal size and profitability, they often evolve after a merger such that one firm is more
dominant in the management of the merged firm than the other.
Answer:
If there is any hope that mergers and acquisitions will be a source of superior
performance for bidding firms, it must be because of some sort of strategic relatedness
between bidding and target firms.
Answer:
In the end, competitive advantage is so important to a firm’s success, it must remain the
sole property of senior management.
Answer:
Compensation at cost-leadership firms is usually tied directly to product innovation and
customer service efforts.
Answer:
Local responsiveness can help firms be successful in addressing the local needs of
nondomestic customers, thereby increasing demand for a firm’s current products or
services.
Answer:
The ability of firms to acquire, develop, and use resources often depends upon their
place in time and space, and firms that do not have space-and-time-dependent resources
face a significant cost disadvantage in obtaining and developing them.
Answer:
Product differentiation increases the threat of substitutes by making a firm’s current
products appear less attractive than substitutes.
Answer:
The greatest risk associated with treating shared activities as profit centers is that
divisions may choose to obtain no services from the shared activities.
Answer:
Any actions that a firm takes that have the effect of reducing the level of rivalry in an
industry that also do not require firms in an industry to negotiate with each other can be
thought of as explicit cooperation.
Answer:
Perhaps the most significant challenge in integrating bidding and target firms has to do
with cultural differences.
Answer:
Network industries are characterized by decreasing returns to scale.
Answer:
A firm’s formal reporting structure is a description of who in an organization reports to
whom and is often embedded in a firm’s organizational chart.
Answer:
When a firm cannot realize the cost savings from economies of scale all by itself, it may
join in a strategic alliance with other firms so that together both firms will have
sufficient volume to be able to gain the cost advantages of economies of scale.
Answer:
Technological software includes things like the quality of relations among labor and
management, an organization’s culture, and the quality of managerial controls.
Answer:
When a firm sells a highly differentiated product, it enjoys a quasi-monopoly in that
segment of the market.
Answer:
Gaining access to new customers is, perhaps, the most traditional reason why firms
begin international operations.
Answer:
One of the key assumptions of the RBV is resource homogeneity.
Answer:
The value that a bidding firm brings to a target firm through an acquisition should be
discounted by the cost of strategizing to implement an acquisition.
Answer:
Corporate level strategies are actions firms take to gain competitive advantages in a
single market or industry.
Answer:
When information asymmetry exists between firms that currently own assets and firms
that may want to purchase these assets, the selling firm will often have difficulty
obtaining the full economic value of these assets.
Answer:
McDonald’s is an excellent example of a firm that simultaneously employs both a
product-differentiation and a cost-leadership strategy since their product differentiation
based on cleanliness, consistency and fun in its fast food outlets allowed the company
to become the market share leader in the industry and to reduce its costs.
Answer:
A process is said to be path dependent when imitating firms are not able to understand
the relationship between the resources and capabilities controlled by a firm and that
firm’s competitive advantage.
Answer:
Transfer prices should equal opportunity cost.
Answer:
Another name for the M-form is the multidivisional structure.
Answer:
Decisions about whether or not to vertically integrate often determine whether or not a
firm is operating in a single business or industry or multiple businesses or industries.
Answer:
Strategic alliances are generally viewed as a poor substitute for diversification since the
economies of scope in diversification can be found in strategic alliances.
Answer:
In general, it is rarely the case that all five forces in the five forces framework will be
equally threatening at the same time.
Answer:
Embargoes are an example of nontariff barriers.
Answer:
Multipoint competition requires loose coordination between the different businesses in
which a firm operates.
Answer:
A learning race exists in a strategic alliance when both parties seek to learn from each
other.
Answer:
When a firm earns above average accounting performance, it is said to enjoy
competitive parity.
Answer:
Mature industries are characterized by elements such as increasing growth in total
industry demand, significant increases in product capacity, and an overall increase in
the profitability of firms in the industry.
Answer:
Even the best formulated strategy is competitively irrelevant if it is not implemented.
Answer:
Edward Chamberlin described firms selling differentiated products and facing a
downward-sloping demand curve as being in an industry characterized by monopolistic
competition.
Answer:
In choosing which transfer pricing system to use, a firm should be less concerned about
finding the “right” transfer-pricing mechanism and be more concerned about choosing a
transfer-pricing policy that creates the fewest management problems.
Answer:
It is unusual for a diversified firm to change its transfer-pricing mechanisms every few
years in an attempt to find the “right” transfer-pricing mechanism.
Answer:
Computer hardware and software technology, robots used in manufacturing and
automated warehouses are examples of which type of resources?
A) financial resources
B) physical resources
C) human resources
D) organizational resources
Answer:
In a ________, cooperating firms create a legally independent firm in which they invest
and from which they share any profits that are created.
A) licensing agreement
B) supply agreement
C) distribution agreement
D) joint venture
Answer:
TerraLoc competes in the market for global positioning devices and services. The
company manufactures its own GPS units, which are smaller than those of any other
competitor and include a proprietary battery that lasts 200% longer than any other
competitor’s battery and that TerraLoc manufacturers on-site. TerraLoc also has
developed proprietary software that is much faster and more precise than that of any
competitor. When developing the proprietary battery, TerraLoc decided to manufacturer
the battery in-house to reduce the possibility that the company it outsourced the battery
manufacturing to might reverse engineer the battery and sell a similar product to
competitors. This possibility was especially troubling given that the company expected
a significant increase in demand due to the improved battery life. Additionally,
TerraLoc sells its products and services through its own direct sales force to ensure that
its representatives highlight the longer battery life of TerraLoc’s units.
TerraLoc is most likely to use the ________ organizational structure.
A) matrix
B) product-based multidivisional
C) functional
D) geography-based multidivisional
Answer:
A decision-making setting is ________ when the future of an exchange cannot be
known when investments in that exchange are being made.
A) uncertain
B) opportunistic
C) flexible
D) dynamic
Answer:
In which type of limited corporate diversification do firms have greater than 95% of
their total sales in a single product market?
A) dominant-business firms
B) single-business firms
C) related-constrained firms
D) related-linked firms
Answer:
Which of the following statements regarding substitutes is accurate?
A) In the extreme, substitutes can ultimately replace an industry’s products or services.
B) Substitutes place a floor on the prices firms in an industry can charge and on the
profits firms in an industry can earn.
C) Substitutes rarely impact the profitability that firms in an industry can earn.
D) The importance of substitutes in reducing the profit potential in a wide variety of
industries is decreasing.
Answer:
Product features, by themselves, are
A) usually not a source of temporary competitive advantage, but they can be a source of
a sustainable competitive advantage.
B) usually not a source of either a temporary competitive advantage, or a source of a
sustainable competitive advantage.
C) usually can be a source of both a temporary competitive advantage and a source of a
sustainable competitive advantage.
D) usually not a source of sustained competitive advantage, but they can be a source of
a temporary competitive advantage.
Answer:
Which one of the following is not a determinant of the ability of a firm to learn from its
international operations?
A) the intent to learn
B) the transparency of business partners
C) receptivity to learning
D) the resources for learning
Answer:
Agrestal Cosmetics, Inc. is a leading U.S. manufacturer of natural, herb-based cosmetic
products. It started out purely as a domestic company but in 1983 established operations
in India primarily to gain access to that country’s abundant supply of hibiscus, a plant
that provided important raw materials to the company’s products. In 2009, Agrestal did
business in 29 countries around the world. It has factories in Malaysia and Taiwan to
use the low labor cost in those countries in making its labor-intensive products. In the
late 1990s, it had to close it operations in a foreign country when, due to a change in the
country’s leadership, all foreign companies had to cease doing business there. During
the Brazilian financial crisis, Agrestal adopted the practice of using revenues generated
in Brazil to buy orange concentrate locally and sell that concentrate in the United
States. Agrestal’s corporate finance department aggressively uses hedging in all the
countries where it operates. In a few select countries, Agrestal licenses its brand names
and know-how to local licensees. Currently, Agrestal is organized whereby all strategic
and operational decisions are made at its Princeton, New Jersey headquarters.
Agrestal’s organizational structure is most likely the ________ structure.
A) centralized hub
B) transnational
C) decentralized federation
D) coordinated federation
Answer:
In an unrelated acquisition, if 5 firms are interested in acquiring a firm and each of the
bidding firms had a current market value of $30,000 while the current market value of
the target firm is $20,000, this acquisition is likely to generate economic profits of
________ for the acquiring firm.
A) $10,000
B) $20,000
C) $50,000
D) $0.00
Answer:
Firms such as Disney that own and operate businesses that share a limited number of
inputs, production technologies or distribution channels are said to be pursuing a
________ corporate diversification strategy.
A) related-constrained
B) related-linked
C) dominant-business
D) single-business
Answer:
While it is often the case that there will be important information asymmetries between
firms in an alliance, these asymmetries are likely to be ________ when alliances
partners come from different countries.
A) much less
B) about the same as
C) much greater
D) marginally greater
Answer:
Firms that are stuck in the middle attempt to sell
A) high-priced products and gain small market share.
B) low-priced products and gain large market share.
C) high-priced products and gain a large market share.
D) medium-priced products and gain medium market share.
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, Peach Computers’ diversification strategy was best characterized as
A) related-linked diversification.
B) dominant-business diversification.
C) single-business diversification.
D) related-constrained diversification.
Answer:
According to Coach’s website, the company has built a distinctive style and prestigious
image over the past 40 years to develop a reputation as “America’s preeminent designer,
producer, and marketer of fine accessories and gifts for women and men including
handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear,
gloves, scarves and fine jewelry.” Coach employs a multi-channel distribution channel
to reach its customers, including company-owned stores and boutiques in the stores of
prominent specialty retailers both within the United States and abroad, and the company
operates an online store. Consumers who purchase coach products are generally willing
to pay the premium price due to the superior quality of Coach’s products as well as the
perceived prestige of owning a Coach product. Coach stresses these features in its
advertising campaigns and regularly allows movies and television shows to favorably
feature Coach products in appropriate scenes. Over the last five years. Coach has
partnered with automobile manufacturers such as Lexus to produce automobiles with
Coach interiors. In an effort to expand its international reach, Coach intends to increase
its international distribution and is expanding into Japan through Coach Japan, Inc., a
joint venture with a local company that will allow Coach to control international
distribution and to maintain a consistent brand strategy domestically and abroad.
Coach’s agreement with Lexus to produce automobiles with Coach leather interior is an
example of
A) cooperative strategic alliance.
B) architectural competence.
C) skunk works.
D) product placement.
Answer:
The training, experience, judgment, intelligence, relationships and insight of individual
managers and workers in a firm are examples of
A) physical resources.
B) human resources.
C) organizational resources.
D) financial resources.
Answer:
By conducting a(n) ________, a firm identifies the critical threats and opportunities in
its competitive environment.
A) internal analysis
B) competitive analysis
C) external analysis
D) strategic choice
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.
If eBay entered into the cooperative agreement with its Australian partner for the
purpose of testing the attractiveness of the Australian and New Zealand auction
industries prior to making a more significant investment in these industries, this would
be an example of
A) transaction cost economics.
B) tacit collusion.
C) explicit collusion.
D) real options.
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 one of the reasons P&G acquired Gillette was to gain greater market power in key
industries, this would be an example of ________ economies.
A) technical
B) pecuniary
C) diversification
D) vertical
Answer:
Firms implementing cost-leadership strategies will have ________ layers in their
reporting structure.
A) many
B) relatively simple
C) relatively few
D) relatively complex
Answer:
For BidBuy, services such as those offered by DollarDog that make BidBuy’s services
more valuable for customers who use the services of both companies are best described
as
A) complementors.
B) substitutes.
C) rivals.
D) suppliers.
Answer:
The view that equity holders only receive payment on their investment in a firm after all
legitimate claims by a firm’s other stakeholders are satisfied is known as the ________
view of equity holders.
A) stakeholder
B) residual claimants
C) legitimate claimants
D) extraordinary claims
Answer:
Firms pursuing an international strategy have ________ basic organizational structural
alternatives.
A) 3
B) 5
C) 4
D) 2
Answer:
Which of the following statements is accurate?
A) In general, economies of scale are relatively easy-to-duplicate bases of cost
leadership, but diseconomies of scale are not.
B) In general, diseconomies of scale are relatively easy-to-duplicate bases of cost
leadership, but economies of scale are not.
C) In general, neither economies of scale nor economies are relatively easy-to-duplicate
bases of cost leadership.
D) In general, both economies of scale and diseconomies of scale are relatively
easy-to-duplicate bases of cost leadership.
Answer:
In general, as long as the number of firms that possess a particular valuable resource or
capability is less than the number of firms needed to generate perfect competition
dynamics in an industry, that resource or capability can be considered ________ and a
potential source of competitive advantage.
A) valuable
B) rare
C) inimitable
D) un-substitutable
Answer:
If in the process of maximizing its performance, a firm engages in activities that pollute
the environment, the impact of that pollution is a(n)
A) capability.
B) externality.
C) competitive advantage.
D) weakness.
Answer:
Research suggests that, in general, vertically integrating is ________ than not vertically
integrating.
A) significantly more flexible
B) somewhat more flexible
C) comparatively flexible
D) less flexible
Answer:
The essence of the ________ to vertical integration is that if a firm possesses valuable,
rare, and costly-to-imitate resources in a business activity, it should vertically integrate
into that activity otherwise it should not vertically integrate into that activity.
A) flexibility-based explanation
B) opportunism-based explanation
C) firm capability explanation
D) opportunity-based explanation
Answer:
If all of a firm’s businesses share the same core competencies, then that firm has
implemented a strategy of ________ diversification.
A) single-business
B) related-linked
C) related-constrained
D) dominant-business
Answer:
According to Coach’s website, the company has built a distinctive style and prestigious
image over the past 40 years to develop a reputation as “America’s preeminent designer,
producer, and marketer of fine accessories and gifts for women and men including
handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear,
gloves, scarves and fine jewelry.” Coach employs a multi-channel distribution channel
to reach its customers, including company-owned stores and boutiques in the stores of
prominent specialty retailers both within the United States and abroad, and the company
operates an online store. Consumers who purchase coach products are generally willing
to pay the premium price due to the superior quality of Coach’s products as well as the
perceived prestige of owning a Coach product. Coach stresses these features in its
advertising campaigns and regularly allows movies and television shows to favorably
feature Coach products in appropriate scenes. Over the last five years. Coach has
partnered with automobile manufacturers such as Lexus to produce automobiles with
Coach interiors. In an effort to expand its international reach, Coach intends to increase
its international distribution and is expanding into Japan through Coach Japan, Inc., a
joint venture with a local company that will allow Coach to control international
distribution and to maintain a consistent brand strategy domestically and abroad.
Which of the following bases of Coach’s competitive advantage is likely to be the most
difficult to duplicate?
A) product features
B) consumer marketing
C) location
D) reputation
Answer:
From a CEO’s perspective, coordinating functional specialists to implement a vertical
integration strategy almost always involves
A) conflict resolution.
B) competitive positioning.
C) product differentiation.
D) corporate expansion.
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. Bates’ culture is an
example of a(n)
A) informal management control.
B) formal management control.
C) compensation policy.
D) formal reporting structure.
Answer: