The centralized structure used by Borders (Chapter 11 Opening Case) did not provide
information from local stores that might have been useful in changing its technology
strategy more quickly than it did. This example illustrates the effect of structure on
strategy.
a. True
b. False
Organizational inertia often prompts top management to initiate structural change when
organizational performance levels drop.
a. True
b. False
Cisco used the structure to implement its strategy.
a. functional; cost leadership.
b. SBU form of the multidivisional; related linked
c. cooperative form of the multidivisional; related linked
d. cooperative form of the multidivisional; related constrained
Some cooperative strategies fail when it is discovered that a firm has misrepresented the
competencies it can bring to the partnership.
a. True
b. False
Clarita Cosmetics is confronting a decline in sales due largely to a general economic
downturn. The top management team is debating whether to lay off employees. In the
debate, the following statements are made. Which of the statements is FALSE?
a. If Clarita Cosmetics lays off a large number of employees, there will be a significant
loss of human capital that will cause further downturns in the firm’s performance.
b. A moderate-sized layoff at Clarita Cosmetics will probably improve firm
performance.
c. If Clarita Cosmetics restructures, it ought to increase investments in training and
development.
d. A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the
increased number of errors employees may make until they learn their new tasks.
The experience that results from long tenure in a firm is known to extend the breadth of
an executive’s knowledge base.
a. True
b. False
The Monteleone Company pays large fees to a highly recognizable, prestigious
individual to be the spokesperson for the company’s products, luxury private jets.
Monteleone is probably following the
a. focused cost leadership strategy.
b. focused differentiation strategy.
c. integrated cost leadership/differentiation strategy.
d. total quality strategy.
Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional
buildings such as schools, prisons, and public administration buildings. It has always
competed on a cost leadership basis. Most of its products are purchased by a few
commercial construction firms, so it is fairly dependent on these construction firms for
selling its product. Durable Ceramic’s next most-efficient competitor, Cost-Less
Ceramics, Inc., earns average returns, whereas Durable earns above-average returns.
The commercial construction firms are putting pressure on Durable to reduce its prices.
If Durable reduces its prices below those of Cost-Less’s prices, it is likely that
a. both Durable and Cost-Less will devise additional ways to become more efficient in
their production processes.
b. Durable will be unable to absorb the lower cost, and will go out of business.
c. both Cost-Less and Durable will go out of business, leaving the customers with fewer
alternative sources of low-cost tile.
d. Cost-Less will go out of business, and Durable will gain higher power over its
customers.
The difference between the cost leadership and differentiation business-level strategies,
and the focused cost leadership and focused differentiation strategies, is their basis for
customer value.
a. True
b. False
The proper matching of what a firm cadowith what it mightdo
a. balances the internal characteristics of the firm with the characteristics of the external
environment.
b. overcomes the rigidity and inertia resulting from a history of success.
c. yields insights the firm requires to select its strategy.
d. develops core competencies based on human knowledge.
While both incremental and radical innovations can create value, incremental
innovations have the potential to contribute more significantly to a firm’s efforts to earn
above-average returns.
a. True
b. False
The factors that lead to poor long-term performance by acquisitions include all of the
following EXCEPT firms
a. with insufficient diversification.
b. having too much debt.
c. being unable to achieve synergy.
d. growing too large.
Hourly workers on the production line of a chicken-processing plant are considered
organizational stakeholders.
a. True
b. False
Customer loyalty programs such as airline frequent-flyer miles are an attempt to
a. decrease competitors’ access to distribution channels.
b. develop a cost advantage independent of scale.
c. increase customers’ switching costs.
d. overcome the perishability of the hotel “product.”
In smaller, new venture firms, returns are sometimes measured in terms of
a. return on assets.
b. return on equity.
c. return on sales.
d. the amount and speed of growth.