After Amazon lowered the price on Kindle e-readers, Sony eventually lowered the price
on its Reader. Sony needed to do this because
a. it is in the same strategic group.
b. it is outside the strategic group.
c. of inter-strategic group competition.
d. of strategic distinctiveness.
A flexible manufacturing system is
a. based on the use of temporary and part-time employees as well as outsourcing.
b. a computer-controlled process that is used to produce a variety of products in
moderate, flexible quantities with minimal human intervention.
c. based on a 360-degree view of the company’s relationships with customers.
d. a system that identifies “the one best way” to produce each product in the company’s
line.
Risk in terms of financial returns reflects an investor’s uncertainty about economic
gains or losses that will result from a particular investment.
a. True
b. False
Entrepreneurs tend to have all the following characteristics EXCEPT
a. willing to take responsibility for projects.
b. passion.
c. preference for certainly about projects.
d. optimism.
McDonald’s operates through a franchising system wherein the head office uses
strategic and financial controls to ensure that the franchises are creating the greatest
possible value. This is an example of a(n)
a. worldwide product divisional structure.
b. strategic network.
c. SBU multidivisional structure.
d. simple structure.
Restructuring refers to changes in the composition of a firm’s set of businesses or its
financial structure.
a. True
b. False
The Chapter 12 Strategic Focus reports on recent surveys which found that about 90
percent of boards of corporations had a succession plan for their CEOs.
a. True
b. False
Which of the following is NOT a result of over-diversification?
a. Executives do not have a rich understanding of all of the firm’s business units.
b. Managers emphasize strategic controls rather than financial controls.
c. Firms use acquisition as a substitute for innovation.
d. Managers become short-term in their orientation.
The firm’s culture promotes unity of purpose for cross-functional work teams through
a. a collectivist structure.
b. an entrepreneurial mind-set.
c. shared values.
d. resource allocation.
Research shows that in times of high or increasing stock prices, due diligence is relaxed
and firms often overpay for acquisitions and the long-run performance of the newly
formed form suffers.
a. True
b. False
Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with
Malay Petroleum. The resulting documents are long, formal, and detailed. They specify
detailed responsibilities of each partner and include methods of monitoring accounting
and technical procedures. OOEP and Malay Petroleum are using the management
approach.
c. Decision-making responsibility is centered at its Dallas headquarters, which allows
the firm to respond quickly to competitive attacks.
d. Southwest’s advantage lies in its ability to “think small.”
Researchers have found that shareholders of acquired firms often
a. earn above-average returns.
b. earn below-average returns.
c. earn close to zero as a result of the acquisition.
d. are not affected by the acquisition.
Firms participate in strategic alliances for all the following reasons EXCEPT to
a. create value that they could not develop by acting independently.
b. enter competitive markets more quickly.
c. gain access to resources.
d. retain tight control over intangible core competencies.
Alfred Chandler found that firms grow in a predictable pattern and that the firm’s
growth patterns determine its structural form. Which form corresponds to the FINAL
stage in Chandler’s theory?
a. functional
b. simple
c. vertically integrated
d. multidivisional
The owner of a store that sells fine-quality fabrics for home seamstresses bemoans the
fact that few young women know how to do fine tailoring, much less simple
dressmaking. Many potential customers are unable to appreciate the premium quality of
the fabrics and are deterred by the high prices, as well as the complexity of fine sewing.
In the past, the store had a strong demand for fabrics, large classes for women learning
the fine points of sewing, and a reputation for excellent service and technical advice.
Now the store is earning lower-than-average returns. This case is an example of
a. the hazard of competitors being able to imitate a firm’s core competency.
b. the need for firms to stick to their core competencies through temporary downturns in
market demand.
c. the lack of intangible resources undermining the core competencies of the firm.
d. core competencies that have become core rigidities.
Autonomous strategic behavior is a(n) _________ process in which product champions
pursue new ideas.
a. top-down
b. horizontal
c. integrated
d. bottom-up
Tablets such as the iPad have had little effect on the sale of PCs in the United States,
and PC producers such as
Taiwan’s Acer Computers have experienced significant growth.
a. True
b. False
Boards with many members from the firm’s top management team tend to have weak
monitoring and control systems for managerial decisions.
a. True
b. False
CaseScenario1:TheWaltDisneyCompany
The Walt Disney Company was founded as a cartoon studio in 1923 by Walt Disney
and his brother Roy with a
$500 loan from an uncle. In the early 1920s, cartoonist Walt Disney visited New York
to pitch his idea for a cartoon rabbit called Waldo. During that trip, through a
complicated series of events, Disney lost the rights to develop Waldo. On the train-ride
back to California he spoke with his wife about the importance of coming home with
some alternative character. “I can’t come back to our office and tell them I’ve lost
Waldo,” he bemoaned. This hardship inspired Disney to develop a new character,
Mickey Mouse, and release the world’s first fully- synchronized sound cartoon,
“Steamboat Willie” (starring, of course, Mickey Mouse). Disney’s creative genius was
now coupled with a fierce instinct to protect and control his creative output. Never
again would he lose “Waldo.” Consequently, the Walt Disney Company was pushed by
Walt to tirelessly create timeless and universal entertainment, consistently innovate and
take risks to deliver that entertainment, stress a vision of being the provider of choice of
quality family entertainment, and maintain rigorous control over the quality of
customers’ experiences with Disney products and its image. Such a personal passion for
control led the Walt Disney Company into theme parks because Disney did not want
Mickey’s reputation sullied by the dirty, cheap theme parks that littered the land during
those days. All films had to be new and of the highest quality animation (taking a
minimum of five years to create, including hand-painted backgrounds); sequel films
were not tolerated. Walt’s vision and risk taking propensity led him in the early 1960s to
buy 43,000 acres in Florida (now Walt Disney World), betting the company’s future on a
high-risk, uncertain venture. Amidst such a flurry of activity, Walt Disney died just
before Christmas 1966, and the company was literally stopped dead in its tracks. Walt
Disney’s blueprint was being followed to the letter, but no further (Walt Disney World
opened in 1971). No “new” creations were undertaken until 1982, when the company
finally launched such businesses as the Disney Channel, Touchstone, and their home
video business. Had it not been for the appointment of Michael Eisner as Disney’s new
CEO in 1984, the company would likely not have survived its perilous financial
situation and stifled creativity. Eisner returned the company to its roots of family
entertainment and values of quality, fairness, creativity, entrepreneurialism, and
teamwork.Why do you think the Walt Disney Company had so much difficulty being
innovative in the decades following Walt’s death?
What are the primary aspects of the strategic management process? You may reference
specific chapters from the text in formulating your response.
CaseScenario2:Raptec.
Raptec operates in three principal business segments: Direct Attached Storage (“DAS”),
Storage Networking Solutions (“SNS”), and Software. These hardware and software
products are found in high-performance networks, servers, workstations, and desktops
from the world’s leading OEMs, and are sold through distribution channels to Internet
service providers, enterprises, and medium and small businesses and consumers. Since
the time it went public, Raptec has experienced rapid growth and consistently profitable
operations. In early 2002, Raptec announced its plan to spin-off the software segment,
subsequently incorporated as Axio, Inc., in the form of a fully independent and separate
company. Software was Raptec’s most profitable and fastest growing segment. By
mid- 2002 Raptec had completed the initial public offering of approximately 15 percent
of Axio’s stock, and then distributed the remaining Axio stock to Raptec’s stockholders
in a tax-free distribution. Axio’s family of products includes category leaders in
CD/DVD burning, digital photography, and digital video. Axio’s new management team
is composed of Lex Luthor, CEO, and previously the President of New Business
Development for Universal Studios Recreation Group; Karal Kool, COO, and
previously General Manager of Raptec’s OEM Solutions Group; and R. Elliot Maxter,
CFO, and previously corporate controller for Raptec. The interim four-member board of
directors is currently comprised of Raptec senior officers, but the terms of the public
offering require them to step down in 2 months. Thus, Axio will need to construct a new
board, which in turn will be responsible for overseeing Axio’s management and their
compensation.
Develop arguments as to why and why not Lex Luthor should be appointed as
chairperson of the new board.
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.What factors may threaten the ability of
ZW&P’s resources and capabilities to generate continued success?
CaseScenario1:TheBoyandGirlClubs.
The Boys and Girls Clubs (BGC) is a national non-profit organization geared toward
providing America’s youth with the tools and skills they need to become healthy adults,
responsible citizens, and effective leaders. By bringing parents, neighbors, educators,
and civic leaders together with our youth, BGC believes it can instill these crucial life
lessons at an age when they’re most needed. The national organization is headquartered
in Atlanta, GA, and serves as a service hub for over 3,700 club locations around the
United States. Each local club is directed by a volunteer board of directors and staffed
by professional youth development workers (usually including an executive director, a
program director, and an arts director) and many volunteers who just enjoy working
with young people and want to make a difference in their lives. While affiliated with the
national center, each local BGC is locally funded.
Why would attention focused on victims of natural disasters be a threat to BGC?
How difficult is it for merger and acquisition strategies to create value and which firms
benefit the most from M & A activity?
CaseScenario2:Palmetto.
Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that
market space (in terms of market share) with its core product, the Palmetto Pidgy.
Because this product category was entirely new to the market, Palmetto had to
internally develop the hardware and software sides of the business, and today it is both
a manufacturer of PDAs and a programmer and licensor of its PDA operating system
software. Recently, however, the hand-held device maker’s performance has taken a
dive as a result of slumping sales and costly inventory problems. Palmetto has also had
difficulty coordinating its software and hardware businesses, in part because of the near
absence of a coherent structure and the differing economics underlying the two.
Specifically, hardware for PDAs is increasingly a cost-based business, while software is
a highly differentiated one. While Palmetto is doing pretty well in both businesses, its
own resource base does not allow it to compete any differently than that proscribed for
other industry participants (that is, it competes on cost with hardware and features with
software). In addition to the issues created by these fundamental differences, other large
companies are entering both the equipment (such as Sony) and software (such as
Microsoft) sides of its business, putting further pressure on margins. Management has
decided that it is unable to focus on the complexities of each of these businesses so it is
opting to break Palmetto into two separate, independent public companies – Pal, Inc.
will be devoted to hardware and Mettolink, Inc. will be devoted to software.
How would the implementation of this structure differ for Pal?
Explain the rationales for a cooperative strategy under each of the three types of basic
market situations (i.e., slow, standard, and fast cycles).