When acquiring a publicly traded firm a bidder has to release all the information it has
about the potential value of that target in combination with itself.
Answer:
To the extent that a board of directors begins to operate a business on a day-to-day
basis, it goes beyond its capabilities.
Answer:
While the U-form structure for a firm pursuing cost leadership is relatively simple, the
U-form structure for a firm implementing a product-differentiation strategy can be
somewhat more complex.
Answer:
Products and services that a firm sells in its domestic market will always also sell in
foreign markets.
Answer:
Within the VRIO framework, resources and capabilities that are not valuable are also
known as weaknesses.
Answer:
In general, technological change creates opportunities, but not threats.
Answer:
Border levies are an example of tariffs.
Answer:
Product differentiation is a business strategy whereby firms attempt to gain a
competitive advantage by increasing the perceived value of their products and services
relative to the perceived value of other firms’ products or services.
Answer:
If all the businesses in which a firm operates share a significant number of inputs,
production technologies, distribution channels, similar customers, and so forth, this
corporate diversification strategy is called related-constrained diversification.
Answer:
Large transportation costs can offset cost reductions attributable to the exploitation of
economies of scale in manufacturing.
Answer:
In emerging industries, product-differentiation efforts often focus on product refinement
as a basis for product differentiation.
Answer:
Economies of scale focus on the relationship between the cumulative volume of
production and average unit costs, while the learning curve focuses on the relationship
between the volume of production at a given time and average unit costs.
Answer:
The rarity of strategic alliances depends solely on the number of competing firms that
have already implemented an alliance.
Answer:
Overall, related diversification is less likely to be consistent with the interests of a firm’s
equity holders than is unrelated diversification.
Answer:
Corporate spin-offs are different from asset divestitures.
Answer:
The link between cumulative volumes of production and cost has been formalized in the
concept of the learning curve.
Answer:
Johnson & Johnson’s introduction of “Johnson’s Toilet and Baby Powder” as a result of
customers asking to purchase the talcum powder is an example of a planned strategy.
Answer:
Firms with high levels of absorptive capacity will learn at faster rates than firms with
low levels of absorptive capacity, even if these two firms are trying to learn exactly the
same things in an alliance.
Answer:
In an acquisition a tender offer can only be made with the support of the management of
the acquired firm.
Answer:
A privately held firm has not sold any shares on the public stock market.
Answer:
Exploiting market power is an example of costly-to-duplicate economies of scope.
Answer:
Countervailing duties are an example of quotas.
Answer:
Diversification economies are achieved by the ability of firms to dictate prices by
exerting market power.
Answer:
Divisions in an M-form organization should be large enough to represent identifiable
business entities but small enough so that a division general manager can manage each
one effectively.
Answer:
Financial resources include only the profits a firm has made earlier in its history and
that it has reinvested in itself.
Answer:
Waring found that firms that operate in industries that are informationally complex,
require customers to know a great deal in order to use the industry’s products, require a
great deal of R & D, and have significant economies of scale are more likely to have
sustained competitive advantage than those firms in industries without those
characteristics.
Answer:
Both shared activities and internal capital allocation are examples of economies of
scope that have the potential for generating positive returns for a firm’s equity holders.
Answer:
If a firm gets too large, it will eventually experience both diseconomies of scale and an
increase in costs associated with the learning-curve effect as cumulative volume of
production grows.
Answer:
Emergent strategies are only important when a firm fails to implement the strategic
management process effectively.
Answer:
When a firm operates in multiple industries simultaneously it is said to be implementing
a geographic market diversification strategy.
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.
P&G’s acquisition of Wella in 2003 is an example of a
A) market extension merger.
B) conglomerate merger.
C) vertical merger.
D) product extension merger.
Answer:
The strategic management process begins when a firm
A) determines its objectives.
B) defines its mission.
C) makes a strategic choice.
D) implements its strategy.
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’s agreements with their Korean and Australian partners were intended to
increase the number of buyers and sellers and thereby increase the value of eBay’s
online auction services for every eBay user, this would imply that the online auction
industry is an example of a ________ industry.
A) declining
B) network
C) commodity
D) mature
Answer:
The primary responsibility of the ________ is to provide information about the firm’s
external and internal environments to the firm’s senior executive.
A) corporate staff
B) board of directors
C) division general managers
D) shared activity managers
Answer:
________ levels of production are associated with ________ levels of employee
specialization.
A) High, high
B) High, low
C) Low, high
D) Low, moderate
Answer:
The most obvious way that firms can try to differentiate their products is by
A) making the product more complex.
B) introducing the product at the right time.
C) customizing the product for a particular segment.
D) altering the features of the products they sell.
Answer:
Which of the following statements regarding the impact of product differentiation on
the threat of new entry is accurate?
A) Product differentiation helps reduce the threat of new entry by forcing potential new
entrants to absorb costs associated with overcoming incumbent firms’
product-differentiation advantages.
B) Product differentiation increases the threat of new entry by allowing potential new
entrants to avoid costs associated with overcoming incumbent firms’
product-differentiation advantages.
C) Product differentiation has no impact on the threat of new entry.
D) It is not possible to determine the impact of product differentiation on the threat of
new entry.
Answer:
Which of the following economies of scope is less costly to duplicate?
A) employee compensation
B) core competencies
C) multipoint competition
D) exploiting market power
Answer:
Managers of bidding firms continue to engage in merger or acquisition strategies even
though they usually do not generate profits for bidding firms in order to
A) ensure survival.
B) improve firm reputation.
C) reduce agency problems.
D) reduce managerial hubris.
Answer:
________ are a subset of a firm’s resources and are defined as tangible and intangible
assets that enable a firm to take full advantage of other resources it controls.
A) Retained earnings
B) Capabilities
C) Human resources
D) Financial resources
Answer:
When adjusting a division’s accounting earnings for use in the economic value added
calculations, R&D spending is usually
A) subtracted from the division’s performance.
B) depreciated over the life of the average R&D projected and subtracted from the
division’s performance.
C) amortized over the life of the average R&D projected and added back to the
division’s performance.
D) added back into the division’s performance.
Answer:
Which of the following best describes the competition in the U.S. online auction
industry?
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
Answer:
Which committee in a U-form organization meets weekly and reviews the performance
of the firm on a weekly basis and typically consists of a CEO and two or three
functional senior managers?
A) top management team
B) executive committee
C) operations committee
D) functional committee
Answer:
Alliances will be preferred to acquisitions when
A) alliances limit a firm’s flexibility under conditions of high uncertainty.
B) there is minimal unwanted organizational “baggage” in an acquired firm.
C) there are legal constraints on acquisitions.
D) the value of a firm’s resources and capabilities does not depend on its independence.
Answer:
________ are specific measurable targets a firm can use to evaluate the extent to which
it is realizing its mission.
A) Strategies
B) Missions
C) Competitive advantages
D) Objectives
Answer:
International strategies are an example of ________ strategies.
A) corporate
B) business
C) functional
D) operational
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.
Grace McKenna is best described as a(n) ________ in SpandoCorp.
A) senior executive
B) corporate staff member
C) division general manager
D) institutional investor
Answer:
LaserTech is a manufacturer of industrial lasers and has developed a new, patented
technology that allows its customers to manufacture their products more precisely with
a higher level of consistency and at a lower cost than they could previously. LaserTech’s
executives believe that no rivals have a similar technology and that it would be very
difficult for rivals to copy this technology since the benefits of the new technology can
only be realized within LaserTech’s system, which includes processes that are protected
by trade secrets, making it difficult for rivals to understand the relationship between the
company’s new technology and its competitive advantage. LaserTech’s new technology
appears to be
A) valuable and rare but not costly to imitate.
B) valuable and either rare or costly to imitate.
C) valuable but neither rare nor costly to imitate.
D) valuable, rare and costly to imitate.
Answer:
Which of the following attributes makes suppliers a stronger threat?
A) The supplier’s industry is dominated by a small number of firms.
B) The product or service provided by suppliers is not highly differentiated.
C) Suppliers are threatened by substitutes.
D) Suppliers are not able to engage in forward vertical integration.
Answer:
The divisions of an M-form organization are true
A) profit-and-loss centers.
B) functional units.
C) matrix teams.
D) organic structures.
Answer:
Which type of competition is characterized by a large number of firms, heterogeneous
products and low cost of entry and exit?
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
Answer:
In a ________ structure, operational decisions are delegated to division general
managers/country presidents, but broader strategic decisions are made at corporate
headquarters.
A) transnational
B) centralized hub
C) coordinated federation
D) decentralized federation
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.
The most significant challenge P&G is likely to face in integrating each of the acquired
companies into P&G’s operations is likely to be ________ differences between P&G
and each of the companies.
A) logistical
B) cultural
C) operational
D) distribution
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.
Which type of economies of scope is Peach Computers experiencing between its units?
A) shared activities
B) core competencies
C) multipoint competition
D) tax advantages
Answer:
Which of the following is a financial motivation for why bidding firms might want to
engage in merger and acquisition strategies?
A) to increase leverage opportunities
B) to capture economies of scale
C) to adopt more efficient production or organizational technology
D) to engage in vertical integration
Answer:
The link between volume of production and the cost of building manufacturing
operations is particularly important in industries characterized by
A) process innovations.
B) product manufacturing.
C) product innovation.
D) process manufacturing.
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 use of licensing in certain countries is an example of ________ governance
organizing option.
A) market
B) corporate
C) hierarchical
D) intermediate market
Answer:
One of the first scholars to examine the longevity of competitive advantage was
A) Dennis Mueller.
B) Geoffrey Waring.
C) Peter Roberts.
D) Rich Houston.
Answer:
The threat of direct competition tends to be high when
A) there are few firms in an industry and these firms tend to be unequal in size.
B) the industry growth rate is higher.
C) firms are unable to differentiate their products.
D) production capacity can be added in small increments.
Answer:
Firms in industries characterized by ________ can expect to earn only competitive
parity.
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
Answer:
A business unit within a diversified firm may be sold to the public through a(n)
A) corporate spin-off.
B) liquidation.
C) IPO.
D) harvest strategy.
Answer:
As long as the cost of ________ to enter a new industry is less than the cost of
________, an alliance can be a valuable strategic opportunity.
A) vertically integrating; learning new skills and capabilities
B) learning new skills and capabilities; using an alliance
C) using an alliance; learning new skills and capabilities
D) learning new skills and capabilities; vertically integrating
Answer: