Operational, functional, strategic, and cultural differences between bidding and target
firms can all be compounded by the merger and acquisition process especially if that
process was unfriendly.
Answer:
Sophisticated software can enhance the value that customers receive from a personal
computer. Therefore, software can be said to be a complementor of a personal
computer.
Answer:
In 2011, the total value of mergers and acquisition deals in the United States was $10
trillion.
Answer:
If the owner of a jewelry store who normally purchased diamonds from a diamond
brokerage firm were to open his own diamond brokerage firm, this would be an
example of forward vertical integration.
Answer:
Wal-Mart exemplifies a firm pursuing a product-differentiation strategy while Victoria’s
Secret exemplifies a firm pursuing a cost-leadership strategy.
Answer:
One of the keys for a bidding firm to earn superior performance in an acquisition
strategy is to make sure that multiple bidders are pursuing the same target.
Answer:
In fragmented industries firms can use product differentiation to help consolidate a
market.
Answer:
Shared activities can increase the revenues in diversified firms’ businesses, and failure
to exploit shared activities across businesses can lead to out-of-control costs.
Answer:
Brand identification and customer loyalty serve as entry barriers because new entrants
not only have to absorb the standard costs associated with starting production in a new
industry, but also have to absorb the costs associated with overcoming an incumbent
firm’s differentiation advantages.
Answer:
While firms often alter the objective properties of their products or services in order to
implement a product-differentiation strategy, the existence of product differentiation is
always a matter of customer perception.
Answer:
When there is low uncertainty about the future value of an exchange, an alliance will be
preferred to going it alone.
Answer:
Whenever one party to an exchange delegates decision-making authority to a second
party, an agency relationship has been created between these parties.
Answer:
It is reasonable to expect that in the near future a marketing specialist will develop a
definitive list of bases of product differentiation.
Answer:
The price of each of a firm’s shares multiplied by the number of shares outstanding is
known as the firm’s current market value.
Answer:
A firm may be able to gain an advantage from vertically integrating when it resolves
some uncertainty it faces sooner than its competition.
Answer:
To be economically valuable, links between bidding and target firms must meet the
same criteria as diversification strategies.
Answer:
The businesses within a diversified firm always gain cost-of-capital advantages by
being part of a diversified firm’s portfolio.
Answer:
The most obvious economy of scope that may motivate firms to pursue an international
strategy is the potential new customers for a firm’s current products or services that
such a strategy might generate.
Answer:
If one of a firm’s exchange partners behaves opportunistically, this reduces the
economic value of the firm.
Answer:
It is possible for a single firm to be a complementor of one firm and a competitor of
another.
Answer:
Economic measures of divisional performance in a diversified firm compare a division’s
performance with a firm’s cost of capital and these measures increase the potential for
gaming, which is generally minimized by accounting measures.
Answer:
Mission statements often contain so many common elements that even if a firm’s
mission statement does not influence behavior throughout an organization, it is likely to
have a significant impact on a firm’s actions.
Answer:
Economies of scope exist in a firm when the value of the products or services it sells
increase as a function of the number of businesses in which the firm operates.
Answer:
One substitute for diversification that exists is that instead of obtaining cost or revenue
advantages from exploiting economies of scope across businesses in a diversified firm,
a firm may decide to simply grow and develop each of its businesses separately.
Answer:
Most firms have a resource base that is composed primarily of valuable but common
resources and capabilities, some of which are essential if a firm is to gain competitive
parity.
Answer:
When the assets of two similar-sized firms are combined, this is known as a merger.
Answer:
Applying accounting measures of competitive advantage for firms that are
headquartered in different has become less challenging today with the globalization of
business.
Answer:
The greater the extent to which a firm’s assumptions and hypotheses accurately describe
how the competition in the industry is likely to evolve, and how that evolution can be
exploited to earn a profit, the more likely it is that a firm will gain a competitive
advantage from implementing its strategies.
Answer:
A firm following a niche strategy in a declining industry reduces its scope of operations
and focuses on narrow segments of the declining industry.
Answer:
A resource can be a source of competitive advantage even if the resource is controlled
by numerous firms.
Answer:
To the extent that customers outside a firm’s domestic market are willing and able to
buy a firm’s current products or services, implementing an international strategy can
directly increase a firm’s revenues.
Answer:
Strategic alliances are the major substitute for vertical integration.
Answer:
When the probability of cheating in a cooperative relationship is lowest, a joint venture
is usually the preferred form of cooperation.
Answer:
When firms without a resource or capability face a cost disadvantage in obtaining or
developing it compared to firms that already possess it, this resource or capability is
described as perfectly imitable.
Answer:
Research shows that joint ventures between firms in the same industry may have
collusive implications and that these kinds of joint ventures are relatively common.
Answer:
Firms that are successful in pursuing a cost-leadership strategy focus solely on keeping
costs low and abandoning other business or corporate strategies.
Answer:
A strategic alliance exists whenever three or more independent organizations cooperate
in the development, manufacture, or sale of products or services.
Answer:
Tacit collusion exists when firms coordinate their pricing decisions not by directly
communicating with each other but by exchanging signals with other firms about their
intent to cooperate.
Answer:
Which type of ratios focus on the ability of a firm to meet its short-term financial
obligations?
A) activity ratios
B) liquidity ratios
C) leverage ratios
D) profitability ratios
Answer:
Which type of economies of scope includes shared activities and core competencies?
A) operational economies of scope
B) financial economies of scope
C) anticompetitive economies of scope
D) employee and stakeholder incentives for diversification
Answer:
To the extent that a strategic alliance is based on ________ relations, it will make the
alliances costly to imitate.
A) socially complex
B) tacit collusion
C) explicit collusion
D) moral hazard
Answer:
Which ratio signals a greater risk of bankruptcy as it increases?
A) debt to equity
B) quick ratio
C) debt to assets
D) cash flow per share
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.
Given that the leather handbag market that Coach largely competes in can be
considered a mature market, Coach should focus its product-differentiation efforts on
A) exploiting a first-mover advantage as a basis of product differentiation.
B) introducing radically new technologies as a basis of product differentiation.
C) seeking a viable market niche that will enable it to survive.
D) refining products as a basis of product differentiation.
Answer:
In the bicycle industry, the feel of high-end bicycles when they are ridden is important.
As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that
rider to switch to an alternative supplier. This is an example of product differentiation
through which of the following?
A) linkages between functions
B) product customization
C) location
D) product complexity
Answer:
A ________ is a compensation arrangement between a firm and its senior management
team that promises these individuals substantial cash payment if their firm is acquired
and they lose their jobs in the process.
A) white knight agreement
B) greenmail agreement
C) shark repellent
D) golden parachute
Answer:
In a(n) ________, a firm, typically working with an investment banker, sells its equity
to the public at large.
A) FTC
B) merger
C) IPO
D) acquisition
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 Gillette’s total market value on the day the deal was announced was $48.30 billion,
P&G’s $57 billion offer would represent a(n)
A) 18% acquisition premium.
B) 82% acquisition discount.
C) 82% acquisition premium.
D) 18% acquisition discount.
Answer:
Which of the following economies of scope do not have the potential for generating
positive returns for a firm’s equity holders since the economies of scope can be realized
by outside equity holders at a low cost by investing in a diversified portfolio of stock?
A) shared activities
B) diversification to maximize the size of a firm
C) internal capital allocation
D) exploiting market power
Answer:
If an electronics manufacturer were to acquire a chain of retail electronic stores to sell
its products, this would be an example of a ________ merger.
A) vertical
B) horizontal
C) market extension
D) product extension
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.
From its organization structure, it appears that Agrestal is attempting to maximize
________ in its operations.
A) local responsiveness
B) strategic coordination
C) operational coordination
D) international integration
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.
The business level strategy Coach is pursuing is likely to
A) reduce the threat of rivalry to virtually zero.
B) increase the threat of substitutes due to premium pricing.
C) decrease the threat of new entrants due to the additional cost they would face to
overcome Coach’s reputation advantages.
D) decrease the threat of buyers since Coach can lower its prices due to its efficient
manufacturing operations.
Answer:
According to the research in strategic human resources management,
A) firms that are able to use human resource practices to develop socially complex
human and organizational resources are able to gain competitive advantage over firms
that do not engage in these practices.
B) firms that are able to use human resource practices to develop socially simplistic
human and organizational resources are able to gain competitive advantage over firms
that do not engage in these practices.
C) firms that are able to use human resource practices to develop socially complex
human and organizational resources gain little advantage over firms that do not engage
in these practices.
D) firms that are able to use human resource practices to develop socially complex
human and organizational resources are at a competitive disadvantage when compared
to firms that do not engage in these practices.
Answer:
Transfer pricing should equal
A) selling price.
B) opportunity cost.
C) total cost.
D) marginal cost.
Answer:
A consolidation strategy is a good option in what type of industry?
A) mature
B) emerging
C) fragmented
D) declining
Answer:
Adverse selection in a strategic alliance is likely only when
A) it is difficult or costly to observe the resources or capabilities that a partner brings to
an alliance.
B) a potential partner can easily see the resources and capabilities that a firm is bringing
to an alliance.
C) it is difficult or costly to know how competitors will react to the strategic alliance.
D) there are significant transaction-specific assets devoted to the alliance.
Answer:
The products or services provided by a firm’s direct competitors meet ________
customer needs in ________ ways as the product provided by the firm itself.
A) different; the same
B) approximately the same; the same
C) different; different
D) approximately the same; different
Answer:
One survey of CEOs from around the world reported that ________ percent of U.S.
CEOs had no foreign experience.
A) 2
B) 14
C) 34
D) 64
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, prior to entering the cooperative agreement with eBay, eBay’s Korean partner stated
that it had the technological capabilities to facilitate eBay’s Korean auction business
when, in fact, the Korean company did not have these capabilities, this would be an
example of
A) adverse selection.
B) explicit collusion.
C) moral hazard.
D) holdup.
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’s development of the new battery technology is likely to
A) reduce the rarity of TerraLoc’s vertical integration strategy since competitors can
purchase batteries from other sources.
B) increase the rarity of TerraLoc’s vertical integration strategy since TerraLoc has
reduced uncertainties related to increased battery life in its products.
C) increase the imitability of TerraLoc’s vertical integration strategy since competitors
can purchase traditional batteries from other sources.
D) decrease the imitability of TerraLoc’s vertical integration strategy since it increases
competitors’ flexibility.
Answer:
Green Frog is an environmentally friendly firm in the cosmetics industry. If during the
strategic planning process Green Frog tried to determine the critical threats and
opportunities in its competitive environment, it would be performing a(n)
A) internal analysis.
B) external analysis.
C) WACC analysis.
D) economic analysis.
Answer:
One feature of Coach’s compensation policies is likely to be
A) rewards for cost reduction.
B) rewards for efficiency.
C) rewards for creative flair.
D) rewards for manufacturing efficiency.
Answer:
Resources that generate a temporary competitive advantage are
A) valuable, rare and costly to imitate.
B) valuable but neither rare nor costly to imitate.
C) valuable and either rare or costly to imitate.
D) valuable and rare but not costly to imitate.
Answer:
One of the reasons why the benefits that accrue from a particular strategic alliance may
be rare is that
A) relatively few firms may have the complementary resources and abilities needed to
form an alliance.
B) there is a relatively large number of alliance partners available.
C) relatively many firms may have the complementary resources and abilities needed to
form an alliance.
D) there may be a relatively low amount of transaction-specific assets to enter into
similar alliances.
Answer:
Which of the following bases of product differentiation attempts to create the
perception that a firm’s products or services are unusually valuable by focusing directly
on the attributes of the products or services a firm sells?
A) Product complexity
B) Product customization
C) Consumer marketing
D) Reputation
Answer:
________ can be can be a source of product differentiation when a single set of
customers purchases several of a firm’s products.
A) Product placements
B) Reputation
C) Product mix
D) Architectural competence
Answer:
When both parties to an alliance are seeking to learn something from that alliance, a
________ can evolve.
A) learning race
B) dynamic race
C) learning dynamic
D) learning curve
Answer:
Which of the following compensation policies is most likely to enhance a firm’s ability
to pursue a low-cost strategy?
A) awarding employees bonuses based on the total amount of goods produced
B) awarding employees bonuses based on customer comment cards
C) awarding employees bonuses that are equal to 50% of the total cost savings achieved
based on employee suggestions and initiatives
D) awarding employees bonuses based solely on how long they have been employed
with the company
Answer:
A firm has implemented a strategy of ________ when all or most of its activities fall
within a single industry and geographic market.
A) limited corporate diversification
B) related diversification
C) unrelated diversification
D) related-linked diversification
Answer:
Based on the above description, the hardwood furniture industry can best be described
as a(n) ________ industry.
A) emerging
B) fragmented
C) consolidated
D) declining
Answer:
Toyota is an example of a firm that uses the ________ structure.
A) centralized hub
B) transnational
C) decentralized federation
D) coordinated federation
Answer:
If Temper Company, a manufacturer of mattresses, was considering moving its
production facilities to China but decided against it because the additional costs of
shipping the mattresses back to the U.S. would offset the cost savings associated with
moving the production facilities, the increased costs associated with shipping would be
an example of
A) learning-curve economies.
B) diseconomies of scale.
C) economies of scale.
D) competitive advantages.
Answer:
If a computer company decided to open its own call centers to provide technical support
to its corporate customers because the employees in these call centers need a significant
level of in-depth training that was highly specialized to the computer company’s
products, this would be consistent with which explanation of vertical integration?
A) opportunism-based
B) flexibility-based
C) firm capabilities-based
D) alliance-based
Answer: