One of the most compelling reasons for firms to begin operations outside their domestic
markets is to refine their current core competencies and to develop new core
competencies.
Answer:
Learning race dynamics are particularly common in relations among large,
well-established firms.
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A firm’s supplier poses a greater threat if the supplier’s industry has a large number of
firms, none of which dominate the supplying industry, than if the supplier’s industry is
dominated by a small number of firms.
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When companies staffed and operated their own call centers in the United States, they
were engaging in backward vertical integration, but when they started using
independent companies in India to staff and operate these centers, they were more
vertically integrated.
Answer:
An important study on executive compensation found that differences in CEO cash
compensation is not very responsive to differences in firm performance even if a
substantial percentage of the CEO’s compensation came in the form of stock and stock
options in the firm.
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Institutional owners are usually pension funds, mutual funds, insurance companies, or
other groups of investors that have joined together to manage their investments.
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Compensation policies are the ways that firms pay employees, and such policies create
incentives for employees to behave in certain ways.
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Budgets are an important control tool and they contribute to only positive outcomes.
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Economies of scale are said to exist when the increase in firm size (measured in terms
of volume of production) are associated with lower costs (measured in terms of average
costs per unit of production).
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In mergers and acquisitions, the owners of the bidding firm appropriate the economic
value created by the transaction.
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The greatest disadvantage of accounting measures of competitive performance is that
they are relatively difficult to compute.
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In an industry, the products or services provided by a firm’s competition meet
approximately the same customer needs in the same way as the products or services
provided by the firm itself, whereas substitutes meet approximately the same customer
needs but do so in different ways.
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When the management of a target firm wants the firm to be acquired, this is known as a
hostile takeover.
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If a well-managed diversified firm uses both accounting and economic measures, it will
be able to unambiguously evaluate divisional performance.
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Through advertising and other consumer marketing efforts, firms attempt to alter the
perceptions of current and potential customers, but only when specific attributes of a
firm’s products or services are altered.
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In 2012, about a third of Wal-Mart’s sales revenues came from outside the United
States.
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Predatory pricing is a type of cross-subsidization in which a firm uses revenues from
other businesses to set its prices in a particular business so that the prices are
substantially more than the subsidized business’s costs.
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When potential cooperative partners misrepresent the skills, abilities, and other
resources that they will bring to an alliance, this is a form of cheating known as adverse
selection.
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A “good strategy” does not necessarily have to create a competitive advantage.
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Currently, most scholars believe that when a firm implements a corporate
diversification strategy it destroys about 25% of its market value.
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Research on outside members of boards of directors tends to show that outside
directors, as compared to insiders, tend to focus less on monitoring a firm’s economic
performance than on other measures of firm performance.
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Because the value of hard currencies can fluctuate in the world economy, firms can
manage their currency risk by engaging in various hedging strategies in world money
markets.
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In comparison to strategic alliances, joint ventures increase the threat of cheating by
partners.
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Products can be differentiated by the extent to which they are customized for particular
customer applications.
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Over the last decade, more and more diversified firms have been abandoning efforts at
managing each business’s activities independently in favor of increased activity sharing.
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All divestments are caused by industry decline.
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The assumption of resource immobility holds that it may be very costly for firms
without certain resources and capabilities to develop or acquire them.
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If Iron Horse Helmets (IHH) were to contract with a Chinese manufacturing firm to
provide IHH with superior quality helmets for sale in the United States but discovered
that the shipments were actually of inferior quality when they were received, IHH
would be said to be acting opportunistically.
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A cost-leadership competitive strategy can reduce both the threat of substitutes and the
threat of suppliers that a firm may face.
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Capabilities 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.
Answer:
In an M-form organization the role of the board of directors is to formulate corporate
strategies consistent with equity holders’ interests and to assure strategy
implementation.
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Timing, location, distribution channels, and service and support are all very similar
bases of product differentiation and can act as substitutes for each other.
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.
Wells Tucker’s position in SpandoCorp is best described as
A) a division general manager.
B) a member of the corporate staff.
C) the senior executive.
D) a member of the board of directors.
Answer:
The center of Osterwalder and Pigneur’s business model canvas is the
A) parity point.
B) value proposition.
C) competitive advantage.
D) strategy box.
Answer:
Firms that have been successful in adopting the transnational structure include
A) Sony.
B) Disney.
C) Ford.
D) Nokia.
Answer:
A common way of thinking about strategy across different businesses within a firm is
known as the firm’s
A) core competency.
B) competitive advantage.
C) economy of scope.
D) dominant logic.
Answer:
Which of the explanations of vertical integration is the oldest and has received the
greatest empirical support?
A) opportunism-based
B) flexibility-based
C) firm capabilities-based
D) alliance-based
Answer:
________ is an economic measure of divisional performance.
A) Return on assets
B) Return on a division’s sales
C) Economic value added
D) A division’s growth rate
Answer:
The percentage of a firm’s total capital that is debt times the cost of debt plus the
percentage of a firm’s total capital; or equity times the cost of equity is the
A) weighted cost of capital.
B) weighted average cost of capital.
C) cost of capital.
D) average cost of capital.
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 price premium that customers are willing to pay for the superior quality and
perceived prestige of Coach’s products over the prices of similar products are known as
A) marginal prices.
B) hedonic prices.
C) heroic prices.
D) elastic prices.
Answer:
Diversified firms that are exploiting core competencies as an economy of scope but are
not doing so with any shared activities are sometimes called ________ diversified
firms.
A) seemingly unrelated
B) unrelated
C) semi-related
D) link-related
Answer:
Most accounting measures of divisional performance have a common limitation in that
they
A) have a short-term bias.
B) are costly to implement.
C) are difficult to interpret.
D) have a long-term bias.
Answer:
Mergers and acquisitions used to create diversification strategies should be managed
through the
A) M-form structure.
B) functional structure.
C) U-form structure.
D) matrix structure.
Answer:
Evaluating a functional manager’s performance relative to budgets can be an effective
control when
A) the process used in developing budgets is open and participative.
B) the process reflects the economic best-case scenario developed by the functional
manager.
C) the process reflects the economic worst-case scenario developed by the functional
manager.
D) the process relies solely on quantitative criteria to evaluate the functional manager’s
performance.
Answer:
Firms using ________ fend off an acquisition by taking over the firm or firms bidding
for them.
A) shark repellents
B) a crown jewel sale
C) the Pac Man defense
D) a golden parachute
Answer:
________ are when employees are given the right, but not the obligation, to purchase
stock at predetermined prices.
A) Flexibility grants
B) Stock grants
C) Stock options
D) Grant options
Answer:
________ measures of competitive advantage compare a firm’s level of return to its cost
of capital instead of to the average level of return in the industry.
A) Economic
B) Accounting
C) Strategic
D) Sustainable
Answer:
To the extent that a firm’s resources and capabilities enhance a firm’s competitive
position by enabling a firm to exploit its opportunities or neutralize its threats, these
resources and capabilities are valuable and are known as
A) temporary competitive advantages.
B) sustainable competitive advantages.
C) core competencies.
D) strengths.
Answer:
A firm engages in a(n) ________ when it purchases a second firm.
A) acquisition
B) joint venture
C) strategic alliance
D) equity alliance
Answer:
Two possible substitutes for strategic alliances include
A) going it alone and tacit collision.
B) going it alone and acquisitions.
C) acquisitions and explicit collusion.
D) explicit collusion and tacit collusion.
Answer:
Which of the following bases of product differentiation is usually costly to duplicate?
A) product features
B) links with other firms
C) reputation
D) product mix
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.
eBay’s agreement with ________ is the most likely to be susceptible to holdup.
A) the Australian partner
B) the Korean partner
C) MBNA
D) the U.S. Postal Service
Answer:
In a coordinated federation structure, shared activities and other
cross-divisional/cross-country economies of scope are managed by the
A) country unit.
B) corporate center.
C) local unit.
D) country manager.
Answer:
A(n) ________ exists whenever two or more independent organizations cooperate in
the development, manufacture, or sale of products or services.
A) vertical market
B) strategic alliance
C) initial public offering
D) market transaction
Answer:
The theoretical roots of the resource-based view can be traced to research done by
A) David Ricardo.
B) Adam Smith.
C) Oliver Williamson.
D) Joseph Schumpeter.
Answer:
________ have full profit-and-loss responsibility and typically have multiple functional
managers reporting to them.
A) Division general managers
B) Corporate staff managers
C) Senior executives
D) Shared activity managers
Answer:
Which role in the office of the president is responsible for strategy implementation?
A) chairman of the board
B) chief executive officer
C) chief operating officer
D) chief strategist
Answer:
Green Frog is an environmentally friendly firm in the cosmetics industry. Even though
Green Frog is environmentally friendly, the strategic planning team had decided that
financial performance is one of the company’s top priorities. Which of the following is
the best example of an objective the company might use to help it achieve its goal of
superior financial performance?
A) increasing profitability
B) growing market share annually
C) improving product quality every quarter
D) growth in earnings per share averaging 15% or better annually for the next five years
Answer:
Firms whose mission is central to all they do are known as ________ firms.
A) missionary
B) emergent
C) parity
D) visionary
Answer:
Recent research shows that firms can simultaneously implement cost-leadership and
product-differentiation strategies if they learn how to manage the ________ inherent in
these two strategies.
A) consistencies
B) similarities
C) contradictions
D) superfluousness
Answer:
The ________ logic suggests that compensation that has a fixed and known downside
risk and significant upside potential is important for firms implementing vertical
integration strategies.
A) opportunism
B) strategic
C) capabilities
D) flexibility
Answer:
Hedging is a way to counter the ________ risks of doing business in foreign markets.
A) political
B) financial
C) cultural
D) business
Answer:
Supermajority voting rules are an example of a
A) poison pill.
B) white knight.
C) golden parachute.
D) shark repellent.
Answer:
Sematech is a producer of computer chips. To gain an advantage over other computer
chip makers, Sematech focuses on reducing its costs below all of its competitors and
has aligned its value chain accordingly. Recently, several of Sematech’s competitors
have begun to reduce the company’s competitive advantage. In response to this threat,
Sematech has decided to add production capacity in an effort to lower costs. Given
Sematech’s business level strategy, which organizational structure is the most
appropriate?
A) matrix structure
B) U-form structure
C) multidivisional structure
D) product-divisional structure
Answer:
Buyers tend to have less power when
A) a firm has only one buyer, or a small number of buyers.
B) the products or services being sold to buyers are standard and not differentiated.
C) the supplies they purchase are an insignificant portion of the costs of their final
products.
D) they are not earning significant economic profits.
Answer:
What is the impact of product differentiation on each of the environmental threats
identified in the five forces framework?
Answer:
Discuss the difference between the learning curve and economies of scale.
Answer:
Discuss whether a firm must be must be the only one to possess a valuable resource or
capability in order for the firm to benefit from the resource or capability’s rarity or if
other firms may own it as well.
Answer:
Identify and discuss the three rules that target firm managers should follow to maximize
the probability of earning economic profits from their merger and acquisition strategies.
Answer:
Identify and discuss the three ways alliances can create economic value by helping
firms improve the performance of their current operations.
Answer:
Identify how cost leadership helps neutralize each of the major threats in an industry.
Answer:
Identify and discuss six rules that firms bidding on a target firm in an acquisition should
follow to increase the possibility that an acquisition strategy will earn superior
performance.
Answer:
Describe the differences between market and hierarchical governance options for firms
pursuing international strategies.
Answer:
Identify the four types of competition, the attributes of each type and the expected
performance under each.
Answer:
Discuss the relationship between accounting methods of measuring divisional
performance and economic methods, identify the formula used for calculating economic
value added, and discuss methods for adjusting accounting earnings and the importance
of making these adjustments.
Answer:
What is the relationship between product differentiation and managerial creativity?
Answer:
Is learning from international operations automatic for firms? Why or why not?
Answer:
Identify the five most common threats facing firms from their local competitive
environment that are represented in the five forces framework, and discuss under what
conditions firms in a specific industry are most likely to earn an above average profit
and when they are likely to earn a below average profit.
Answer:
Describe the difference between a competitor and a complementor and identify the role
complementors play in an industry.
Answer: