Capstone Final

200 Questions  I  By Jprohoroff
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  • 1. 
    Strong pressures for local responsiveness emerge when customer tastes and preferences
    • A. 

      Differ significantly between countries.

    • B. 

      Differ slightly between countries.

    • C. 

      Are universally alike.

    • D. 

      Are cyclical in nature.

    • E. 

      None of the above.


  • 2. 
    Which of the following entry modes allow(s) a company to engage in global strategic coordination?
    • A. 

      Exporting

    • B. 

      Licensing

    • C. 

      Joint ventures

    • D. 

      Wholly owned subsidiaries

    • E. 

      Joint ventures and wholly owned subsidiaries


  • 3. 
    A key to making a strategic alliance work is
    • A. 

      Having one partner handle daily operations.

    • B. 

      Selecting the right partner.

    • C. 

      Sharing all knowledge.

    • D. 

      Enforcing one culture for both partners.

    • E. 

      Reducing investment in the alliance to a minimum.


  • 4. 
    Which of the following is not a risk of exporting?
    • A. 

      Tariff barriers

    • B. 

      Transportation costs

    • C. 

      Location diseconomies

    • D. 

      Prime interest rates

    • E. 

      Delegation of marketing activities to a local agent


  • 5. 
    In which of the following circumstances does a localization strategy make the most sense?
    • A. 

      Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing.

    • B. 

      Global market standardization is possible, but there are no significant economies of scale to be realized from centralizing global manufacturing.

    • C. 

      Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing.

    • D. 

      Global market standardization is possible, and there are significant economies of scale to be realized from centralizing global manufacturing.

    • E. 

      Consumer tastes and preferences differ among national markets, and economies of scale are substantial.


  • 6. 
    Global economies of scale can be realized by
    • A. 

      Expansion of overseas sales.

    • B. 

      Better utilization of production facilities.

    • C. 

      Boosting bargaining power with suppliers.

    • D. 

      Increasing cost savings through learning effects.

    • E. 

      All of the above.


  • 7. 
    Which of the following companies increased company growth rates by developing products at home and then expanding sales of these products in international markets?
    • A. 

      Procter & Gamble

    • B. 

      Ford

    • C. 

      Toyota

    • D. 

      All of the above

    • E. 

      None of the above


  • 8. 
    Firms should choose likely countries for an international expansion effort based on all of the followingexcept the
    • A. 

      Size of the market.

    • B. 

      Existing wealth of consumers in that market.

    • C. 

      Likely future wealth of consumers in that market.

    • D. 

      Political stability of that market.

    • E. 

      Age of the country.


  • 9. 
    Global expansion
    • A. 

      Is feasible only for large companies.

    • B. 

      Can enable companies to increase their profitability and grow their profits more rapidly.

    • C. 

      Allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase them.

    • D. 

      Requires locating facilities in foreign countries.

    • E. 

      Makes sense for manufacturing firms but not for service firms.


  • 10. 
    Foreign subsidiaries play a major role in shaping the future direction of a company pursuing a(n)
    • A. 

      Transnational strategy.

    • B. 

      International strategy.

    • C. 

      Localization strategy.

    • D. 

      Joint venture.

    • E. 

      Global standardization strategy.


  • 11. 
    A company that enters a foreign market by entering into a licensing agreement with a local company
    • A. 

      Can realize location economies.

    • B. 

      Can engage in global strategic coordination.

    • C. 

      Can realize experience-curve effects.

    • D. 

      Can realize experience-curve effects. risks losing control over its technology to the venture partner. risks losing control over its technology to the venture partner.

    • E. 

      Can engage in global strategic coordination and realize experience-curve effects.


  • 12. 
    What are the risks associated with licensing as a means of entering overseas markets?
    • A. 

      Licensing limits a company's ability to coordinate strategic moves across countries.

    • B. 

      A company may lose control of its technology.

    • C. 

      A company may lose control over its manufacturing, marketing, and strategic functions.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 13. 
    A nation's companies gain competitive advantage if their domestic customers are
    • A. 

      Nondemanding purchasers.

    • B. 

      Able to obtain products or services in other countries.

    • C. 

      Sophisticated and demanding.

    • D. 

      Willing to spend money on novelties.

    • E. 

      Not willing to accept low-priced products.


  • 14. 
    Which of the following has occurred in international trade over the past half-century?
    • A. 

      There has been a dramatic lowering of barriers to international trade.

    • B. 

      Tariff rates on manufactured goods traded by advanced nations have fallen.

    • C. 

      Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have been removed.

    • D. 

      The volume of world trade has increased dramatically.

    • E. 

      All of the above.


  • 15. 
    Most manufacturing companies begin their global expansion by
    • A. 

      Licensing.

    • B. 

      Franchising.

    • C. 

      Exporting.

    • D. 

      Forming a joint venture.

    • E. 

      Setting up a wholly owned subsidiary in the host country.


  • 16. 
    Which of the following factors increases pressures for cost reductions?
    • A. 

      Differences in distribution channels

    • B. 

      Increasing national wealth

    • C. 

      Great transportation needs

    • D. 

      High switching costs

    • E. 

      Price as the main competitive weapon in a market


  • 17. 
    Attaining a credible commitment from a potential partner
    • A. 

      Is a step in partner selection.

    • B. 

      Requires the ability to share skills with partners.

    • C. 

      Requires the ability to learn from alliance partners.

    • D. 

      Is a way to minimize opportunism.

    • E. 

      Requires the ability to share skills with and learn from alliance partners.


  • 18. 
    Cost reduction pressures can be particularly intense in industries producing
    • A. 

      Commodity-type products.

    • B. 

      Highly differential products.

    • C. 

      Goods that do not compete on the basis of price.

    • D. 

      Goods servicing narrowly defined markets.

    • E. 

      Highly advertised goods.


  • 19. 
    The ability to realize cost economies from global volume is greatest in the case of
    • A. 

      Products that need to be customized to local requirements.

    • B. 

      Commodity-type products that serve universal needs.

    • C. 

      Low-weight, high-value products that can be differentiated by global companies.

    • D. 

      Products that can be economically manufactured in small batches.

    • E. 

      Companies competing in industries where they face a large number of multinational competitors.


  • 20. 
    Factors of production include all but which of the following?
    • A. 

      Land

    • B. 

      Labor

    • C. 

      Raw materials

    • D. 

      Ethnic diversity

    • E. 

      Managerial sophistication


  • 21. 
    When entering an overseas market, which of the following factors should be considered?
    • A. 

      Size of the market

    • B. 

      Purchasing power

    • C. 

      Consumer demand for the company's product

    • D. 

      Economic risks

    • E. 

      All of the above


  • 22. 
    Which entry mode gives a multinational the tightest control over foreign operations?
    • A. 

      Exporting from the home country and letting a foreign agent organize local marketing

    • B. 

      Licensing

    • C. 

      Franchising

    • D. 

      Entering into a joint venture with a foreign company to set up overseas operations

    • E. 

      Setting up a wholly owned subsidiary


  • 23. 
    When a company increases its growth rate by taking goods or services developed at home and selling them internationally, it is
    • A. 

      Leveraging its existing products.

    • B. 

      Taking the path of least resistance.

    • C. 

      Engaging in product positioning.

    • D. 

      Realizing cost economies from global expansion.

    • E. 

      Realizing location economies.


  • 24. 
    Which of the following isnot a necessity for leveraging the skills of global subsidiaries?
    • A. 

      The firm must have incentives for local managers to share knowledge and ideas.

    • B. 

      The firm's managers must be aware that competencies can develop anywhere.

    • C. 

      The firm must be pursuing a strategy of differentiation.

    • D. 

      The firm's managers must help to transfer competencies around the company.

    • E. 

      The firm must offer incentives that encourage employees to take necessary risks.


  • 25. 
    A localization strategy is most appropriate when
    • A. 

      There are relatively few differences from one location to another.

    • B. 

      Consumer tastes and preferences are universally similar.

    • C. 

      Consumer tastes and perferences differ substantially across nations.

    • D. 

      There is no need to customize products.

    • E. 

      Local demand and national demand are equal.


  • 26. 
    Companies that pursue a transnational strategy are trying to develop
    • A. 

      A business model that achieves low costs.

    • B. 

      A differentiation strategy across geographical markets.

    • C. 

      A flow of skills between different subsidiaries in the global network.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 27. 
    Which of the following factors increases pressures for local responsiveness?
    • A. 

      Powerful buyers

    • B. 

      Persistent excess capacity

    • C. 

      Low-cost competitors

    • D. 

      Differences in customer tastes and preferences

    • E. 

      Trade barriers


  • 28. 
    Procter & Gamble grew rapidly in international markets because of its
    • A. 

      Skills in mass-marketing.

    • B. 

      Patents on essential products.

    • C. 

      Financial stamina.

    • D. 

      Work force diversity.

    • E. 

      Concentric diversification.


  • 29. 
    When a company performs a value creation activity in the optimal location for that activity, wherever in the world that might be, it is trying to capitalize on
    • A. 

      Economies of scale.

    • B. 

      Economies of scope.

    • C. 

      The transnational strategy.

    • D. 

      Location economies.

    • E. 

      Its localization strategy.


  • 30. 
    For a hotel company whose competitive advantage is based on high brand-name recognition, which of the following ways of serving an overseas market makes the most sense?
    • A. 

      Franchising

    • B. 

      Licensing

    • C. 

      Exporting

    • D. 

      Entering into a joint venture with a foreign company

    • E. 

      Setting up a wholly owned subsidiary


  • 31. 
    Host government demands generally
    • A. 

      Increase pressures for local responsiveness.

    • B. 

      Increase pressures for cost reductions.

    • C. 

      Discourage foreign companies from operating in the home country.

    • D. 

      Impede a company's ability to minimize its transaction costs.

    • E. 

      Impede a company's ability to differentiate its product offering across national borders.


  • 32. 
    Clear Vision's decision to own a manufacturing facility overseas was not influenced by which of the following factors?
    • A. 

      Low labor costs

    • B. 

      Availability of a skilled work force

    • C. 

      Geographical proximity to India

    • D. 

      Tax breaks given by the Hong Kong government

    • E. 

      Ability to find a Chinese partner


  • 33. 
    When toymaker Mattel sells Barbie dolls in the Middle East, it changes the doll's shape to one that is a more accurate portrayal of a female body. Mattel does this to
    • A. 

      Create a commodity-type product.

    • B. 

      Transfer technological know-how.

    • C. 

      Increase product standardization.

    • D. 

      Realize experience curve effects.

    • E. 

      Respond to differences in local tastes.


  • 34. 
    In which of the following circumstances does a global standardization strategy make the most sense?
    • A. 

      Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing.

    • B. 

      Global market standardization is possible, but there are no significant economies of scale to be realized from centralizing global manufacturing.

    • C. 

      Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing.

    • D. 

      Consumer tastes and preferences differ among national markets, and economies of scale are insubstantial.

    • E. 

      Global market standardization is possible, and there are significant economies of scale to be realized from centralizing global manufacturing.


  • 35. 
    Which of the following is not an objective of a transnational company?
    • A. 

      Local responsiveness

    • B. 

      Realization of experience-based economies

    • C. 

      Low cross-national integration

    • D. 

      Global learning

    • E. 

      Realization of location economies


  • 36. 
    Managers of a multinational enterprise must recognize that skills
    • A. 

      Need to be transferred from headquarters to the firm's overseas operations.

    • B. 

      May arise from anywhere within the firm's global network.

    • C. 

      Developed overseas usually do not rise to the level of domestic skills.

    • D. 

      Should not deviate from their domestic level.

    • E. 

      Must be tightly controlled to assume global similarity.


  • 37. 
    The timing of entry into an overseas market
    • A. 

      Doesn't matter in the long run.

    • B. 

      Has little effect on long-term success.

    • C. 

      Is a matter for careful consideration.

    • D. 

      Has little or no effect on the overall costs of market entry.

    • E. 

      Depends on the entry of competition.


  • 38. 
    Which of the following is not an attribute of a national or country-specific environment that has an impact on global competitiveness of companies located in that nation?
    • A. 

      Factory production endowments

    • B. 

      Local demand conditions

    • C. 

      Related and supporting industries

    • D. 

      Strategy, structure, and rivalry of firms within the nation

    • E. 

      Advertising expenses


  • 39. 
    All of the following are first-mover advantages except the ability to
    • A. 

      Ride down the experience curve ahead of rivals.

    • B. 

      Avoid pioneering costs.

    • C. 

      Discourage new entrants.

    • D. 

      Create switching costs for customers.

    • E. 

      Preempt rivals by building a strong brand name.


  • 40. 
    A localization strategy is based on which of the following ideas?
    • A. 

      There is a convergence in the tastes of consumers in different nations of the world.

    • B. 

      There are substantial economies of scale to be realized from centralizing global production.

    • C. 

      Consumer tastes and preferences differ among national markets.

    • D. 

      There are cost advantages associated with manufacturing a standard product for global consumption.

    • E. 

      Competitive strategy should be centralized at the world head office.


  • 41. 
    When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself
    • A. 

      Locked into an old, inefficient technology.

    • B. 

      Able to sell its products at continually lower prices.

    • C. 

      Increasing returns on its assets.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 42. 
    Which of the following statements concerning vertical integration is not correct?
    • A. 

      Vertical integration can reduce a company's overall cost of production.

    • B. 

      Vertical integration allows a company to circumvent powerful buyers and suppliers.

    • C. 

      Vertical integration can be used to protect a company's investments in proprietary technology.

    • D. 

      Vertical integration is a means of implementing just-in-time inventory systems when suppliers are unreliable.

    • E. 

      Vertical integration facilitates the attainment of economies of scope.


  • 43. 
    Hewlett Packard and Compaq recently completed a merger. The combined firm is larger and therefore can negotiate lower prices from suppliers. This benefit of horizontal integration is called
    • A. 

      Economies of scale.

    • B. 

      Reduction of excess capacity.

    • C. 

      Cross-selling.

    • D. 

      Product bundling.

    • E. 

      Market power.


  • 44. 
    Observing the pattern of consolidation in U.S. industries over time, one will notice that
    • A. 

      Horizontal integration has never been a very popular strategy.

    • B. 

      Firms that horizontally integrate tend to divest later.

    • C. 

      Horizontal integration has been very popular in the last decade.

    • D. 

      While a few industries have consolidated since 1970, most remain fragmented.

    • E. 

      Mergers were very common and acquisitions were rare from 1900 to 1999.


  • 45. 
    Outsourcing occurs when a firm
    • A. 

      Buys one of its rivals.

    • B. 

      Merges with one of its suppliers.

    • C. 

      Enters into a joint venture with a rival.

    • D. 

      Hires another firm to perform value creation activities.

    • E. 

      Enters into contracts with two suppliers simultaneously.


  • 46. 
    When a company decides to expand into new industries, it must
    • A. 

      Construct its business models at two levels.

    • B. 

      Secure government approval from the Securities and Exchange Commission (SEC).

    • C. 

      Select a new CEO.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 47. 
    Which of the following is not an accurate statement about outsourcing?
    • A. 

      Outsourcing should be done for an entire function—for example, all of human resources.

    • B. 

      Outsourcing requires that some value creation activities be performed outside an organization.

    • C. 

      A risk of outsourcing is the decreased control that organizations have over how the functions are performed.

    • D. 

      Outsourcing means that activities can be performed by companies that specialize in that activity.

    • E. 

      Outsourcing is a strategy that is primarily used by small firms who cannot afford skilled personnel in every specialty.


  • 48. 
    Antitrust regulation
    • A. 

      Favors large companies.

    • B. 

      Reduces industry competition.

    • C. 

      Is concerned with companies' abuse of their market power to raise prices for consumers above the level that would exist in more competitive situations.

    • D. 

      Tends to raise prices for consumers.

    • E. 

      Enables the achievement of market power.


  • 49. 
    Which of the following is not a benefit of vertical integration?
    • A. 

      Facilitating investments in specialized assets

    • B. 

      Enhancing product quality

    • C. 

      Improved scheduling

    • D. 

      Increasing cost structure

    • E. 

      None of the above


  • 50. 
    Which of the following strategies facilitates the implementation of a just-in-time inventory system?
    • A. 

      Short-term contracts

    • B. 

      Vertical integration

    • C. 

      Unrelated diversification

    • D. 

      Diversification based on transferring competencies

    • E. 

      Diversification based on realizing economies of scope


  • 51. 
    Companies invest in specialized assets because these assets allow them to
    • A. 

      Lower their cost structure.

    • B. 

      Charge excessive prices for their products.

    • C. 

      Better differentiate their products.

    • D. 

      A and B.

    • E. 

      A and C.


  • 52. 
    To ensure the easy transfer of important competitive information between a firm and its outsourcing contractors, the firm should
    • A. 

      Exchange hostages.

    • B. 

      Use parallel sourcing.

    • C. 

      Lengthen the supply chain.

    • D. 

      Develop trust.

    • E. 

      Become a virtual corporation.


  • 53. 
    Credible commitments
    • A. 

      Are believable promises or pledges to support the development of a long-term relationship between companies.

    • B. 

      Facilitate diversification based on acquisitions and restructuring.

    • C. 

      Facilitate competitive bidding.

    • D. 

      Facilitate vertical integration.

    • E. 

      Reduce the risk of losing proprietary technology to a venture partner and facilitate vertical integration.


  • 54. 
    Adam's boss tells him that their company is pursuing a strategy of horizontal integration, which means that the company will
    • A. 

      Acquire one of its suppliers.

    • B. 

      Buy one of its rivals.

    • C. 

      Begin to distribute its own products.

    • D. 

      Reorganize into fewer business units.

    • E. 

      Centralize all of its support functions.


  • 55. 
    Which of the following activities should not be outsourced by a virtual corporation?
    • A. 

      Manufacturing

    • B. 

      Research and developoment (R&D)

    • C. 

      Materials management

    • D. 

      Contract management

    • E. 

      Marketing


  • 56. 
    In which of the following is a firm most likely to lose direct control over value creation activities?
    • A. 

      Merger

    • B. 

      Acquisition

    • C. 

      Vertical integration

    • D. 

      Strategic alliance

    • E. 

      Outsourcing


  • 57. 
    Many industries have experienced increased consolidation over the last decade due to an increase in
    • A. 

      Strategic alliances.

    • B. 

      Vertical integration.

    • C. 

      Horizontal integration.

    • D. 

      Franchising.

    • E. 

      Diversification.


  • 58. 
    A wealth of data suggests that most mergers and acquisitions
    • A. 

      Create extensive value for the companies involved.

    • B. 

      Do not create, and may actually reduce, value for the entities involved.

    • C. 

      Create and sustain large and immediate increases in value.

    • D. 

      Have little financial impact on the firms involved.

    • E. 

      None of the above.


  • 59. 
    Which of the following is not a characteristic of strategic alliances entered into to support related diversification?
    • A. 

      It is a way for companies to realize some of the benefits of diversification at a lower level of bureaucratic costs.

    • B. 

      It requires each company to take an equity stake in the new venture.

    • C. 

      A disadvantage is the risk of losing proprietary know-how to a competitor.

    • D. 

      It entails investing in a new business or product (including upgrades) instead of an existing one.

    • E. 

      It allows a company to swap complementary skills.


  • 60. 
    Companies can maintain market discipline over suppliers by
    • A. 

      Outsourcing.

    • B. 

      Demanding hostages.

    • C. 

      Attaining a credible commitment.

    • D. 

      Parallel sourcing.

    • E. 

      Full integration.


  • 61. 
    When Daimler-Benz and Chrysler merged, DaimlerChrysler sharply reduced its U.S. corporate-level staff, running the combined company primarily from its German headquarters. Which benefit of horizontal integration does this example illustrate?
    • A. 

      Economies of scale

    • B. 

      Reduction of excess capacity

    • C. 

      Product bundling

    • D. 

      Cross-selling

    • E. 

      Elimination of duplication


  • 62. 
    Under which of the following circumstances is vertical integration most likely to help a company establish itself as a differentiated player in its core business?
    • A. 

      When backward vertical integration involves circumventing suppliers with the power to charge high prices

    • B. 

      When vertical integration is based on a desire to avoid paying market middlemen

    • C. 

      When vertical integration allows the company to establish for itself a stable supply of high-quality inputs

    • D. 

      When vertical integration facilitates close coordination among adjacent stages of production, eliminating the need to hold excessive inventories

    • E. 

      When vertical integration prohibits technologically complementary processes being carried out in quick succession


  • 63. 
    A hospital supply company invests in training for a team of sales associates to learn the details of each hospital chain's operations. In return, the hospital chain invests in a computer system that supports supply ordering. The supply company and the hospital chain are working to ensure the success of their long-term relationship by
    • A. 

      Reducing the risk of losing proprietary technology.

    • B. 

      Making a credible commitment.

    • C. 

      Encouraging competitive bidding.

    • D. 

      Facilitating vertical integration.

    • E. 

      Using parallel sourcing.


  • 64. 
    Under which of the following circumstances is vertical integration hazardous?
    • A. 

      When the technology involved in different stages of production is changing rapidly

    • B. 

      When vertical integration involves moving downstream into retailing

    • C. 

      When the value added by successive stages of production is declining

    • D. 

      When the industries involved are undergoing rapid expansion

    • E. 

      When the company's competitors are also following a strategy of vertical integration


  • 65. 
    When an intermediate manufacturer moves into final assembly, it is pursuing
    • A. 

      Backward integration.

    • B. 

      Forward integration.

    • C. 

      Taper integration.

    • D. 

      Related diversification.

    • E. 

      Unrelated diversification.


  • 66. 
    John's surfboard shop has a long-term relationship with two surfboard makers. John is using
    • A. 

      Parallel sourcing.

    • B. 

      Cross-selling.

    • C. 

      Product bundling.

    • D. 

      Vertical integration.

    • E. 

      Horizontal integration.


  • 67. 
    Forward integration means that a company is moving into
    • A. 

      Sales.

    • B. 

      Retail.

    • C. 

      Distribution.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 68. 
    Horizontal integration may be thought of as
    • A. 

      Moving into a new unrelated industry.

    • B. 

      Giving control to suppliers.

    • C. 

      Gaining control of distributors.

    • D. 

      Staying inside the industry in which the company currently operates.

    • E. 

      Combining functional units within the company.


  • 69. 
    To build trust in a cooperative relationship, both firms can
    • A. 

      Rely on competitive bidding.

    • B. 

      Make mutual investments in specialized assets.

    • C. 

      Write short-term contracts that must be renewed frequently.

    • D. 

      Increase their vertical integration.

    • E. 

      Use outsourcing of noncore activities.


  • 70. 
    A specialized asset is one that is designed to
    • A. 

      Perform a multitude of generic tasks.

    • B. 

      Perform a specified sequence of tasks.

    • C. 

      Perform several nonsequential tasks.

    • D. 

      Perform a specific task.

    • E. 

      None of the above.


  • 71. 
    When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?
    • A. 

      Full integration

    • B. 

      Taper integration

    • C. 

      Competitive bidding

    • D. 

      Long-term contracting

    • E. 

      Diversification based on economies of scope


  • 72. 
    Long-term contracts
    • A. 

      Are preferable to short-term contracts when there is a minimal need for cooperation.

    • B. 

      Are preferable to vertical integration when it is not feasible to exchange hostages.

    • C. 

      Generally result in lower prices than does competitive bidding.

    • D. 

      Achieve exactly the same outcomes as vertical integration, but they incur higher bureaucratic costs.

    • E. 

      Are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.


  • 73. 
    Another name for long-term cooperative relationships between two or more companies who agree to commit resources to develop new products is
    • A. 

      Horizontal integration.

    • B. 

      Outsourcing.

    • C. 

      Strategic alliance.

    • D. 

      Joint venture.

    • E. 

      Vertical integration.


  • 74. 
    Strategic outsourcing is best described as a
    • A. 

      Means of getting rid of excess activities.

    • B. 

      Way of getting other companies to do what the outsourcing company no longer wants to do.

    • C. 

      Method of streamlining the marketing activities of a company.

    • D. 

      Decision to allow one or more of a company's value chain activities to be performed by other companies.

    • E. 

      None of the above.


  • 75. 
    Vertical integration is based on a company entering industries that add _________ to its core products.
    • A. 

      Costs

    • B. 

      Little or nothing

    • C. 

      Incremental elements

    • D. 

      Shipping expenses

    • E. 

      Value


  • 76. 
    In today's business environment, mergers and acquisitions are
    • A. 

      Rare.

    • B. 

      Too expensive to undertake.

    • C. 

      Occurring in many industries.

    • D. 

      An inappropriate technique for expanding a company.

    • E. 

      None of the above.


  • 77. 
    Outsourcing
    • A. 

      Eliminates the need for a value chain.

    • B. 

      Reduces the firm's dependence on its value chain.

    • C. 

      Reorders the steps in a firm's value chain.

    • D. 

      Moves some value chain activities outside the firm.

    • E. 

      Strengthens the firm's capabilities in each value chain function.


  • 78. 
    The final part of the strategy formulation process is
    • A. 

      Formulation of business-level strategies.

    • B. 

      Formulation of functional-level strategies.

    • C. 

      Formulation of corporate-level strategies.

    • D. 

      Development of functional-level goals.

    • E. 

      Development of business-level goals.


  • 79. 
    Which of the following problems is (are) associated with a strategy of vertical integration?
    • A. 

      An increasing cost structure

    • B. 

      Manufacturing disadvantages that arise because of rapidly changing technology

    • C. 

      Marketing disadvantages that arise when demand is unpredictable

    • D. 

      All of the above

    • E. 

      None of the above


  • 80. 
    Ownership of retail outlets may be important for a manufacturer if
    • A. 

      The products produced by the manufacturer are not complex.

    • B. 

      After-sales service is required for complex products.

    • C. 

      Products are expended in consumption.

    • D. 

      Products are intended for one-time use.

    • E. 

      Products are inexpensive.


  • 81. 
    Which of the following statements concerning research and development is correct?
    • A. 

      Exploratory research is more important than development research.

    • B. 

      Development research is more important than exploratory research.

    • C. 

      Exploratory research is directed toward commercialization of a new technology.

    • D. 

      Development research advances basic science.

    • E. 

      Companies with a strong record of internal new venturing excel at both types of research.


  • 82. 
    Which of the following entry strategies should be used when speed is an important consideration?
    • A. 

      Internal new venture

    • B. 

      Acquisition

    • C. 

      Joint venture

    • D. 

      Unrelated diversification

    • E. 

      Related diversification


  • 83. 
    General organizational competencies are found
    • A. 

      In the skills of a company's top managers and functional experts.

    • B. 

      At low levels in the organization.

    • C. 

      Among technology professionals.

    • D. 

      Within a company's strategic core.

    • E. 

      In an organization's tangible resources.


  • 84. 
    New ventures are likely to be preferred compared to acquisitions when
    • A. 

      Entry barriers are high.

    • B. 

      Exit barriers are high.

    • C. 

      A company's business model is based on using its technology to innovate new kinds of products for related markets.

    • D. 

      The company needs more mega-opportunities.

    • E. 

      The industry is in the mature stage of the industry life cycle.


  • 85. 
    What accounts for the high failure rate of all new products that reach the marketplace?
    • A. 

      Market entry on too small a scale

    • B. 

      Poor commercialization of the new-venture product

    • C. 

      Poor corporate management of the new-venture unit

    • D. 

      All of the above

    • E. 

      None of the above


  • 86. 
    Companies that base their diversification strategy on transferring competencies tend to acquire new businesses that are ___________ to their existing business activities.
    • A. 

      Unrelated

    • B. 

      Not comparable

    • C. 

      Opposed

    • D. 

      Related

    • E. 

      Identical


  • 87. 
    A company pursuing a multibusiness model based on diversification may justify this strategy for what reason(s)?
    • A. 

      Transfer competencies

    • B. 

      Reserve competencies

    • C. 

      Resource sharing

    • D. 

      Product bundling

    • E. 

      All of the above


  • 88. 
    New ventures
    • A. 

      Should be killed if they don't make a profit within three years.

    • B. 

      Are often preferred compared to acquisitions by technology-based companies.

    • C. 

      Are preferred compared to acquisitions when entry barriers are high.

    • D. 

      Are less risky than acquisitions.

    • E. 

      Are best when the company is entering the industry on a small scale.


  • 89. 
    What is perhaps the most important reason why acquisitions made by a company fail?
    • A. 

      The expense of the acquisition

    • B. 

      The timing of the acquisition

    • C. 

      Management's unwillingness to expend the necessary effort to make the acquisition work effectively

    • D. 

      Incompetence on the part of workers in the acquired firm

    • E. 

      Difficulties in coordinating manufacturing activities


  • 90. 
    Diversification dissipates value when it is based on
    • A. 

      Realizing economies of scope.

    • B. 

      Pooling risks.

    • C. 

      Transferring competencies.

    • D. 

      Acquisitions and restructuring.

    • E. 

      Leveraging existing competencies.


  • 91. 
    Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?
    • A. 

      The company does not have to achieve coordination between business units.

    • B. 

      The company may create more value from an unrelated diversification strategy.

    • C. 

      The company may experience lower bureaucratic costs.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 92. 
    The role of managers in corporate-level strategy is to
    • A. 

      Identify markets or industries in which a company should compete to maximize long-term profitability.

    • B. 

      Invent products that ensure the long-run success of the company.

    • C. 

      Use their corporate power to ensure the profitability of functional-level strategies.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 93. 
    Hamel and Prahalad have developed a model that can help managers assess how and when they should expand beyond their current market or industry. They find that it is useful to view a company as a portfolio of
    • A. 

      Resources.

    • B. 

      Distinctive competencies.

    • C. 

      Strategies.

    • D. 

      Situational advantages.

    • E. 

      Strategic intent.


  • 94. 
    Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?
    • A. 

      Diversify through acquisition

    • B. 

      Do not diversify at all

    • C. 

      Diversify with an internal new venture

    • D. 

      Diversify with a joint venture

    • E. 

      Diversify through vertical integration


  • 95. 
    Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope?
    • A. 

      The head office evaluates each business unit as a stand-alone operation.

    • B. 

      The strategy allows a company to realize cost economies from sharing manufacturing facilities, distribution channels, advertising campaigns, and research and development costs among business units.

    • C. 

      The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale.

    • D. 

      Managers must be aware of the costs of coordination.

    • E. 

      The strategy requires close coordination among different business units.


  • 96. 
    Which of the following is not a general organizational competency?
    • A. 

      Entrepreneurial capabilities

    • B. 

      Capabilities in organizational design

    • C. 

      Superior strategic capabilities

    • D. 

      Product bundling

    • E. 

      All of the above


  • 97. 
    At its simplest level, a joint venture may be thought of as a(n)
    • A. 

      Merger of two companies.

    • B. 

      Acquisition of a smaller company by a larger company.

    • C. 

      Form of strategic outsourcing.

    • D. 

      Sign of weakness on the part of one of the companies.

    • E. 

      Corporate partnership.


  • 98. 
    Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create
    • A. 

      A new business unit in the same industry.

    • B. 

      A new business unit in a different industry.

    • C. 

      A new industry.

    • D. 

      A new market segment.

    • E. 

      New customers in the same industry.


  • 99. 
    Product bundling refers to
    • A. 

      Preparation of products for shipment.

    • B. 

      A complete package of related products.

    • C. 

      A method of stocking products efficiently.

    • D. 

      An inventory procedure for ensuring effective counting of products.

    • E. 

      A package of unrelated products.


  • 100. 
    A strategy based on diversification may fail to add value because companies
    • A. 

      Seek to achieve differentiation instead of low cost.

    • B. 

      Diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas.

    • C. 

      Make acquisitions rather than develop new technologies on their own.

    • D. 

      Incur bureaucratic costs that exceed the value created by the strategy.

    • E. 

      Seek to achieve cost leadership instead of differentiation.


  • 101. 
    Joint ventures
    • A. 

      Are an alternative to new ventures.

    • B. 

      Are attractive when speed is important.

    • C. 

      Are attractive when entry barriers are high.

    • D. 

      Should be done on a small scale.

    • E. 

      Reduce the risk of loss of proprietary knowledge.


  • 102. 
    A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?
    • A. 

      Joint ventures

    • B. 

      New ventures

    • C. 

      Acquisitions

    • D. 

      Long-term contracting

    • E. 

      Taper integration


  • 103. 
    A diversification strategy based on resource sharing
    • A. 

      Entails a company creating value by applying the distinctive competencies it developed in one line of business to another line of business.

    • B. 

      Requires the development of new business-level strategies.

    • C. 

      Can help a company to realize economies of scope.

    • D. 

      Is a valid way of supporting the generic business-level strategy of differentiation.

    • E. 

      Increases the accountability of units.


  • 104. 
    Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?
    • A. 

      Changing industry conditions

    • B. 

      Changing firm-specific conditions

    • C. 

      Diversification for the wrong reasons

    • D. 

      Increasing bureaucratic costs of diversification

    • E. 

      All of the above


  • 105. 
    Which of the following is not a guideline for a successful acquisition?
    • A. 

      Good bidding strategy

    • B. 

      A clear strategic rationale for making the acquisition

    • C. 

      Completing the acquisition quickly

    • D. 

      Thorough preacquisition screening

    • E. 

      Postacquisition audit to review the process and discuss ways to improve it


  • 106. 
    Free cash flow is defined as
    • A. 

      Money in a company's bank account.

    • B. 

      Government funds given to a company for meeting Environmental Protection Agency (EPA) regulations.

    • C. 

      Additional funds donated by stockholders.

    • D. 

      Cash in excess of that required to fund investments in the company's industry and to meet any debt commitments.

    • E. 

      Money borrowed by the company that requires no interest payments.


  • 107. 
    When a company has cash in excess of the amount needed to maintain a competitive advantage in its core business, it will most likely pursue
    • A. 

      Taper integration.

    • B. 

      Full integration.

    • C. 

      Diversification.

    • D. 

      Long-term contracts.

    • E. 

      Strategic alliances.


  • 108. 
    When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue?
    • A. 

      Unrelated diversification

    • B. 

      Related diversification

    • C. 

      A focus strategy

    • D. 

      Taper integration

    • E. 

      Backward integration


  • 109. 
    A focus on using or recombining existing competencies or building new competencies to enter new markets helps managers think strategically about how industry boundaries
    • A. 

      Tend to remain static over time.

    • B. 

      Might change over time.

    • C. 

      Completely disappear over five-year spans.

    • D. 

      Are not important.

    • E. 

      None of the above.


  • 110. 
    According to Gary Hamel and C. K. Prahalad, a company is best viewed as a
    • A. 

      Portfolio of products.

    • B. 

      Series of possibilities.

    • C. 

      Collection of functions.

    • D. 

      Set of applications.

    • E. 

      Portfolio of distinctive competencies.


  • 111. 
    Diversification is sometimes pursued by a company for the wrong reasons. Which of the following is a faulty justification for diversification?
    • A. 

      Risk pooling

    • B. 

      Rescuing the core business from difficulty

    • C. 

      Growth for growth's sake

    • D. 

      All of the abaove

    • E. 

      None of the above


  • 112. 
    In the joint venture between Stephanie's dressmaking shop and Kevin's fabric factory, the partners argue constantly about how to schedule tasks and reward workers. Which of the following disadvantages is Stephanie and Kevin's joint venture experiencing?
    • A. 

      Joint ventures risk the loss of proprietary information to a partner.

    • B. 

      Joint venture partners must split the profits of the business.

    • C. 

      Joint venture partners must share control and decision-making power.

    • D. 

      Joint ventures are slower to reach profitability than are acquisitions.

    • E. 

      Joint ventures require less up-front investment than do internal new ventures.


  • 113. 
    Which of the following seems to be a major determinant of a new venture's success?
    • A. 

      Large-scale entry into the target industry designed to build market share, even when such entry involves significant short-term losses

    • B. 

      Cautious small-scale entry into the target industry so that the company can assess the probable outcome of the venture without losing too much money

    • C. 

      A low level of integration between the marketing and the research and development functions of the venturing company

    • D. 

      Supporting many new venture projects in the hope that one will succeed

    • E. 

      Killing the new venture if it does not show a profit after the end of the third year


  • 114. 
    What is the process of transferring resources to and creating a new business unit in a new industry called?
    • A. 

      External new venturing

    • B. 

      Exportation of resources

    • C. 

      Intrapreneuring

    • D. 

      Risk avoidance

    • E. 

      Internal new venturing


  • 115. 
    An internal new venture is the most appropriate strategic choice when
    • A. 

      An industry is mature.

    • B. 

      The firm will enter on a small scale.

    • C. 

      The firm has competencies that can be leveraged.

    • D. 

      Speed of entry is the most important consideration.

    • E. 

      There is strong pressure for quick profitability.


  • 116. 
    Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it?
    • A. 

      Poor postacquisition integration

    • B. 

      Overestimation of the potential gains to be derived from synergy

    • C. 

      The high cost of making acquisitions

    • D. 

      Lack of preacquisition screening

    • E. 

      Overestimation of the potential costs of realizing synergies


  • 117. 
    The greater the number of business units in a company's portfolio, the _________ it is for corporate managers to remain informed about the complexities of each business.
    • A. 

      Easier

    • B. 

      More difficult

    • C. 

      Less important

    • D. 

      Less expensive

    • E. 

      More simplistic


  • 118. 
    Which of the following statements is false?
    • A. 

      Acquisitions are preferable to joint ventures when the new business is unrelated to the existing business.

    • B. 

      Acquisitions are preferable to new ventures when speed is important.

    • C. 

      Joint ventures are generally preferable to acquisitions when entry barriers are high.

    • D. 

      Acquisitions can be both a reason for corporate decline and part of a turnaround strategy.

    • E. 

      New ventures are preferable to acquisitions in the embryonic stage of the industry life cycle.


  • 119. 
    In which of the following cases are bureaucratic costs likely to be lowest?
    • A. 

      A vertically integrated company with five divisions that pursues full integration

    • B. 

      A company with five divisions that pursues related diversification based on economies of scope

    • C. 

      A company with five divisions that pursues related diversification based on transferring competencies

    • D. 

      A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring

    • E. 

      A company with twenty divisions that pursues taper integration


  • 120. 
    If a company is to increase the probability of a new product's commercial success, the company must foster close links between
    • A. 

      Marketing and sales.

    • B. 

      Engineering and advertising.

    • C. 

      Quality assurance and inventory management.

    • D. 

      Research and development (R&D) and marketing.

    • E. 

      Accounting and industrial engineering.


  • 121. 
    The basic principles of agency theory are
    • A. 

      Relatively straightforward.

    • B. 

      Somewhat obtuse.

    • C. 

      Of limited use in explaining the relationship between senior managers and stakeholders.

    • D. 

      Slanted in favor of managers as opposed to stakeholders.

    • E. 

      Mostly theoretical in nature.


  • 122. 
    A typical board of directors is composed of
    • A. 

      Inside directors.

    • B. 

      External directors.

    • C. 

      Inside directors and consumer advocates.

    • D. 

      Outside directors and union representatives.

    • E. 

      Inside and outside directors.


  • 123. 
    The quest to maximize a company's profitability should be constrained by
    • A. 

      Law.

    • B. 

      Managers.

    • C. 

      Ethical obligations.

    • D. 

      CEOs.

    • E. 

      All of the above.


  • 124. 
    The purpose of governance mechanisms in corporations is to
    • A. 

      Keep employees in line.

    • B. 

      Reduce the scope and frequency of the agency problem.

    • C. 

      Satisfy the requirements of the Securities and Exchange Commission (SEC).

    • D. 

      Limit corporate growth to manageable rates.

    • E. 

      None of the above.


  • 125. 
    A company's stockholders provide a company with
    • A. 

      Emotional and intellectual support.

    • B. 

      Risk capital.

    • C. 

      Free advertising.

    • D. 

      Advice on new product lines.

    • E. 

      A code of ethics.


  • 126. 
    Which of the following is not a reason why the board of directors may act as the guardian of stockholder interests within a company?
    • A. 

      Board members are directly elected by stockholders.

    • B. 

      The board is positioned at the apex of decision making within a company and is thus in a good position to monitor strategies.

    • C. 

      Board members can be held legally accountable for the actions of the company.

    • D. 

      Many board members are the nominees of the company CEO.

    • E. 

      The board has legal authority to hire, fire, and compensate senior executives.


  • 127. 
    A company's stakeholders include which of the following?
    • A. 

      Stockholders

    • B. 

      Creditors

    • C. 

      Employees

    • D. 

      Customers

    • E. 

      All of the above


  • 128. 
    Why are managers thought to engage in empire building?
    • A. 

      Growth results in large company size, and large size satisfies managers' needs for power, status, income, and job security.

    • B. 

      The pursuit of growth represents the best way of maximizing the long-run profitability of the company.

    • C. 

      Growth is designed to increase market share, which in turn increases company profits.

    • D. 

      Companies that do not grow stagnate.

    • E. 

      Stockholders would rather invest in large companies than in small ones.


  • 129. 
    The abbreviation IPO stands for
    • A. 

      Initial product output.

    • B. 

      Interim production output.

    • C. 

      Initial public offering.

    • D. 

      Inventory purchasing online.

    • E. 

      None of the above.


  • 130. 
    Over the past decade, maximizing returns to shareholders has
    • A. 

      Become less important.

    • B. 

      Taken on added importance.

    • C. 

      Remained the same as in the past.

    • D. 

      Been a minor corporate goal.

    • E. 

      None of the above.


  • 131. 
    When are the interests of stockholders and senior managers likely to be most closely aligned?
    • A. 

      When the board of directors is dominated by insiders

    • B. 

      When managers receive most of their compensation in the form of a regular salary

    • C. 

      When stockholders are weak

    • D. 

      When managers receive most of their compensation in the form of stock options

    • E. 

      When corporate raiders are unable to mount a takeover bid


  • 132. 
    When managers pay bribes to gain access to lucrative business contracts, they are engaging in
    • A. 

      Opportunistic exploitation.

    • B. 

      Utilitarian ethics.

    • C. 

      Self-dealing.

    • D. 

      Information manipulation.

    • E. 

      Corruption.


  • 133. 
    When managers of a firm seek to unilaterally rewrite the terms of a contract with suppliers, buyers, or complement providers in a way that is more favorable to their firm, they are engaging in
    • A. 

      Opportunistic exploitation.

    • B. 

      Ethical behavior.

    • C. 

      Corruption.

    • D. 

      Philosophical ethics.

    • E. 

      Self-dealing.


  • 134. 
    The takeover constraint
    • A. 

      Effectively limits the number of independent companies that a company can acquire.

    • B. 

      Limits the degree to which managers can pursue strategies that are at variance with stockholder interests.

    • C. 

      Is a theoretical construct that can be ignored in practice.

    • D. 

      Limits the freedom that individual companies have to maximize their long-run return on investment.

    • E. 

      Is imposed by corporate managers on errant business-level managers.


  • 135. 
    Which of the following is not a governance mechanism used to align the interests of managers and stockholders?
    • A. 

      Stockholder meetings

    • B. 

      The board of directors

    • C. 

      Stock-based compensation schemes

    • D. 

      The mission statement

    • E. 

      Takeover constraints


  • 136. 
    Sarbanes-Oxley, federal legislation enacted in 2002, requires
    • A. 

      CEOs to endorse their company's financial statements.

    • B. 

      CFOs to endorse their company's financial statements.

    • C. 

      Companies to use the same accounting firm for auditing and consulting services.

    • D. 

      Members of the board of directors to post a surety bond.

    • E. 

      CEOs and CFOs to endorse their company's financial statements.


  • 137. 
    A stock option is a right to buy
    • A. 

      Shares of the company's stock at the stock's current price.

    • B. 

      Shares of the company's stock at half the stock's current price.

    • C. 

      Shares of the company's stock at a predetermined price at some point in the future.

    • D. 

      Bonds issued by the company.

    • E. 

      None of the above.


  • 138. 
    A takeover constraint
    • A. 

      Limits the extent to which managers pursue strategies that are inconsistent with shareholder interest.

    • B. 

      Prevents a company from being taken over.

    • C. 

      Uses the threat of a takeover to cause the CEO to fear the loss of his or her job.

    • D. 

      Is reduced by corporate raiders.

    • E. 

      Is greatest when a company's stock price is significantly higher than book value.


  • 139. 
    Which of the following stakeholders might not want a company to maximize its long-run profitability and profit growth?
    • A. 

      Suppliers

    • B. 

      Creditors

    • C. 

      Customers

    • D. 

      A and C

    • E. 

      B and C


  • 140. 
    Which of the following is not a responsibility of the board of directors?
    • A. 

      Monitor corporate strategy decisions and ensure that they are consistent with stockholder interests

    • B. 

      Apply sanctions on management when appropriate

    • C. 

      Hire, fire, and compensate the CEO

    • D. 

      Develop the company's competitive strategy

    • E. 

      Make sure the audited financial statements present a true picture of the company's financial situation


  • 141. 
    In applying agency theory to problems of corporate management, the principals are the
    • A. 

      Employees.

    • B. 

      CEO.

    • C. 

      Top management team.

    • D. 

      CEO and the top management team.

    • E. 

      Stockholders.


  • 142. 
    Internal stakeholders of a company include
    • A. 

      Unions.

    • B. 

      Customers.

    • C. 

      The board of directors.

    • D. 

      Suppliers.

    • E. 

      Local communities.


  • 143. 
    Although stockholders are legal owners, CEOs do not always pursue stockholders' interests. CEOs can pursue their own interests because
    • A. 

      They can use their authority over corporate funds to satisfy their desires for status, power, and income.

    • B. 

      They have the ability to initiate a leveraged buyout.

    • C. 

      An outside director will not have knowledge of inside operations if he or she chairs the board.

    • D. 

      Stockholders are the weakest stakeholder group because they are removed from operations.

    • E. 

      Stockholder meetings are not required.


  • 144. 
    Which of the following actions reduces the risk of a company losing external stakeholder support?
    • A. 

      Recognizing stakeholder claims in the mission statement

    • B. 

      Maximizing short-run profit

    • C. 

      Pursuing strategies with high social returns, regardless of cost

    • D. 

      Pursuing strategies with high profits, regardless of the social consequences

    • E. 

      Implementing stock-based compensation schemes


  • 145. 
    The takeover constraint refers to the
    • A. 

      Opportunity to acquire competitors if they are smaller than the acquiring company.

    • B. 

      Risk of being acquired by another company.

    • C. 

      Drop in the price of a share of stock due to a rumored takeover of the company.

    • D. 

      Lack of resources required to acquire another company.

    • E. 

      Reluctance of a company's managers to acquire another company.


  • 146. 
    Which of the following statements concerning profitability and profit growth is false?
    • A. 

      Attaining future profit growth may require investments that reduce current profitability.

    • B. 

      Managers must find the right balance between profitability and profit growth.

    • C. 

      Too much emphasis on current profitability at the expense of profit growth can make an enterprise less attractive to shareholders.

    • D. 

      Boosting a company's profitability and profit growth rate is inconsistent with satisfying the claims of other key stakeholder groups.

    • E. 

      Too much emphasis on profit growth can reduce profitability and make an enterprise less attractive to shareholders.


  • 147. 
    Which of the following statements concerning stock-based compensation schemes for executives is incorrect?
    • A. 

      They are the most objective and unambiguous way to compensate executives.

    • B. 

      They can align the interests of management and stockholders.

    • C. 

      They can dilute the equity of stockholders.

    • D. 

      The option strike price is typically the price that the stock was trading at when the option was granted.

    • E. 

      None of the above are correct.


  • 148. 
    Institutional investors are becoming more aggressive in exerting their power with the board by
    • A. 

      Boycotting stockholder meetings.

    • B. 

      Pursuing leveraged buyouts.

    • C. 

      Selling their shares when they do not agree with company actions.

    • D. 

      Defining a company's business for them.

    • E. 

      Pushing for more effective governance structures.


  • 149. 
    When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, this is called
    • A. 

      On-the-job consumption.

    • B. 

      Agency theory.

    • C. 

      Information asymmetry.

    • D. 

      A tradeoff between stakeholders.

    • E. 

      A performance measurement.


  • 150. 
    A stakeholder impact analysis would include which of the following steps?
    • A. 

      Identification of stakeholders

    • B. 

      Identification of stakeholders' interests and concerns

    • C. 

      Assessment of the likelihood that a stakeholder will file discrimination charges against the company

    • D. 

      A and B

    • E. 

      A and C


  • 151. 
    Pursuing strategies that maximize the long-run profitability and profit growth of a company benefits which group(s) of stakeholders?
    • A. 

      Employees

    • B. 

      Creditors

    • C. 

      Charitable organizations in the local community

    • D. 

      The general public

    • E. 

      All of the above


  • 152. 
    Which of the following statements about the board of directors is false?
    • A. 

      Board members are elected by stockholders.

    • B. 

      The board can be held legally accountable for a company's actions.

    • C. 

      The board has the legal authority to hire, fire, and compensate the CEO.

    • D. 

      All directors are full-time employees of the company.

    • E. 

      Outside directors help perform the monitoring function of the board.


  • 153. 
    Business ethics is concerned with  Business ethics is concerned with
    • A. 

      Teaching people the difference between right and wrong.

    • B. 

      Ensuring that managers weigh the ethical implications of their decisions.

    • C. 

      Ensuring that employees obey the law.

    • D. 

      Replacing economics with social responsibility in the decision-making process.

    • E. 

      Increasing profits.


  • 154. 
    Which of the following is not an accurate statement about current levels of pay for CEOs of U.S.-based firms?
    • A. 

      CEO pay since 2000 is at a historically high level.

    • B. 

      Most of CEO pay is in the form of salary.

    • C. 

      CEO compensation is not closely tied to corporate performance in most firms.

    • D. 

      CEO pay is rising more rapidly than pay for other workers.

    • E. 

      The level of CEO compensation is determined by the corporate board of directors.


  • 155. 
    External stakeholders of a company include
    • A. 

      Unions.

    • B. 

      The board of directors.

    • C. 

      Executive officers.

    • D. 

      Stockholders.

    • E. 

      Employees.


  • 156. 
    CEO compensation packages are most frequently criticized because of their
    • A. 

      Apparent lack of relationship to company performance.

    • B. 

      Life insurance benefits.

    • C. 

      Features.

    • D. 

      Cost to the company.

    • E. 

      Lack of motivation.


  • 157. 
    Ethics may best be thought of as
    • A. 

      Legal prescriptions for conduct.

    • B. 

      Standards of right and wrong.

    • C. 

      Cultural mores.

    • D. 

      Desirable but unattainable behaviors.

    • E. 

      All of the above.


  • 158. 
    The relationship between an enterprise and its stakeholders is essentially what type of relationship?
    • A. 

      Exchange

    • B. 

      Master-servant

    • C. 

      Bailor-bailee

    • D. 

      Supply and demand

    • E. 

      Quasi-egalatarian


  • 159. 
    Members of the board of directors are supposed to be agents for
    • A. 

      Stockholders.

    • B. 

      Employees.

    • C. 

      Executive officers.

    • D. 

      Customers.

    • E. 

      Suppliers.


  • 160. 
    Which of the following is not a criticism of boards?
    • A. 

      Inside directors can use their control over information to influence outside directors.

    • B. 

      The CEO nominates most board directors.

    • C. 

      Outside board chairpersons are ineffective since the outside directors have no knowledge of company operations.

    • D. 

      Insiders can control the information the board receives.

    • E. 

      A board with more insiders may pursue strategies consistent with the interests of management rather than those of stockholders.


  • 161. 
    Which of the following is not one of the advantages of a geographic structure?
    • A. 

      Cost inefficiencies from issues of scope

    • B. 

      Responsiveness to the needs of regional customers

    • C. 

      Lower transportation costs

    • D. 

      More coordination and control than a functional structure

    • E. 

      Centralization of key activities and functions that allow leveraging skills across regions


  • 162. 
    The organizational structure and organizational culture of a company can have
    • A. 

      Little effect on overall company performance.

    • B. 

      A direct bearing on a company's profits.

    • C. 

      A tangential effect on employee morale.

    • D. 

      No impact on employee morale.

    • E. 

      None of the above.


  • 163. 
    To a large degree, any organization's tasks are a function of its
    • A. 

      Market area.

    • B. 

      Labor supply.

    • C. 

      Supervisors.

    • D. 

      Strategy.

    • E. 

      Compensation plan.


  • 164. 
    Control through organizational culture
    • A. 

      Is less expensive than output control.

    • B. 

      Reduces mutual adjustment.

    • C. 

      Involves employees internalizing the norms and values of the organization.

    • D. 

      Includes setting individual goals.

    • E. 

      Reduces mutual adjustment and includes setting individual goals.


  • 165. 
    The most appropriate structure for a company pursuing low-cost and differentiation strategies simultaneously is
    • A. 

      Functional.

    • B. 

      Geographic.

    • C. 

      Matrix.

    • D. 

      Product team.

    • E. 

      Simple.


  • 166. 
    A drawback of the functional structure is
    • A. 

      That each worker must report to more than one superior.

    • B. 

      The difficulty in communicating and coordinating across functions.

    • C. 

      Too much decentralization of decision-making authority

    • D. 

      Its lack of flexibility.

    • E. 

      The need to downsize before implementing this structure.


  • 167. 
    The term used to describe how people learn an organization's culture and way of behaving in the organization is
    • A. 

      Organizational structure.

    • B. 

      Organizational development.

    • C. 

      Organizational design.

    • D. 

      Organizational behavior.

    • E. 

      Organizational socialization.


  • 168. 
    The process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully is referred to as
    • A. 

      Organizational structuring.

    • B. 

      Corporate systems design.

    • C. 

      Organizational design.

    • D. 

      Departmentalization.

    • E. 

      Structural landscaping.


  • 169. 
    A matrix structure would be the most appropriate for which of the following firms?
    • A. 

      A large multinational company with a distinctive competence in marketing

    • B. 

      A company operating in the maturity stage of the industry life cycle

    • C. 

      A medium-sized technological firm with an objective of fast product development time

    • D. 

      A company with a high level of vertical differentiation

    • E. 

      A company pursuing a cost-leadership strategy


  • 170. 
    As a general principle, a company should always choose the hierarchal organization structure that has the
    • A. 

      Most levels of authority.

    • B. 

      Fewest levels of authority.

    • C. 

      Greatest number of people.

    • D. 

      Least number of people.

    • E. 

      None of the above.


  • 171. 
    Strategic control systems utilized to ensure long-run profitability include
    • A. 

      Personal control.

    • B. 

      Output control.

    • C. 

      Behavior control.

    • D. 

      All of the above.

    • E. 

      None of the above.


  • 172. 
    The organization structure that organizations most commonly adopt to solve control problems that result from producing many different kinds of products for many different market segments is the
    • A. 

      Functional structure.

    • B. 

      Process structure.

    • C. 

      Matrix structure.

    • D. 

      Product structure.

    • E. 

      Differentiated structure.


  • 173. 
    When decision-making responsibilities are decentralized, benefits include all of the following except
    • A. 

      Increased motivation and accountability.

    • B. 

      Lower bureaucratic costs from flattened hierarchy.

    • C. 

      Reduced information overload.

    • D. 

      Easier coordination.

    • E. 

      All of the above are benefits of decentralization.


  • 174. 
    Which of the following integrating mechanisms consists of one manager from each relevant function or division assigned to a team that meets to solve a specific mutual problem?
    • A. 

      Direct contact

    • B. 

      Liaison roles

    • C. 

      Teams

    • D. 

      Integrating roles

    • E. 

      The matrix structure


  • 175. 
    In a successful company, the purpose of a control system is to
    • A. 

      Provide managers with a set of incentives to motivate employees to work toward company goals.

    • B. 

      Provide managers with specific feedback on how well the organization and its members are performing.

    • C. 

      Provide managers with information that can be used to criticize employee performance objectively.

    • D. 

      A and B.

    • E. 

      B and C.


  • 176. 
    A cost-leadership strategy would be most effective with
    • A. 

      Output controls.

    • B. 

      Personal controls.

    • C. 

      Behavioral controls.

    • D. 

      Cultural controls.

    • E. 

      No controls.


  • 177. 
    Which of the following structures is the flattest?
    • A. 

      Functional

    • B. 

      Geographic

    • C. 

      Market

    • D. 

      Matrix

    • E. 

      Product


  • 178. 
    A hospital examines its processes closely and then changes them radically to become more patient-centered. Among the changes are new ways of doing tasks and new groupings of workers. This is an example of
    • A. 

      Restructuring.

    • B. 

      Reengineering.

    • C. 

      Benchmarking.

    • D. 

      Downsizing.


  • 179. 
    Which of the following structures requires centralization of value chain support activities?
    • A. 

      The product structure

    • B. 

      The product team structure

    • C. 

      The matrix structure

    • D. 

      The product and product team structures

    • E. 

      The matrix and product team structures


  • 180. 
    Which form of control would you be most likely to find in a voluntary or charity organization?
    • A. 

      Bureaucratic control through rules and procedures

    • B. 

      Control through norms and values

    • C. 

      Financial control through accurate financial statements

    • D. 

      Output control

    • E. 

      Incentive systems


  • 181. 
    Restructuring is
    • A. 

      A rethinking and redesign of a firm's business processes.

    • B. 

      A radical readjustment of the organization's staffing and hierarchy.

    • C. 

      A philosophy that states that mistakes, defects, and poor-quality materials are not acceptable and should be eliminated.

    • D. 

      The shift that firms make from a functional to a more complex structure as the firm grows in complexity and size.

    • E. 

      Employed when a firm needs help in improving its functional strategies.


  • 182. 
    In any organization, for-profit or not-for-profit, span of control refers to the
    • A. 

      Number of managers at the highest levels in the organization.

    • B. 

      The CEO and his or her management team.

    • C. 

      The number of subordinates who report directly to one manager.

    • D. 

      The number of supervisors in a specific segment of a manufacturing activity.

    • E. 

      None of the above.


  • 183. 
    Essentially, centralization or decentralization are concepts that refer to the
    • A. 

      Levels where decisions are made in an organization.

    • B. 

      Number of hierarchical levels existing in an organization.

    • C. 

      Numbers of managers in an organization.

    • D. 

      Number of employees in an organization.

    • E. 

      None of the above.


  • 184. 
    Using output controls at the individual level is least appropriate when the work force consists primarily of
    • A. 

      Salespeople.

    • B. 

      Production workers.

    • C. 

      Research and development scientists.

    • D. 

      Tax accountants.

    • E. 

      Data-entry clerks.


  • 185. 
    An organization that has an adaptive culture is an organization that is
    • A. 

      Innovative.

    • B. 

      Resistant to major changes.

    • C. 

      Supportive of managers who take the initiative and make changes on their own.

    • D. 

      A and C.

    • E. 

      B and C.


  • 186. 
    The specific collection of values, norms, beliefs, and attitudes shared by people and groups in a company is commonly referred to as
    • A. 

      Organizational fit.

    • B. 

      Organizational culture.

    • C. 

      Organizational development.

    • D. 

      Organizational positioning.

    • E. 

      All of the above.


  • 187. 
    Matrix structures
    • A. 

      Have many hierarchical levels.

    • B. 

      Are appropriate for companies with many low-skilled workers.

    • C. 

      Group activities vertically by function and horizontally by product or project.

    • D. 

      Are appropriate for a firm pursuing a low-cost strategy.

    • E. 

      Have many hierarchical levels and two forms of horizontal differentiation.


  • 188. 
    Which of the following is not one of the company levels where strategic control systems measure performance?
    • A. 

      Board of directors

    • B. 

      Corporate

    • C. 

      Divisional

    • D. 

      Functional

    • E. 

      Individual


  • 189. 
    Which of the following actions would you expect to see in a company that is undergoing a reengineering?
    • A. 

      Hiring more managers

    • B. 

      Hiring more workers

    • C. 

      Examining activities from a customer's point of view

    • D. 

      Investing more in product research and development (R&D)

    • E. 

      Centralizing decision-making authority


  • 190. 
    A stereo manufacturer sells only leading-edge stereos to the upscale segment. Which of the following structures is the most appropriate for this firm?
    • A. 

      Matrix

    • B. 

      Multidivisional

    • C. 

      Geographic

    • D. 

      Functional

    • E. 

      Simple


  • 191. 
    Control through organizational culture is so powerful because
    • A. 

      It reduces the costs of organizational control in a large company.

    • B. 

      Self-control develops through the establishment of an internal system of organizational values.

    • C. 

      It results in maximum decentralization and the elimination of bureaucracy.

    • D. 

      It achieves increased performance through the alignment of organizational goals with societal expectations.

    • E. 

      It achieves external control through motivated coworkers.


  • 192. 
    Standardization is employed to squeeze out costs in manufacturing. Standardization may be achieved through standardization of
    • A. 

      Inputs.

    • B. 

      Work processes.

    • C. 

      Outputs.

    • D. 

      Both B and C.

    • E. 

      A, B, and C.


  • 193. 
    Organizations strive to control employees' behavior by linking __________ systems to their control systems.
    • A. 

      Computer

    • B. 

      Disincentive

    • C. 

      Reporting

    • D. 

      Administrative

    • E. 

      Reward


  • 194. 
    When a company engages in restructuring, it may be necessary to
    • A. 

      Increase the size of the work force.

    • B. 

      Increase the number of organizational levels.

    • C. 

      Lay off employees.

    • D. 

      Add to the operating costs.

    • E. 

      None of the above.


  • 195. 
    Which characteristic is shared by all three of the product, market, and geographic structures?
    • A. 

      All three utilize permanent organizational groups.

    • B. 

      All three are based on the use of cross-functional teams.

    • C. 

      All three require that support functions be decentralized.

    • D. 

      All three organize workers into permanent groups, are based on the use of cross-functional teams, and require that support functions be centralized.

    • E. 

      There is no common characteristic for all three structures.


  • 196. 
    A typical matrix organizational structure is
    • A. 

      Flat and decentralized.

    • B. 

      Flat and centralized.

    • C. 

      Tall and decentralized.

    • D. 

      Tall and centralized.

    • E. 

      None of the above.


  • 197. 
    Which of the following is required by a restructuring?
    • A. 

      Eliminating business units

    • B. 

      Rethinking business processes

    • C. 

      Creating more business units

    • D. 

      Flattening the organizational hierarchy

    • E. 

      Broadening the span of control


  • 198. 
    Standardization is a form of
    • A. 

      Output control.

    • B. 

      Financial control.

    • C. 

      Organizational inertia.

    • D. 

      Organizational culture.

    • E. 

      Behavior control.


  • 199. 
    The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as
    • A. 

      Uniformity of output.

    • B. 

      Conformity of behavior.

    • C. 

      Standardization.

    • D. 

      Maximization of effort.

    • E. 

      Behavioral control.


  • 200. 
    Control systems
    • A. 

      Enable a company to evaluate its performance.

    • B. 

      Help managers determine which generic strategy to pursue.

    • C. 

      Are used only at the business level.

    • D. 

      Allow firms to control the external environment.

    • E. 

      Are most effective for firms pursuing cost leadership.


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