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Q:
(p. 234) Low-cost advantages should ______ the attractiveness of substitute products.
A. increase
B. lessen
C. strengthen
D. have no effect on
Q:
In network industries with increasing returns to scale where standards are unimportant, strategic alliances can be used to create a more favorable competitive environment.
Q:
(p. 234) Truly low-cost advantages ______ price competition.
A. increase
B. lessen
C. strengthen
D. have no effect on
Q:
Learning race dynamics are particularly common in relations among large, well-established firms.
Q:
(p. 234) Common resource, skills and organizational requirements to support an "overall cost leadership" generic strategy include all but:
A. Sustained access to capital
B. Subjective measurement and incentives instead of quantitative measures
C. Process engineering skills
D. Tight cost control
Q:
Firms with high levels of absorptive capacity will learn at higher rates than firms with low levels of absorptive capacity, even if these two firms are trying to learn exactly the same things in an alliance.
Q:
(p. 234) ______ type of innovations support a cost leadership strategy. A. disruptive
B. process
C. Product
D. breakthrough
Q:
Network industries are characterized by decreasing returns to scale.
Q:
(p. 234) Organizational requirements to support and sustain cost leadership are:
A. Subjective measurements and incentives
B. Tradition of closeness to key customers
C. Frequent, detained control reports
D. Some personnel skilled in sales and operations
Q:
When both parties to an alliance are seeking to learn something from that alliance, a learning race can evolve.
Q:
(p. 234) Which of the following is NOT a skill or a resource that fosters cost leadership?
A. Strong downstream partners
B. Process engineering skills
C. Low-cost distribution system
D. Sustained capital investment and access to capital
Q:
In general, due to the intangible nature of knowledge, firms are not able to use alliances to learn from their competitors.
Q:
(p. 232) Business success built on cost leadership requires the business to be able to provide its product or service at a cost _____ what its competitors can achieve. A. at
B. above
C. below
D. equal to
Q:
When a firm cannot realize the cost savings from economies of scale all by itself, it may join in a strategic alliance with other firms so that together both firms will have sufficient volume to be able to gain the cost advantages of economies of scale.
Q:
(p. 232) Which of these refers to business strategies that seek to establish long-term competitive advantages by emphasizing and perfecting value chain activities that can be achieved at costs substantially below what competitors are able to match on a sustained basis?
A. Differentiation strategies
B. Grand strategies
C. Low-cost strategies
D. Speed-based strategies
Q:
In an equity alliance, cooperating firms supplement contracts with equity holdings an alliance partners.
Q:
(p. 231) Which of the following are often referred to as generic strategies?
A. Cost leadership and differentiation
B. Market leadership and differentiation
C. Cost leadership and product pricing
D. Differentiation and value chain analysis
Q:
(p. 231) Businesses that create competitive advantages from one or both of cost and differentiation usually experience ______ profitability within their industry.
A. above-average
B. average C. below average
D. marginal
Q:
In a nonequity alliance, firms create a legally independent firm in which they invest and from which they share any profits that are created.
Q:
A strategic alliance exists whenever three or more independent organizations cooperate in the development, manufacture, or sale of products or services.
Q:
(p. 231) The two most prominent sources of competitive advantage for a business are:
A. Integration and coordination
B. Cost and differentiation
C. People and products
D. Products and services
Q:
The use of strategic alliances to manage economic exchanges has grown substantially over the last several years.
Q:
Explain the model of Grand Strategy Clusters.
Q:
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
Q:
Briefly describe the Grand Strategy Selection Matrix. What strategies are recommended in each quadrant? Explain.
Q:
The two responsibilities of the senior executive in an M-form organization are
A) strategy formulation and strategy implementation.
B) strategy formulation and strategic control.
C) strategic control and strategy implementation.
D) strategy implementation and differentiation.
Q:
What are the strategy choices in global industries?
Q:
Which of the following statements regarding institutional investors is accurate?
A) Institutional investors tend to be more interested in maximizing the short-term value of their portfolios than in the long-term performance of firms in those portfolios.
B) High levels of institutional ownership are negatively related to the level of R&D in a firm.
C) High levels of institutional ownership have a strong, positive relationship with the level of R&D in a firm.
D) High levels of institutional ownership lead firms to sell strategically unrelated businesses.
Q:
What is a global industry? What are the unique strategy-shaping features of global industries?
Q:
In 1970, institutions owned ________ percent of the equity traded in the United States and by 2002 they owned ________ percent of the equity traded in the United States.
A) 32; 62
B) 62; 32
C) 48; 62
D) 32; 48
Q:
Define fragmented industries. What ways businesses in this industry can pursue strategies? Explain.
Q:
The senior executive (the president or CEO) in an M-form organization has two responsibilities:
A) budgeting and accounting.
B) budgeting and mission setting.
C) strategy formulation and strategy implementation.
D) strategy formulation and budgeting.
Q:
Define declining industry. What strategic choices do the firms in this industry have? Explain.
Q:
Supervision of the board of directors in its monitoring role is the responsibility of
A) the CEO.
B) the chairman of the board.
C) the chief operating officer.
D) the president.
Q:
Evaluate the strategic choices for businesses in mature industries.
Q:
In 2005, what percentage of the equity traded in the United States was owned by institutional investors?
A) 20%
B) 38%
C) 59%
D) 69%
Q:
What are the strategic choices in growing industries?
Q:
The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.
A) nominating committee
B) audit committee
C) personnel and compensation committee
D) finance committee
Q:
The ________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements.
A) audit committee
B) finance committee
C) nominating committee
D) personnel and compensation committee
Q:
Define emerging industries. Describe the features of business strategies required for success in this industry.
Q:
In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests
A) that combining these roles is always positively related with firm performance.
B) that separating these roles is always positively related with firm performance.
C) that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.
D) that separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.
Q:
Describe the different stages of industry evolution. Identify the key functional areas and strategy focus of each stage.
Q:
Which of the following statements regarding outside members of boards of directors is accurate?
A) Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.
B) Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
C) Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
D) Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.
Q:
Evaluate the risks of speed as a competitive advantage.
Q:
A board of directors typically consists of
A) 10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm.
B) 10 to 15 individuals drawn exclusively from a firm's top management group.
C) 10 to 15 individuals drawn exclusively from individuals outside the firm.
D) 10 to 15 individuals drawn from all stakeholder groups associated with the firm.
Q:
Speed-based competitive advantages can be creates around what types of activities? Explain.
Q:
Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?
A) Senior executives
B) Corporate staff
C) Board of directors
D) Division general managers
Q:
What potential risks managers must take into account as they evaluate the differentiation based advantages?
Q:
Define differentiation. Evaluate a business's differentiation opportunities using skills, resources and organizational requirements.
Q:
Two common agency problems include
A) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion.
B) managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion.
C) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking.
D) managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.
Q:
What are the risks of a cost leadership strategy?
Q:
In an agency relationship, the party that delegates decision-making authority to another individual is known as the
A) stakeholder.
B) principal.
C) agent.
D) stockholder.
Q:
Evaluate a business's cost leadership opportunities using skills, resources and organizational requirements.
Q:
The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with
A) the interests of all of its stakeholders.
B) an exclusively short-term perspective.
C) an exclusively long-term perspective.
D) the interests of its equity holders.
Q:
(p. 253) Which of these refers to acquisition of businesses that are related to the acquiring firm in terms of technology, markets or products?
A. Concentric diversification
B. Horizontal integration
C. Conglomerate diversification
D. Divestiture
Q:
The divisions of an M-form organization are true
A) profit-and-loss centers.
B) functional units.
C) matrix teams.
D) organic structures.
Q:
(p. 253) Growth through the acquisition of one or more similar firms operating at the same stage of the production marketing chain refers to
A. Product development
B. Joint ventures
C. Conglomerate diversification
D. Horizontal acquisition
Q:
In a multidivisional structure, each business that the firm engages in is managed through a
A) product line.
B) division.
C) geographic unit.
D) function.
Q:
The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.
A) matrix
B) U-form
C) M-form
D) functional
Q:
(p. 253) A strategy that seeks to reap the initially high profits associated with customer acceptance of new or greatly improved product refers to
A. Joint ventures
B. Horizontal integration
C. Innovation
D. Conglomerate diversification
Q:
(p. 254) Quadrant II of the Grand Strategy Cluster suggests which of these strategies?
A. Horizontal acquisition
B. Concentrated growth
C. Concentric diversification
D. Joint ventures
Q:
Corporate spin-offs are different from asset divestitures.
Q:
(p. 254) Which of these strategies are suggested by the first quadrant of the Grand Strategy Cluster?
A. Horizontal acquisition
B. Concentrated growth
C. Concentric diversification
D. Joint ventures
Q:
Transfer prices should equal opportunity cost.
Q:
(p. 253) Selling present products to customers in related marketing areas by adding channels of distribution is called
A. Market development
B. Vertical acquisition
C. Turnaround strategy
D. Conglomerate diversification
Q:
It is unusual for a diversified firm to change its transfer-pricing mechanisms every few years in an attempt to find the "right" transfer-pricing mechanism.
Q:
(p. 252) Quadrant IV of the Grand Strategy Selection Matrix suggests which of these strategies?
A. Vertical acquisition
B. Turnaround
C. Product development
D. Horizontal acquisition
Q:
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.
Q:
(p. 252) The most common approach in Quadrant III of the Grand Strategy Selection Matrix, when the basic idea underlying the matrix is the choice of an internal or external emphasis for growth or profitability is
A. Concentrated growth
B. Horizontal growth
C. Divestiture
D. Conglomerate diversification
Q:
Traditionally, the compensation of corporate managers in a diversified firm has been only loosely connected to the firm's economic performance.
Q:
(p. 252) The sale of a firm or a major component refers to
A. Retrenchment
B. Divestiture
C. Liquidation
D. Conglomerate diversification
Q:
In choosing which transfer pricing system to use, a firm should be less concerned about finding the "right" transfer-pricing mechanism and be more concerned about choosing a transfer-pricing policy that creates the fewest management problems.
Q:
(p. 252) ________ offers the best possibility for recouping the firm's investment.
A. Liquidation
B. Divestiture
C. Turnaround
D. Retrenchment
Q:
In a diversified firm, market prices are set by a firm's corporate management to accomplish corporate objectives while transfer prices are determined by the market forces of supply and demand.
Q:
(p. 252) Which of these refers to cutting back on products, markets, operations because the firm's overall competitive and financial situation cannot support commitments needed to sustain or build its operations?
A. Conglomerate diversification
B. Concentrated growth
C. Retrenchment
D. Vertical integration
Q:
Intermediate products or services are those products or services that are produced in one division of a diversified firm that are used as inputs by another division.
Q:
(p. 251) Acquiring or entering businesses unrelated to a firm's current technologies, markets or products is referred to as
A. Conglomerate diversification
B. Horizontal integration
C. Retrenchment
D. Vertical integration
Q:
In zero-based budgeting, each project has to stand on its own merits each year by being included among the important projects that a firm can afford to fund and no project receives funding for the future simply because it received funding in the past.
Q:
(p. 252) Quadrant II of the Grand Strategy Selection Matrix suggests which of these strategies when the basic idea underlying the matrix is the choice of an internal or external emphasis for growth or profitability?
A. Horizontal integration
B. Conglomerate diversification
C. Market development
D. Retrenchment
Q:
To the extent that a firm exploits real economies of scope in implementing a diversification strategy, it will be able to unambiguously evaluate the performance of individual division in that firm.