Q&A Hero

Q: (p. 252) Quadrant I 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: (p. 251) Acquisition of firms that supply inputs such as raw materials is referred to as A. Conglomerate diversification B. Horizontal acquisition C. Retrenchment D. Vertical acquisition

Q: If a well-managed diversified firm uses both accounting and economic measures, it will be able to unambiguously evaluate divisional performance.

Q: By adjusting for a division's earning and accounting for the cost of investing in a division, economic value added is a much more accurate estimate of a division's economic performance than are traditional accounting measures of performance.

Q: (p. 251) Seeking out countries in which governmental restraints exclude or inhibit global competitors or allow concessions or both, that are advantages to localized firms refers to A. Broad-line global competition B. Protected niche strategy C. National focus strategy D. Global focus strategy

Q: The most popular economically oriented measure of division performance in a diversified firm is economic value added.

Q: (p. 250) Targeting a particular segment of the industry for competition on a worldwide basis refers to A. Broad-line global competition B. Protected niche strategy C. National focus strategy D. Global focus strategy

Q: Economic measures of divisional performance in a diversified firm compare a division's performance with a firm's cost of capital and these measures increase the potential for gaming, which is generally minimized by accounting measures.

Q: (p. 250) Which of these is NOT a basic option that can/should be used to pursue global market coverage? A. Licensing B. Harvesting the business C. Maintaining a domestic production base and exporting D. Establishing foreign-based plants and distribution

Q: Economic methods of divisional performance in a diversified firm build on accounting methods but adjust those methods to incorporate short-term investments that may generate long-term benefits.

Q: (p. 250) ________ is targeting a particular segment of the industry for competition on a worldwide basis. A. Licensing B. National focus strategy C. Global focus strategy D. Protected niche strategy

Q: Most accounting measures of divisional performance focus on long-term benefits and minimize the possibility of a short-term bias.

Q: (p. 249) Industries in which competition crosses national borders are called a(n) __________ industry. A. Emerging B. Growth C. Global D. Fragmented

Q: One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.

Q: (p. 249) Focus strategies in fragmented industries can be pursued through: A. A wide range of services to a single market area B. A narrow range of products C. Handling broad types of orders from small to very large D. Serving the customers at a national level

Q: Only accounting measures of performance can be used in accurately measuring the performance of divisions within a diversified firm.

Q: (p. 249) When a business introduces standardized, efficient, low-cost facilities at multiple locations it can be described as following which of these strategies? A. "Formula" facilities B. Specialization C. Tightly managed decentralization D. Harvesting the business

Q: In an M-form organization, the chief executive officer is solely responsible for strategy implementation.

Q: (p. 249) Businesses in fragmented industries can compete using all of these strategies EXCEPT A. "Formula" facilities B. Tightly managed decentralization C. "Harvesting" the business D. Specialization

Q: The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation.

Q: (p. 248) A fragmented industry is one in which: A. Foreign firms have almost equal market shares on domestic firms B. One firm strongly influences the industry's outcomes C. No firm has a significant market share D. Competitors have been beaten down by regulations

Q: In 1970, institutions owned 62 percent of the equity traded in the United States; by 1990, institutions owned 48 percent of this equity and by 2002, they owned only 32 percent of this equity.

Q: (p. 247) Firms in a declining industry should choose strategies that emphasize all but which one of the following themes? A. Focus on growing segments B. Emphasize price cutting and promotion investment to drive out weaker competitors C. Emphasize product innovation and quality improvement D. Emphasize production and distribution efficiency

Q: Institutional owners are usually pension funds, mutual funds, insurance companies, or other groups of investors that have joined together to manage their investments.

Q: (p. 247) __________ industries are those that make products or services for which demand is growing slower than demand in the economy as a whole. A. Mature B. Declining C. Growth D. Emerging

Q: The title chairman of the board often, but not always, identifies the firm's senior executive.

Q: Differentiate between joint ventures and strategic alliances. Describe the comparative benefits of each type of strategy.

Q: Describe how the grand strategy of turnaround can help a firm that finds itself with declining profits.

Q: A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.

Q: To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities.

Q: Describe some general motivations behind diversifying a firm.

Q: How is concentric diversification different from conglomerate diversification?

Q: Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.

Q: What strategy is being used when the firm acquires other firms that supply it with inputs or are customers for its outputs? Describe the reasons for choosing this strategy.

Q: Research on outside members of boards of directors tends to show that outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance.

Q: In principle, only the CEO and the president report to the board of directors while other senior managers report only to the CEO.

Q: Using an example, describe the grand strategy of horizontal acquisition.

Q: In an M-form organization the role of the board of directors is to formulate corporate strategies consistent with equity holders' interests and to assure strategy implementation.

Q: What is the grand strategy of innovation? How is it different from product innovation?

Q: One common agency problem occurs when managers decide to take some of a firm's capital and invest it in managerial perquisites that do not add economic value to the firm but that do directly benefit those managers.

Q: Compare and contrast market development and product development, citing one example of each.

Q: In an agency relationship the party delegating the decision-making authority is called the agent.

Q: What conditions favor the use of a concentrated growth strategy?

Q: Whenever one party to an exchange delegates decision-making authority to a second party, an agency relationship has been created between these parties.

Q: What is meant by "concentrated growth" strategy? What are the risks and rewards of this strategy?

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 the interests of its equity holders.

Q: What is the premise behind the value disciplines proposed by Treacy and Wiersema? Identify all three and discuss each briefly.

Q: Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.

Q: How does low-cost leadership differ from a differentiation strategy and a focus strategy?

Q: Describe the balanced scorecard as a framework to translate a strategy into operational terms. How does it achieve this?

Q: Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

Q: All firms that use the multidivisional structure use the same criteria for defining the boundaries of profit-and-loss centers.

Q: What seven criteria should be used in preparing long-term objectives? What is the purpose of each?

Q: The divisions in an M-form organization are true profit-and-loss centers.

Q: To achieve long-term prosperity, strategic planners commonly establish long-term objectives in which seven areas? Describe each briefly.

Q: In the multidivisional structure, each business that the firm engages in is managed through a division.

Q: (p. 225) A Japanese keiretsu: A. Involves no more than 10 firms B. Is joined around a trading company or bank C. Does not minimize risks of competition D. Is a licensing agreement

Q: Another name for the M-form is the multidivisional structure.

Q: (p. 225) A chaebol: A. Is like a keiretsu except financed through government banking groups B. Is run by the owners C. Is financed through stock or bond sources D. Is found in Viet Nam

Q: The most common organization structure for implementing a corporate diversification strategy is the U-form.

Q: (p. 225) Strategic choice decision making leads to the selection of long-term objectives and grand strategies. This process is: A. Sequential B. Random C. Simultaneous D. Closed

Q: Discuss the importance of compensation policies in diversified firms and identify the CEO compensation package that most closely aligns the interests of the CEO with those of stockholders.

Q: (p. 224) Consortia are: A. Licensing agreements that exchange equity positions B. Joint ventures C. Decreasing costs but not risks D. Large interlocking relationships between businesses of an industry

Q: (p. 224) Strategic alliances are distinguished from joint ventures because: A. Joint ventures do not work in global situations B. Joint ventures are synonymous with licensing agreements C. Alliances never transfer property rights from U.S. licensors to foreign licensees for strategic alliance D. There are no equity positions taken in strategic alliances

Q: Discuss the role of transfer pricing systems in an M-form organization, identify difficulties with setting optimal prices, and identify four alternative transfer pricing schemes.

Q: (p. 224) _______ is partnerships that exist for a defined period during which partners contribute their skills and expertise to a cooperative project. A. Licensing agreements B. Franchising agreements C. Export agreements D. Strategic alliances

Q: Discuss the relationship between accounting methods of measuring divisional performance and economic methods, identify the formula used for calculating economic value added, and discuss methods for adjusting accounting earnings and the importance of making these adjustments.

Q: (p. 221) Occasionally, two or more capable companies lack a necessary component for success in a particular competitive environment. The optimal strategy in such a case would be: A. Concentric integration B. Diversification C. Conglomerate diversification D. Joint venture

Q: Discuss the role of accounting measures of divisional performance, identify three different standards of comparison that can be used when evaluating the accounting performance of a division along with the strengths and weaknesses of each standard, and describe the potential weaknesses of accounting measures of divisional performance.

Q: (p. 221) When companies lack a necessary component for success in a particular environment, they may participate in types of joint ventures which include: A. Leasing B. Strategic alliance C. Joint ownership D. Divestiture

Q: Discuss the role of division general managers in an M-form organization and compare and contrast this role with that of senior executives in U-form organizations.

Q: (p. 220) Which kind of bankruptcy provides time and protection to the debtor firm? A. Chapter 5 bankruptcy B. Chapter 7 bankruptcy C. Chapter 11 bankruptcy D. Chapter 12 bankruptcy

Q: Identify the responsibilities of the senior executive in an M-form organization and discuss the three different roles in the office of the president and the responsibilities of each role.

Q: Discuss the role of institutional investors in an M-form organization. In addressing this question, be sure to identify who institutional investors are and discuss trends in institutional ownership and whether institutional investors encourage managers to act in ways that are consistent with the interests of equity holders or if institutional investors are overly myopic.

Q: A. Reorganization B. Liquidation C. A second chance D. A conditional second chance

Q: (p. 218) More than 75 percent of financially desperate firms file for a: A. Reorganization bankruptcy B. Partial bankruptcy C. Liquidation bankruptcy

Q: Describe the nature and role of the board of directors in an M-form organization and discuss who generally serves on the board, the role of outside members on a board of directors and when the roles of CEO and chairman of the board should be combined or separated.

Q: (p. 218) Which of the following types of bankruptcies provides the firm with a conditional second chance? A. Liquidation bankruptcy B. Total bankruptcy C. Organizational bankruptcy D. Reorganization bankruptcy

Q: Define what constitutes an agency relationship and the roles of the principal and the agent; discuss how the agency relationship is reflected in the context of corporate diversification and when the agency relationship can be effective; and identify two common agency problems.

Q: (p. 218) When a firm agrees to a complete distribution of its assets to creditors, most of whom will receive a small fraction of the amount that they are owed, this form of bankruptcy is called a: A. Reorganization bankruptcy B. Liquidation bankruptcy C. Partial bankruptcy D. Organizational bankruptcy