1.
value:
2.00 points
Which of the following statements about corporate
diversification is incorrect?
Creating added value for shareholders via diversification
requires building a multibusiness company where the whole is greater than the
sum of its parts.
Shareholder value is not created by diversification unless
it passes the “better off” or “1 + 1 = 3 test.”
The more attractive an industry’s prospects are for growth
and good long-term profitability, the less expensive it can be to enter.
Diversification moves that satisfy all three diversification
tests have the greatest potential to grow shareholder value over the long term.
Diversification cannot be considered a success unless it
results in added shareholder value—value that shareholders cannot capture for
themselves by spreading their investments across the stocks of companies in
different industries.
2.
value:
2.00 points
Striving to be socially responsible entails touching such
bases as
what actions to take to enhance workforce diversity and make
the company a great place to work.
exerting conscious efforts to ensure that all elements of
the company’s strategy are ethical and actions to make the company a great
place to work.
All of these choices are correct.
what, if any, actions to take to protect or enhance the
environment (beyond what is legally required).
whether to make charitable contributions and donate money
and the time of company personnel to community service endeavors.
3.
value:
2.00 points
Putting together a capable top management team
is important in building an organization capable of
proficient strategy execution but is nearly always less crucial than doing a
superior job of training and retraining employees.
should take top priority in building competitively valuable
core competencies.
entails filling key managerial slots with people who are
good at figuring out what needs to be done and skilled in “making it
happen” and delivering good results.
is particularly essential for executing a strategy to keep a
company’s costs lower than rivals’ and become the industry’s low-cost leader.
is particularly important when the firm is pursuing
unrelated diversification or making a number of new acquisitions in related
businesses.
4.
value:
2.00 points
Acquiring an existing firm operating in a foreign country
rather than undertaking internal development may be the least risky and
cost-efficient means of overcoming entry barriers such as
putting the acquiring firm’s strategy into place.
gaining access to local distribution networks, building supplier
networks, and establishing working relationships with key government officials.
accelerating efforts to build a strong market presence.
All of these choices are correct.
moving directly to the task of transferring resources and
personnel, and integrating and redirecting activities into the acquiring firm’s
operation.
5.
value:
2.00 points
Which is not one of the four conditions that make entry via
an internally developed start-up strategy in a foreign country appealing?
When adding new production capacity will adversely impact
the supply-demand balance in the local market
All of these choices are correct.
Having scale economies to compete against local rivals
When creating an internal start-up is cheaper than making an
acquisition
Having the ability to gain good distribution access
6.
value:
2.00 points
Using domestic plants as a production base for exporting
goods to selected foreign country markets
can be an excellent initial strategy to pursue international
sales.
works well when a firm does not have the financial resources
to employ cross-market subsidization.
can be a powerful strategy because the company is not
vulnerable to fluctuating exchange rates.
can be a competitively successful strategy when a company is
focusing on vacant market niches in each foreign country.
is usually a weak strategy when competitors are pursuing
multicountry strategies.
7.
value:
2.00 points
The consequences of pursuing a strategy that has unethical
or shady components include
customer defections and loss of reputation.
the costs of providing remedial education and ethics
training to company personnel.
lower stock prices.
All of these choices are correct.
incurring potentially large legal and investigative costs,
government fines, and civil penalties.
8.
value:
2.00 points
The character of a company’s corporate culture is a product
of
the company’s core values and business principles.
All of these choices are correct.
the work practices and behaviors that define “how we do
things around here.”
its style of operating and ingrained behaviors and
attitudes.
the “chemistry” that permeates its work
environment.
9.
value:
2.00 points
The businesses in a diversified company’s lineup exhibit
good resource fit when
the resource requirements of each of its businesses exactly
match the resources the company has available.
its individual businesses add to a company’s resource
strengths and when it has the resources to adequately support the requirements
of its businesses as a group without spreading itself too thin.
each business unit produces sufficient cash flows over and
above what is needed to build and maintain the business, thereby providing the
parent company with enough cash to pay shareholders a generous and steadily
increasing dividend.
each business unit generates just enough cash flow annually
to fund its own capital requirements and thus does not require cash infusions
from the corporate parent.
there are enough cash cow businesses to support the capital
requirements of the cash hog businesses.
10.
value:
2.00 points
Experience indicates that strategic alliances
are generally successful.
work well in cooperatively developing new technologies and
new products but seldom work well in promoting greater supply chain efficiency.
work best when they are aimed at achieving a mutually
beneficial competitive advantage for the allies.
stand a reasonable chance of helping a company reduce
competitive disadvantage but very rarely form the basis of a durable
competitive advantage over rivals.
are usually a company’s best approach to building a
distinctive competence.
11.
value:
2.00 points
A company’s strategy needs to be ethical because
of the risks of getting caught and prosecuted by
governmental authorities if an unethical strategy is used.
a strategy that is unethical not only damages the company’s
reputation, but it can also have costly consequences.
of the dangers that top management will be embarrassed if
the company’s unethical behavior is publicly exposed.
unethical strategies are inconsistent with or else weaken
the corporate culture.
everyone is an ethics watchdog, and somebody is sure to blow
the whistle on the company’s unethical behavior.
12.
value:
2.00 points
Strategic alliances, joint ventures, and cooperative
agreements between domestic and foreign firms are a potentially fruitful means
for the partners to
enter additional country markets.
fill competitively important gaps in their technical
expertise and/or knowledge of local markets.
gain better access to scale economies in production and/or
marketing.
All of these choices are correct.
share distribution facilities and dealer networks, thus
mutually strengthening their access to buyers.
13.
value:
2.00 points
One of the suggested advantages of an unrelated
diversification strategy is that it
increases strategic fit opportunities and the potential for
a 1 + 1 = 3 outcome on the bottom line.
spreads the stockholders’ risks across a group of truly
diverse businesses.
expands a firm’s competitive advantage opportunities to
include a wider array of businesses.
results in having more cash cow businesses than cash hog
businesses.
facilitates capturing the financial fits among sister
businesses (as compared to a strategy of related diversification).
14.
value:
2.00 points
Dispersing particular value chain activities across many
countries rather than concentrating them in a select few countries can be more
advantageous when
buyer-related activities (such as sales, advertising,
after-sale service and technical assistance) need to take place close to
buyers.
All of these choices are correct.
it helps hedge against the risks of exchange rate fluctuations,
supply disruptions, and adverse political developments.
high transportation costs make it uneconomical to operate
from one or just a few locations.
there are diseconomies of scale in trying to operate from a
single location.
15.
value:
2.00 points
The basic premise of unrelated diversification is that
the least risky way to diversify is to seek out businesses
that are leaders in their respective industry.
any company that can be acquired on good financial terms and
has satisfactory growth and earnings potential represents a good acquisition
and a good business opportunity.
the best way to build shareholder value is to acquire
businesses with strong cross-business financial fit.
the best companies to acquire are those that offer the
greatest economies of scope rather than the greatest economies of scale.
the task of building shareholder value is better served by
seeking to stabilize earnings across the entire business cycle than by seeking
to capture cross-business strategic fits.
16.
value:
2.00 points
The guidelines for designing an incentive compensation
system that will help drive successful strategy execution include
having an outside wage and salary expert administer the
system, so that there is no doubt as to its fairness and impartiality.
making minimal use of nonmonetary incentives and rewarding
people for diligently performing their assigned duties.
basing the incentives on group performance rather than
individual performance.
having a bonus and incentive plan that applies to managers
only (employees should generally not be included in incentive pay plans but
should have attractive wages and salaries).
making the payoff for meeting or beating performance targets
a major, not minor, piece of the total compensation package.
17.
value:
2.00 points
A belief in ethical relativism leads to the conclusion that
ethical standards are determined objectively (rather than
subjectively).
whether the payment of bribes and kickbacks should be deemed
ethical or unethical depends on the moral standards, values, beliefs,
convictions, and business norms that prevail in particular cultures, societies,
countries, or circumstances.
because ethical standards are subjective, it is perfectly
appropriate for each company to define and implement its own ethical principles
of right and wrong as concerns the use of underage labor and the payment of
bribes and kickbacks.
standards of right and wrong are governed by what is legal
in a given country; thus, whether the use of underage labor and the payment of
bribes and kickbacks is ethical or unethical is governed by local law.
ethical standards are objective and universal; thus, whether
the use of underage labor and the payment of bribes and kickbacks should be
deemed ethical or unethical definitely is not dependent on the moral standards,
values, beliefs, convictions, and business norms that prevail in particular
cultures, societies, countries, or circumstances.
18.
value:
2.00 points
Once a company has decided to employ one of the five basic
competitive strategies, then it must also consider such additional strategic
choices as
whether and when to go on the offensive and initiate
aggressive strategic moves to improve the company’s market position.
whether to bolster the company’s market position by merging
with or acquiring another company.
whether to form strategic alliances and collaborative
partnerships to add to its accumulation of resources and competitive
capabilities.
whether to integrate forward or backward into more stages of
the industry value chain.
All of these choices are correct.
19.
value:
2.00 points
First-mover advantages are unlikely to be present in which
one of the following instances?
when first-time customers remain strongly loyal to
pioneering firms in making repeat purchases
when rapid market evolution (due to fast-paced changes in
technology or buyer preferences) presents opportunities to leapfrog a
first-mover’s products with more attractive next-version products
when early commitments to new technologies, new-style
components, new or emerging distribution channels, and so on can produce an
absolute cost advantage over rivals
when pioneering helps build a firm’s image and reputation
with buyers
when moving first can constitute a preemptive strike, making
imitation extra hard or unlikely
20.
value:
2.00 points
The strength of a think local, act local multidomestic
strategy is that
each of a company’s country strategies is almost totally
different from and unrelated to its strategies in other countries.
it eliminates the costs and burdens of trying to coordinate
the strategic moves undertaken in one country with the moves undertaken in the
other countries.
the plants located in different countries can be operated
independently of one another, thus promoting greater achievement of scale economies.
it matches a company’s competitive approach to prevailing
market and competitive conditions in each country market.
it avoids host-country ownership requirements, and import
quotas.
21.
value:
2.00 points
Which one of the following is not a substantive
culture-changing action that a company’s managers can undertake to alter a
problem culture?
screening all candidates for new positions carefully and
hiring only those who appear to fit in with the new culture
urging company personnel to search outside the company for
work practices and operating approaches that may be an improvement over what
the company is presently doing
revising policies and procedures in ways that will help
drive cultural change
promoting individuals who have stepped forward to advocate
the shift to a different culture and who can serve as role models for the
desired cultural behavior
designing compensation incentives that boost the pay of
teams and individuals who display the desired cultural behaviors and hit
change-resisters in the pocketbook
22.
value:
2.00 points
The options for allocating a diversified company’s financial
resources include
making acquisitions to establish positions in new businesses
or to complement existing businesses.
funding long-range R&D ventures aimed at opening market
opportunities in new or existing businesses.
investing in ways to strengthen or grow existing businesses.
All of these choices are correct.
paying off existing debt, increasing dividends, building
cash reserves, or repurchasing shares of the company’s stock.
23.
value:
2.00 points
Which of the following is not one of the problems and risks
of cross-border strategic alliances, that is, between domestic and foreign
firms?
Becoming overly dependent on another company for essential
expertise and competitive capabilities
Suspicions about whether allies are being forthright in
exchanging information and expertise
Overcoming language and cultural barriers, and the sometimes
extensive managerial time required for trust-building, communication, and
coordination
Making it harder to pursue a multidomestic strategy as
compared to a global strategy
The trouble allies can have reaching mutually agreeable ways
to deal with key issues
24.
value:
2.00 points
Opportunities for cross-business strategic fit exist
in production and distribution activities only.
in sales and marketing activities only.
in supply chain activities only.
in R&D and technology activities only.
anywhere along the respective value chains of related
businesses; no one place is best.
25.
value:
2.00 points
When evaluating strategic fit benefits that related
diversification can deliver, one must keep in consideration a number of
factors. Which one is not relevant?
The capture of cross-business strategic fits benefits is
possible only through related diversification.
Related diversification is the process of holding the stock
of many businesses in a portfolio.
Shareholder value is created when the diversified company’s
profitability exceeds expectations.
Shareholder value stemming from a diversified business
cannot be replicated by simply owning a diversified portfolio of stocks.
Cross-business strategic fit benefits are not automatically
realized; the benefits materialize only after management has successfully
pursued internal actions to capture them.
26.
value:
2.00 points
The three tests for judging whether a particular
diversification move can create value for shareholders are the
industry attractiveness test, the profitability test, and
the shareholder value test.
attractiveness test, the cost-of-entry test, and the
better-off test.
shareholder value test, the cost-of-entry test, and the
profitability test.
strategic fit test, the competitive advantage test, and the
return on investment test.
resource fit test, the profitability test, and the
shareholder value test.
27.
value:
2.00 points
The most important strategy-making guidance that comes from
drawing a Nine-Cell Industry Attractiveness-Competitive Strength Matrix is
why cash cow businesses are more valuable than cash hog
businesses.
which businesses are in industries with profitable value
chains and which are in industries with money-losing value chains.
which businesses have the biggest competitive advantages and
which ones confront serious competitive disadvantages.
which businesses in the portfolio have the most potential
for strategic fit and resource fit.
that corporate resources should be concentrated on those
businesses enjoying both a higher degree of industry attractiveness and
competitive strength and that businesses having low competitive strength in
relatively unattractive industries should be looked at for possible
divestiture.
28.
value:
2.00 points
Which of the following is not something a company should
usually consider in crafting a strategy of social responsibility?
making charitable contributions and donating money and the
time of company personnel to community service endeavors
actions to protect or enhance the environment
actions to ensure the company has an ethical strategy and
operates honorably and ethically
actions to benefit shareholders (such as raising the
dividend to boost the stock price)
actions to create a workforce diversity program
29.
value:
2.00 points
A think global, act global approach to crafting a global
strategy involves
selling much the same products under the same brand names
everywhere and expanding into most, if not all, nations where there is
significant buyer demand.
pursuing the same basic competitive strategy theme
(low-cost, differentiation, best-cost, and focused) in all countries where the
firm does business.
integrating and coordinating the company’s strategic moves
worldwide.
utilizing the same competitive capabilities, distribution
channels, and marketing approaches worldwide.
All of these choices are correct.
30.
value:
2.00 points
In a diversified company, the competitive advantage
potential of cross-business strategic fit is greater when
businesses included in the corporate portfolio compete in
fast-growing industries.
the strategy maps of the various business units converge.
valuable opportunities exist to transfer skills, technology,
or intellectual capital from one business to another, combine the performance
of related activities, or share the use of a well-respected brand name across
multiple products or service categories.
the business lineup includes a number of cash cows.
competition is less intense and driving forces are
relatively weak.
31.
value:
2.00 points
Which one of the following is not a good example of a
defensive strategy to protect a company’s market share and competitive
position?
signaling challengers that retaliation is likely in the
event that they launch an attack
adding new features or models and otherwise broadening the
product line to close off vacant niches and gaps to opportunity-seeking
challengers
thwarting the efforts of rivals to attack with lower prices
by maintaining economy-priced options of its own
making early announcements about impending new products or
price changes to induce potential buyers to postpone switching
engaging in a preemptive strike strategy in an effort to
discourage rivals from being aggressive
32.
value:
2.00 points
Companies with politicized cultures
tend be plagued with infighting that consumes a great deal
of organizational energy and often results in the company’s strategic agenda
taking a backseat to political maneuvering.
are typically run by political managers who have little
regard for high ethical standards.
are typically opposed to sound strategic initiatives
designed to promote the well-being of specific functions.
tend to be preoccupied with making sure the company has a
safe, follow-the-industry-leader type of strategic vision and to avoid risky
business strategies.
are typically opposed to performance-based incentive
compensation and employee empowerment.
33.
value:
2.00 points
Which one of the following is not a benefit of prescribing
policies and operating procedures to aid management’s task of implementing
strategy?
helping enforce consistency in how particular activities are
performed
providing top-down guidance to operating managers,
supervisory personnel, and employees regarding how to alter past practice and
how things need to be done now
promoting the creation of a can-do work climate that
facilitates good strategy execution
helping build employee commitment to adopting best practices
and using the tools of TQM and Six Sigma
Two answers are correct: helping enforce consistency in how
particular activities are performed, and providing top-down guidance to
operating managers, supervisory personnel, and employees regarding how to alter
past practice and how things need to be done now.
34.
value:
2.00 points
Vertical integration strategies
are one of the best strategic options for helping companies
win the race for global market leadership.
extend a company’s competitive and operating scope because
its operations extend across more parts of the total industry value chain.
are a cost-effective means of expanding a company’s lineup
of products and services.
are particularly effective in boosting a company’s ability
to expand into additional geographic markets, particularly the markets of
foreign countries.
are a good strategy option for improving a company’s supply
chain management capabilities, pursuing efforts to remodel a company’s value
chain, achieving direct control over the costs of performing value chain
activities, and gaining access to buyers.
35.
value:
2.00 points
Which of the following is a diversified business with one
major “core” business and a collection of small related or unrelated
businesses?
broadly diversified enterprise
narrowly diversified enterprise
high-compensation/low-risk enterprise
multibusiness enterprise
dominant business enterprise
36.
value:
2.00 points
Which of the following is not among the types of actions and
initiatives undertaken by management in the strategy execution process?
building an organization capable of executing the strategy
instituting policies and procedures that facilitate rather
than impede strategy execution
pushing for continuous improvement in how value chain
activities are performed
tying rewards directly to the achievement of strategic and
financial targets and to good strategy execution
deciding which core competencies and value chain activities
to leave as is and which ones to overhaul and improve
37.
value:
2.00 points
The purpose of managing by walking around or MBWA is to
gather information about what is happening from people at
different organizational levels and learn firsthand how well the strategy
execution process is proceeding.
be visible and accessible to employees.
gather information about what strategy to follow and to
learn what competitors are doing.
learn more about company operations and see how activities
are really being done.
give employees a chance to make suggestions for improvement.
38.
value:
2.00 points
Which of the following is not a typical strategic objective
or benefit that drives mergers and acquisitions?
to gain quick access to new technologies or other resources
and capabilities
to fundamentally alter a company’s trajectory and improve
its business outlook
to expedite shifting from one strategy to another and gain
better access to additional financial capital
to extend a company’s business into new product categories
and/or expand a company’s geographic coverage
to create a more cost-efficient operation out of the
combined companies
39.
value:
2.00 points
Which of the following is not a strategic option companies
should consider in tailoring their strategy to fit circumstances of emerging
country markets?
All of these choices are correct.
Try to change the local market to better match the way the
company does business elsewhere.
Be prepared to modify aspects of the company’s business
model to accommodate local circumstances.
Prepare to compete on the basis of low price.
Enter only those emerging markets that provide profit
sanctuaries by offering opportunities for offensive strategies, such as
preemptive strikes.
40.
value:
2.00 points
The most common building blocks for a company’s
organizational structure
usually consist of two divisions: a division charged with
performing primary value chain activities and a division charged with
performing support activities.
are almost always the departments performing such key
administrative support functions as finance, accounting, information
technology, human resource management, and R&D.
usually consist of supply chain management, components
manufacture, assembly, distribution, and administration.
typically consist of an unempowered employee department, an
empowered employee department, teams of front-line supervisors, teams of
middle-level managers and administrators, and the group of top-level executives
who comprise the company’s “executive suite.”
involve a functional or departmental structure that includes
process, geographic, product, or customer groups performing one or more major
processing steps along the value chain.
41.
value:
2.00 points
Mergers and acquisitions
are usually more successful in helping a company’s shift
from one competitive strategy to another than in improving a company’s
competitive strength and resource capabilities.
are highly risky because of the financial drain that comes
from using the company’s cash resources to pay for the costs of the merger or
acquisition.
are nearly always successful in achieving their desired
purpose (unlike strategic alliances and collaborative partnerships).
all too frequently do not produce the hoped-for outcomes.
are generally more effective in securing a new competitive
advantage than in protecting an existing competitive advantage.
42.
value:
2.00 points
Good strategy execution
allows companywide performance measures to be met.
requires a team effort with managers who have
strategy-executing responsibility and making all employees active participants
in the execution process.
All of these choices are correct.
requires getting things done effectively and efficiently.
requires middle and lower-level managers to ensure
strategy-critical activities are successfully implemented.
43.
value:
2.00 points
Businesses are said to be “related” when
many consumers buy the products/services of both businesses.
they have several key suppliers and several key customers in
common.
their value chains possess competitively valuable
cross-business relationships that present opportunities to transfer skills and
capabilities from one business to another, share resources or facilities to
reduce costs, share use of a well-known brand name, and/or create mutually
useful resource strengths and capabilities.
their products are both sold through retailers.
their value chains have the same number of primary
activities.
44.
value:
2.00 points
Which one of the following is an example of an offensive
strategy?
pursuing continuous product innovation to draw sales and
market share away from less innovative rivals
blocking the avenues open to challengers
signaling challengers that retaliation is likely
maintaining a war chest of cash and marketable securities
introducing new features or models to fill vacant niches in
its overall product offering and better match the product offerings of key
rivals
45.
value:
2.00 points
A strategic alliance
is a collaborative arrangement in which companies join
forces to defeat mutual competitive rivals.
is a formal agreement between two or more companies in which
there is strategically relevant collaboration of some sort, joint contribution
of resources, shared risk, shared control, and mutual dependence.
involves two or more companies joining forces to pursue
vertical integration.
is usually a cheaper and more effective way for companies to
join forces than is a merger.
is a partnership between two companies that is typically
intended to eliminate the need to engage in outsourcing.
46.
value:
2.00 points
The school of ethical relativism hold
