1. According to Michael Porter, three tests must be met in order for diversification to create shareholder value, Which if the following is NOT one of those tests?
A) Attractiveness Test
B) Economies-of-Scale Test
C) The CostofEntry Test
D) The BetterOff Test
2. Which of the following illustrates best how firms can potentially benefit from vertical integration?
A) Vertical integration allows firms to reduce organizational complexity and administrative costs.
B) Firms that vertically integrate will have increased strategic flexibility when faced with technological changes.
C) Firms that vertically integrate do not have to make transaction-specific investments.
D) Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.
4. Otto Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?
A) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market.
B) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU.
C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.
D) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.
5. Which of the following best illustrates forward vertical integration?
A) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.
B) A firm that manufactured and sold car engines to major automobile companies launches its own line of cars.
C) A chain of ice cream parlors launches a brand of toys and accessories for children.
D) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.
6. Which of the following is NOT a reason why mergers and acquisitions have increased in the United States during recent years?
A) Low interest rates and favorable employment statistics
B) Companies have struggled to grow organically
C) It has become legislatively easier to carry out M&As
D) Opportunities in various industries (i.e. healthcare, technology, energy, consumer materials)
7. Which of the following statements are true?
A) Strategic group maps segments an industry on the basis of the strategies of the member firms
B) Segmentation segments an industry on the basis of the strategies of the member firms
C) Strategic group maps concentrates on the characteristics of the market as the basis for disaggregation
D) A and C are true
8. How has the administrative and political distance between Canada, Mexico, and the United States been reduced?
A) The widespread acceptance of the Spanish language in the US and Canada
B) By lowering the disparities between their per capita incomes
C) By reducing their cultural differences
D) None of the above
9. In an industry, the threat new entrants is high when:
A) Capital requirements are low.
B) Expected returns are high.
C) Technological know-how is industry specific.
D) Switching costs are high.
10. McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast food chain pursuing according to these specific examples?
A) Multidomestic strategy
B) Focused differentiation strategy
C) Global-standardization strategy
D) International strategy
11. How Trader Joe's competes in the supermarket industry can be understood by which level of strategy?
A) Corporate
B) Business
C) Operational
D) None of the above
12. Which of the following authors breaks down diversification into 5 levels, each level with a different percentage of revenue from one firm.
A) Michael Porter
B) Igor Ansoff
C) Richard Rumelt
D) Henry Mintzberg
13. On December 8th last year the Microsoft Corporation bought LinkedIn for an estimated value of $26 billion. LinkedIn is now managed and owned by Microsoft. What does this scenario best illustrate?
A) A merger
B) A joint venture
C) An acquisition
D) An equity alliance
14. Walgreens' decision to buy Rite-Aid occurred at which level of strategy?
A) Competitive
B) Business
C) Operational
D) None of the above
16. Which of the following statements is NOT true about a Value Chain Analysis?
A) A value chain shows how a product moves from raw material stages to the final customer.
B) A value chain helps a firm identify multiple means for implementing a chosen business-level strategy.
C) A value chain show which parts of operations create value and which do not.
D) All of the above are true
17. Which of the following industries has the highest threat of substitutes?
A) Energy (utilities) industry
B) Long haul aviation industry
C) Automobile industry
D) Radio Industry
18. The resource-based view of firm focuses on:
A) The importance of environmental sustainability for firm strategy
B) The view that the foundation for organizational capability is macro environmental aspects
C) The notion that resources and capabilities are the principal basis for firm strategy and the primary source of profitability
D) A theory of the firm based upon the work of David Ric and Joseph Sch.
19. The primary factor determining the degree of vertical integration in a firm is:
A) Transaction costs
B) Administrative costs
C) The relative level of transaction costs to administrative costs
D) The nature of an industry
20. In March, Janet Yellen (Chair of the Board of Governors of the Federal Reserve System) announced that the Federal Reserve was raising the target federal funds rate by a quarter of a percentage point. What tool (s) within an external environmental analysis would this announcement potentially appear in?
A) Macro environmental analysis
B) Dynamic capability analysis
C) Task environmental analysis
D) A and B
21. When should a firm consider utilizing a focus business level strategy?
A) The firm has enough resources to pursue larger shares of the market.
B) There are only a very few segments to focus on in the industry.
C) It is difficult for the firm's rivals to serve the specialized needs of a target market.
D) All of the above
22. Cost leadership strategies typically work best when ____________?
A) Most buyers use the particular product in different ways
B) Consumers incur high switching costs
C) The product is customized and not readily available
D) Price competition is vigorous
23. Which of the following is a poor example of a core competence?
A) Better marketing and customer research
B) Established brand name
C) Better merchandising and product display skills
D) Unusual innovativeness in new product development
24. Which of the following is NOT a motivation for M&As?
A) Acquiring Resources or Capabilities
B) Cost Economies and Market Power
C) Geographical Extension
D) All are motivations for M&As