BUSINESS POLICY AND STRATEGY FINAL EXAM

Question 1: The laws, and the enforcement of laws, associated with the protection of intellectual property rights, represent a significant currency and management risk to multinational firms.

True

False

Question 2: Software Tech, Inc., a company in the computer software industry, invests heavily in R&D and product design. Thus, most of its value is added:

Upstream

In its infrastructure

Downstream

Midstream

Question 3: Offshoring takes place when a firm decides to shift an activity that they were previously performing in a domestic location to a foreign location.

True

False

Question 4: Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by:

Flexibility in adjusting to local laws and customs

Decreased duplication of inventories which are often involved in having multiple plants producing similar products

Decreased shipping and transportation costs inherent in local production

Economies of scale gained through centralized production of standardized products

Question 5: Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.

True

False

Question 6: The sale of Boeing's commercial aircraft and Microsoft's operating systems in many countries enable these companies to benefit from:

Higher prices in their domestic markets

Economies of scale

Optimizing the location for many activities in their value chain

Reducing their exposure to currency risks

Question 7: Appreciation of the U.S dollar will have the following impact on McDonald's:

Lower sales abroad because foreign customers cannot afford McDonalds' products

More transfer of ingredients from the U.S to branches abroad to take advantage of the higher dollar

Lower profits, because foreign profits will be reduced when measured in dollars

No impact at all

Question 8: A multidomestic strategy would likely include the use of high volume, centralized production facilities to maximize economies of scale.

True

False

Question 9: An advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain.

True

False

Question 10: Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

True

False

Question 11: __________ entail the creation of a third-party legal entity, whereas __________ do not.

Licensing agreements; joint ventures

Joint ventures; strategic alliances

Strategic alliances; joint ventures

Franchising agreements; strategic alliances

Question 12: The form of entry strategy into international operations that offers the lowest level of control would be:

Franchising

Licensing

Joint venture

Exporting

Question 13: Which one of the following is one of Theodore Levitt's assumptions supporting a pure global strategy?

Consumers are willing to pay more for specific product features

Customer needs and interests are becoming more dissimilar

If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved

MNCs can compete with aggressive pricing on low cost products that meet the common needs of global consumers

Question 14: The reasons that explain why some governments make better use of the inflows from foreign investment and know-how than others include all of the following except:

Governmental practices that are business-friendly

Local entrepreneurs that can train workers and invest in modern technology

High tariffs and taxes on foreign investors and multinational corporations provide income to improve living conditions

Sound management of broader economic factors such as interest rates and inflation

Question 15: Because many countries are investing in countries other than their own, each country is becoming more autonomous and independent.

True

False

Question 16: All of the following are limitations of a global strategy except:

Limited ability to adapt to local markets

The ability to locate activities in optimal locations

The concentration of activities may increase dependence on a single facility

Single locations may lead to higher tariffs and transportation costs

Question 17: As a manager, when faced with ethical crises you should:

Focus on issues most relevant to stockholders

Wait for the other party to make the first move

Take the initiative to address the problem

Cover up as much as possible

Question 18: Emotional intelligence (EI) is one of the components of a high intelligence quotient (IQ).

True

False

Question 19: Proactive measures to prevent organizational ethics problems include all of the following except:

Instituting a reward system which considers outcomes as its primary criterion

Using leaders as role models of ethical behavior

Issuing statements describing the organization's commitment to certain standards of behavior

Using the organization's information systems as a control system

Question 20: Which of the following is an important characteristic of a leader?

Goal-oriented

Satisfied with the status quo

Reactive

Focused on past performance

Question 21: Leaders who fail to institute proper systems and controls that facilitate ethical conduct share responsibility with those who conceive, execute, and knowingly benefit from corporate misdeeds.

True

False

Question 22: All of the following constitute organizational bases of a leader's power except:

Legitimate power

Reward power

Referent power

Coercive power

Question 23: Behavioral barriers to change occur because of conflicts between departments, conflicts arising from power relationships, and refusal to share information.

True

False

Question 24: All of the following are elements of the Goolsby Leadership Model except:

Integrity

Charisma

Courage

Impact

Question 25: The "top down" perspective of empowerment:

Encourages intelligent risk-taking

Trusts people to perform

Encourages cooperative behavior

Delegates responsibility

Question 26: Competitive benchmarking is a method of seeking the best examples of practices or processes that have essentially the same function regardless of industry.

True

False

Question 27: Manufacturing employees at Chaparral Steel are directly involved with customers and have access to the new innovative knowledge being developed in its manufacturing processes. This is an example of:

Hierarchical control

Knowledge management

Enabling heroes and drones

Employee empowerment

Question 28: A compliance-based approach to ethics management combines a concern for law with an emphasis on managerial responsibility for ethical behavior.

True

False

Question 29: Which component of emotional intelligence (EI) enables a manager to have a deep understanding of the existence and importance of cultural and ethnic differences?

Self-awareness

Empathy

Social skills

Self-regulation

Question 30: Internal benchmarking is discouraged in most organizations because it creates competition and internal rivalries that are counterproductive.

True

False

Question 31: Inspiring and motivating people with a mission or purpose is a necessary and sufficient condition for developing a learning organization.

True

False

Question 32: All of the following are guidelines an organization can use to promote the challenging of the status quo except:

Establishing a "culture of dissent."

Forcefully creating a sense of urgency

Fostering a culture that encourages risk taking

Creating a results-based reward system

Question 33: The three broad sets of capabilities that a leader should possess include all of the following except:

Technical skills

Cognitive abilities

Calculative abilities

Emotional intelligence

Question 34: Continuous monitoring enhances an organization's ability to respond with speed and flexibility.

True

False

Question 35: In emerging economies and continental Europe, principal-principal conflicts are frequent. These consist of conflicts between controlling shareholders and executives.

True

False

Question 36: Rules and regulations are examples of:

Implicit controls

Informational controls

Cultural norms

Boundaries and constraints

Question 37: In 2001, Cisco Systems, Inc.'s stock price fell dramatically when it inaccurately forecast new sales orders because it relied too heavily on historical sales figures. What caused this mistake?

Its strategic control system failed to detect changes in consumer demand

It "projected the past into the future."

The momentum of its previous successes blinded it to the need to adapt and change

All of the above contributed to the mistake

Question 38: The "traditional" approach to strategic control is sequential. Which of the following is not one of the steps in the sequence?

Action plans are submitted by lower level managers

Performance is measured against the predetermined goal

Strategies are implemented

Strategies are formulated and top management sets goals

Question 39: Top managers at USA Today meet every Friday to review daily operational reports and year-to-date data. This is an example of:

Behavioral control

Informational control

Strategy formulation

Strategy implementation

Question 40: In "single loop" learning, the organization's assumptions, premises, goals, and strategies are continuously monitored, tested, and reviewed.

True

False

Question 41: For businesses facing complex and turbulent business environments:

Goals and objectives that are uncertain prevent opportunism

Traditional strategic controls are usually inappropriate

Complacency about predetermined milestones can prevent adaptability

Detailed plans are needed to maintain order

Question 42: Intel's exemplary corporate governance practices include all of the following except:

A mix of inside and outside directors

All outside directors to assure objectivity in decision-making

Board presentations and access to employees

Formal evaluation of officers

Question 43: The Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of publicly-listed companies must reveal off-balance-sheet finances and vouch for the accuracy of information provided.

True

False

Question 44: The late Sam Walton, founder of Wal-Mart, used to give pep rallies at local Wal-Mart stores. What purpose did this serve?

It was used to remind employees of Wal-Mart's rules and regulations

It helped reinforce and sustain Wal-Mart's culture

It demonstrated to employees the importance of articulating explicit goals and objectives

It made Wal-Mart's reward system very explicit

Question 45: An organization's reward system is typically a weak method of motivating employees.

True

False

Question 46: When countercultures emerge that have shared values opposite from the dominant culture of an organization:

Organizational cohesiveness increases

Information is shared rather than hoarded

Individuals begin working at cross purposes

Individuals gain insights into overarching goals and objectives

Question 47: Rule-based controls are appropriate in organizations where most of the employees are unskilled.

True

False

Question 48: In principal-principal conflicts (conflicts between controlling shareholders and minority shareholders), the ownership (of equity) is:

Widely dispersed (5-20% is considered "concentrated ownership")

Controlled almost completely by management

Concentrated-often greater than 50% of equity is controlled by controlling shareholders

Often held by employee stock ownership programs

Question 49: Rules and regulations, rather than culture or rewards, would be used for strategic control at which type of company?

Software developer

Stock brokerage firm

Manufacturer of mass produced products

High tech research facility

Question 50: Managerial opportunism can take all of the following forms except:

Shirking

Job-hopping

On the job consumption

Excessive product diversification

Question 51: For firms following a differentiation strategy, behavioral and intangible incentives are not an effective means of motivating employees.

True

False

Question 52: Operational decision making in a large business places excessive demands on the firm's top management.

True

False

Question 53: Which of the following is an advantage of a divisional type of organizational structure?

Efficient use of managerial and technical talent

An enhanced ability to respond quickly to changes in the external environment

High degree of emphasis on long term performance

Uniformity in image and quality across divisions

Question 54: According to the text, there are elements of team building that influence a team's success. These include all of the following except:

Work. Work should be relevant and meaningful to group members

People bonding during the "heat of the battle." Team members become more unified during a crisis

Titles. Titles are important to a team's success

Teams taking care of their own. Team members look after each other's best interest

Question 55: The matrix structure attempts to combine the advantages of the functional and divisional structure.

True

False

Question 56: An advantage of the barrier-free form of organizing is that internal cooperation and shared objectives are not required for it to work.

True

False

Question 57: All of the following are disadvantages of a divisional type of organizational structure except:

It can be very expensive compared to a functional organizational structure

There is a strong tendency for divisions to focus on short-term performance

There can be dysfunctional competition among divisions

There is separation of strategic and operating control

Question 58: A matrix organizational structure is characterized by:

Dual reporting relationships

A combination of functional and divisional organization structures

Efficient use of resources and expertise

All of the above

Question 59: According to the text, boundary less organizational structures are most effective when they replace rather than complement traditional organizational structures.

True

False

Question 60: For firms following related diversification strategies, reward and evaluation systems should rely primarily on behavioral indicators, since the organization needs to reward and reinforce behaviors that facilitate sharing and collaboration.

True

False

Question 61: An organization such as ConAgra that has dozens of different divisions with similar products will probably have the greatest success with which form of organization structure?

Functional structure

Matrix structure

Strategic business unit structure

Holding company structure

Question 62: The purpose of boundaryless forms of organizing is to facilitate the widespread sharing of knowledge and information across internal and external boundaries of the organization.

True

False

Question 63: Complete the following sentence: "Strategic business unit (SBU) structures are best suited for corporations pursuing __________, whereas holding company structures are best suited for companies with __________ strategies."

Product-market diversification, international

International diversification, product-market

Related diversification, unrelated diversification

Unrelated diversification, related diversification

Question 64: Strategic business unit (SBU) and holding company structures result from extensive:

Diversification

Vertical integration

International expansion

Organizational flattening

Question 65: All of the following statements about simple organizational structures are true except:

Small firms with a narrow product-market scope will adopt such a structure

Decision making authority is highly centralized

There is little specialization of tasks

Creativity and individualism are rare

Question 66: Complicated working relationships, intense power struggles, and excessive reliance on group processes are disadvantages of what type of organizational structure?

Divisional

Matrix

Holding company

Functional

Question 67: In a simple structure where the owner manager makes most of the important decisions, extensive rules and regulations are used to maintain order.

True

False

Question 68: Product champions are critical during the period after a new venture project has been defined but before it has gained momentum and achieved project impetus.

True

False

Question 69: Only about 50 percent of corporate venturing efforts reach profitability within six years of their launch.

True

False

Question 70: In the opening case, Polaroid fell victim to the "innovator's dilemma." What does this refer to?

Excessive borrowing in order to develop more radical innovations

Whether to innovate radically or incrementally

Becoming preoccupied with meeting current market needs and ignoring future innovation needs

Conflict over how to integrate product and process innovations

Question 71: __________ produce fundamental changes that can transform a company or even revolutionize an industry; __________ enhance existing practices and often represent evolutionary applications of fundamental breakthroughs.

Technological breakthroughs; product-market breakthroughs

New technologies; new paradigms

Incremental innovations; radical innovations

Radical innovations; incremental innovations

Question 72: Process innovations are often associated with a low cost leadership strategy.

True

False

Question 73: Two common forms of a focused approach to corporate entrepreneurship include:

Internal collaboration and internal venturing

Social capital and collaboration capital

Business incubators and new venture groups

Focus groups and business incubators

Question 74: Product champions:

Are typically senior executives

Are usually inventors of some sort

Scavenge for resources and encourage others to back promising new ideas

Are strong supporters of the status quo

Question 75: After 15 teams created 128 different phones, Chris Galvin, former CEO of Motorola, recently eliminated the autonomous teams being used to develop new wireless phones. This was necessary because such teams:

Often lack coordination

Sometimes waste resources on projects with questionable feasibility

Sometimes create inefficiencies through duplication of effort

All of the above

Question 76: Corporate venture funding refers to special funds that are set aside to invest in the corporation's internal ventures.

True

False

Question 77: Real options analysis helps managers make investment decisions involving large irreversible commitments of financial resources.

True

False

Question 78: Incremental innovations:

Are usually highly disruptive

Usually represent technological breakthroughs

Are usually small improvements in products or processes

Nearly always can be patented

Question 79: Whereas __________ are often associated with a low cost leader strategy, __________ are frequently an important aspect of a differentiation strategy.

Process innovations; product innovations

Product innovations; service innovations

Radical innovations; instrumental innovations

Marketing innovations; management innovations

Question 80: The term "skunkworks" is used to refer to a type of in-house facility that corporations use to develop entrepreneurial ideas.

True

False

Question 81: For innovation team members to work enthusiastically on innovation projects, it is important to separate the performance of individual team members from the performance of the innovation itself.

True

False

Question 82: Sony Corporation's mission statement says, "We should always be the pioneers with our products-out front leading the market." This is an example of:

Innovativeness

Proactiveness

Competitive aggressiveness

Autonomy

Question 83: According to the text, new venture ideas must pass through two critical stages to be implemented by corporations-project definition and project impetus.

True

False

Question 84: Real options logic is useful when corporations consider stock options as a way to finance entrepreneurial ventures.

True

False

Question 85: All of the following are examples of strategic actions a firm might take except:

Acquire competitors to reduce competition

Expand into neglected markets

Change product packaging

Tie-up raw material sources

Question 86: Adaptive new entry involves offering a radical new product or highly innovative service.

True

False

Question 87: Generally speaking, the opportunity recognition process consists of two phases of activity. They are:

Global Search and Recycling Profits

Value Creation and Affordability

Discovery and Evaluation

None of the above

Question 88: Venture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a track record.

True

False

Question 89: Which of the following is not a key element of a blue ocean strategy?

Pursue low cost and differentiation advantages simultaneously

Make the competition irrelevant

Highlight incremental improvements to capture market share

Create new demand in uncharted territory

Question 90: Because new ventures are typically small, they usually don't have high economies of scale relative to competitors.

True

False

Question 91: The best example of a tactical action that a company might use in response to a competitive attack is:

Acquire the competitor

Target the rival's markets

Expand into new geographical areas

Offer price discounts and rebates

Question 92: Netflix CEO Reed Hastings made this important observation about dealing with rivals:

"In a highly competitive marketplace, firms must be paranoid about the multitude of potential rivals."

"You can afford to ignore rivals in small markets, but you can never ignore rivals in large markets, such as on-line video companies like YouTube."

"There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix's lunch. The challenge for a management team is to figure out which are real threats and which aren't."

"Netflix's position is so strong that I don't worry about new entrants."

Question 93: "Blue ocean" strategies rarely provide sustainable advantages because they are easily imitated.

True

False

Question 94: Market commonality is the extent to which rivals draw from the same types of resources.

True

False

Question 95: Forbearance is a particularly aggressive type of competitive attack.

True

False

Question 96: In the context of competitive dynamics, tactical actions involve major commitments of distinctive and specific resources to strategic initiatives.

True

False

Question 97: In the opening case, ESPN's cell phone enterprise failed even though it was designed to appeal to sports fanatics and was backed by a $40 million ad campaign. What happened?

It misread how easy it would be to leverage its brand

Compared to other providers, it had no buyer incentives and poor customer service

Its costs were significantly higher than other cell phone providers because it had to lease network access

All of the above happened

Question 98: Which of the following questions should a firm ask itself before responding to a competitive attack?

How serious is the impact of the attack?

What is our competitive intent-do we want to blunt the attack or enhance our competitive position with our response?

What resources do we have available for a response?

All of the above

Question 99: Equity financing for entrepreneurial start-ups includes which of the following?

Investments by family and friends

Personal savings

Private investors

All of the above

Question 100: Which of the following types of resources contribute to the success of entrepreneurial firms?

Social capital

Financial resources

Human resources

All of the above contribute to the success of entrepreneurial firms