bUSN620 Comp final exam ch 6 to 10

bUSN620 Comp final exam ch 6 to 10
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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.


2.00 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.

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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.


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.


2.00 points

Which isnotone 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


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.


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.


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.


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.


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.


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.


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.


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).


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.


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

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.


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

making the payoff for meeting or beating performance targets a major, not minor, piece of the total compensation package.


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


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.


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


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.


2.00 points

Which one of the following isnota 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


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.


2.00 points

Which of the following isnotone 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


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.


2.00 points

When evaluating strategic fit benefits that related diversification can deliver, one must keep in consideration a number of factors. Which one isnotrelevant?

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.


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.


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.


2.00 points

Which of the following isnotsomething 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


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.


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.


2.00 points

Which one of the following isnota 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


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

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.


2.00 points

Which one of the following isnota 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.


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.


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


2.00 points

Which of the following isnotamong 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


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.


2.00 points

Which of the following isnota 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


2.00 points

Which of the following isnota 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.


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

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.

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

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.


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.


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.


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


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.


2.00 points

The school of ethical relativism holds that

concepts of right and wrong are always a function of each individual’s own set of values, beliefs, and ethical convictions.

concepts of right and wrong are always governed by business norms in each country, culture, or society.

when there are country or cross-cultural differences in what is considered ethical or unethical in business situations, it is appropriate for local moral standards to
take precedence over what the ethical standards may be elsewhere.

what constitutes ethical or unethical conduct varies according to the religious convictions of each society or each culture within a country.

concepts of right and wrong as they apply to business behavior are always varying shades of gray, never absolute (i.e., black or white).


2.00 points

The drawbacks of a localized multidomestic strategy include

hindering the use of cross-market subsidization techniques and increasing company vulnerability to adverse shifts in currency exchange rates.

the difficulty in taking into account significant country-to-country differences in distribution channels and marketing methods.

the difficulty in and costs of being responsive to country-to-country differences in customer needs, buying habits, cultural traditions, and market conditions.

being unsuitable for competing in the markets of emerging countries and posing added difficulty in building multiple profit sanctuaries.

hindering transfer of a company’s competencies and resources across country boundaries, and hindering the pursuit of a single, uniform competitive advantage in all
country markets where a company operates.


2.00 points

To use location to build competitive advantage, a company that operates multinationally or globally must

locate production plants in those countries having suppliers that can supply all the necessary raw materials and components so as to avoid inbound shipping costs.

scatter its production plants across many countries in different parts of the world so as to minimize transportation costs.

employ either an export strategy or a franchising strategy.

consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and (2) in which
countries to locate particular activities.

concentrate all of its value chain activities in a single country—the one that has the best combination of low wage rates, low shipping costs, and low tax rates on


2.00 points

Which one of the following isnota fundamental part of a company’s culture?

“Chemistry” that permeates its work environment

work practices and behaviors that define “how we do things around here”

the company’s style of operating and ingrained behaviors and attitudes

the company’s strategic vision, strategic intent, and strategy

the company’s core values and business principles


2.00 points

Assessments of how a diversified company’s subsidiaries compare in competitive strength should be based on such factors as

the ability to hurdle barriers to entry, value chain attractiveness, and business risk.

cost reduction potential, customer satisfaction potential, and comparisons of annual cash flows from operations.

relative market share, ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and ability to benefit
from strategic fits with sister businesses.

the appeal of its strategy, relative number of competitive capabilities, the number of products in each businesses product line, which businesses have the
highest/lowest market shares, and which businesses earn the highest/lowest profits before taxes.

vulnerability to seasonal and cyclical downturns, vulnerability to driving forces, and vulnerability to fluctuating interest rates and exchange rates. Bottom of Form

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