BUS 189 Midterm Exam 2 | Questions and Answers (Complete Solutions)

BUS 189 Midterm Exam 2 | Questions and Answers (Complete Solutions) An internal new venture is the most appropriate strategic choice when: a. The firm has competencies that can be leveraged b. an industry is mature c. the firm will enter on a small scale d. speed of entry is the most important consideration e. there is strong pressure for quick profitability When corporate CEO's and top managers use their power and control over funds to satisfy their personal desire for wealth or status: a. greenmail b. information asymmetry c. self-dealing d. employee incentive e. on-the-job consumption Organizations strive to control employee's behavior by linking __________ systems to their control systems a. disciplinary b. disincentive c. reporting d. incentive e. administrative Which of the following statements is true in the context of principal-agent relationships a. the agency relationship is confined to the top management and does not continue down the hierarchy within the company b. agents almost always have more information about the resources they are managing that the principal does c. information asymmetry can make it easier for principals to measure how well an agent is performing d. in a principal-agent relationship, the decision making power rests entirely with the principals e. the relationship between the company and the suppliers is an example of a principal-agent relationship In their article, "Corporate strategy: The quest for parenting advantage," Campbell, Goold & Alexander point out that "multibusiness companies create value by influencing- or parenting- businesses they own." critical success factors parenting opportunities In their article, "Creating Corporate Advantage," Collis & Montgomery great corporate strategies are based on strength in three factors which they present as a "triangle" what are these 3 factors? business resources capabilities In his book crossing the chasm, Geoffery moore discusses some of the issues involved in marketing technologically new products as markets develop through different stages.....The two stages of customers between which chasm will fall into the chasm and go out of business. The two stages of customers between which the chasm exists are: a. innovators and early adopters b. late majority and laggards c. early majority and middle majority d. early adopters and early majority e. middle majority and late majority Which of the following statements is true about establishing technical standards: a. companies in an industry cannot lobby the government to mandate an industry standard b. technical standards are often set by cooperation among businesses, without government help c. companies cannot adopt technical standards that are in the public domain d. market demand is not taken into consideration when it comes to establishing technical standards e. the strategy and business model a company has developed for promoting its technological standard holds little importance when it comes to establishing standards Which of the following is a disadvantage of first movers? a. they cannot establish significant brand loyalty due to high costs b. they cannot create switching costs for their customers, thus making it difficult to enter the market c. they have decreased sales volume compared to their rivals and thus operate at a loss d. they run the risk of building the wrong resources and capabilities e. they do not have the power to exploit network effects and positive feedback loops Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called: a. early adopters b. the early majority c. innovators d. laggards e. the late majority In his article, "increasing returns and the new world of business," Brian Arthur points out that "economies have undergone a transformation from bulk-material manufacturing to design and use of technology"....He identifies 3 reasons why high-technology industries such as pharmaceuticals, computer hardware and software, and aircraft are subject to increasing returns. What are these 3 reasons? high up-front costs network effects customer groove-in "strategies for two-sided markets," eisenmann, parker and van alstyne point out that many "blockbuster products and services that have redefined the global business landscape...serve what economists call two-sided markets or two sided networks are platforms".....what are these 3 challenges? pricing the platform winner-take all dynamics the threat of envelopment Organizational culture is: a. the means through which a company assigns employees to specific tasks and roles and specifics how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers b. the process of deciding how a company should create use and combine organizational structure, control systems, and culture to pursue a business model successfully c. the clear and unambiguous chain of command that defines each managers relative authority from the CEO down through top middle to first-line managers d. the principle that a company should design its hierarchy with the fewest levels of authority necessary to use organizational resources effectively e. the norms and value systems that are shared among employees of an organization Which of the following ideas is a localization strategy is based on? a. there is a convergence in the tastes of consumers in different nations of the world b. there are substantial economies of scale to be realized from centralizing global production c. consumer tastes and preferences differ among national markets d. there are cost advantages associated with manufacturing a standard product for global consumption e. competitive strategy should be centralized at the world head office The term used to describe how people learn an organizations culture and way of behaving in the organization is: a. organizational socialization b. organizational structure c. organizational design d. organizational behavior e. organizational development The purpose of an _____ is to provide managers with incentives for motivating employees as well as feedback on how the company performs a. adaptive culture b. organizational design c. control system d. span of control e. hierarchy of authority ________ are external stakeholders in a company a. stockholders b. customers c. managers d. employees e. board members in his article, "distance still matters: the hard reality of global expansion"......he identifies four different dimensions of distance between countries. What are these dimensions? geographic dimension cultural dimension economic dimension administrative dimension An internal new venture is the most appropriate strategic choice when: a. the firm has competencies that can be leveraged b. an industry is mature c. the firm will enter on a small scale d. speed of entry is the most important consideration e. there is strong pressure for quick profitability When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it's called: a. greenmail b. information asymmetry c. self-dealing d. employee incentive e. on-the-job consumption Organizations strive to control employees behavior by linking _____ systems to their control systems a. disciplinary b. distinctive c. reporting d. incentive e. administrative Which of the following statements is true in the context of principal-agent relationships? a. the agency relationship is confined to the top management and does not continue down the hierarchy within the company b. agents almost always have more information about the resources they are managing than the principal does c. information asymmetry can make it easier for principals to measure how well an agent is performing d. in a principal-agent relationship, the decision making power rests entirely with the principals e. the relationship between the company and the suppliers is an example of a principal-agent relationship A fragmented industry is one composed of: a. a single large company that has the power to determine prices b. large companies and their subsidiaries c. companies that operate in many different locations across the world d. a large number of small and medium-sized firms e. a small number of single proprietorships Consumers will bear the costs of switching technologies if: a. switching costs are substantial b. the new products are packaged attractively c. there is a lack of complementary products d. the new technology is advertised subtly e. the benefits of adopting the new technology outweigh the costs of switching Firms sometimes pursue a chaining strategy to: a. create product diversity b. generate revenue by licensing the patents it owns c. obtain the advantages of economies of scale d. spread overhead costs e. establish a number of unrelated business units Format wars, in the context of high-technology industries, refer to: a. battles to control the source of differentiation, and thus the value that the differentiation can create for the customer b. the confusion among customers that arises as a result of several choices of formats for PC's and other gadgets c. the price-based battles in the network of complementary products, which is a primary determinant of the demand for an industry's products d. conflicts within an organization about which format to adopt for their products e. price-based battles among companies producing similar products Which of the following factors increases pressures for local responsiveness? a. powerful buyers b. uniformity in distribution channels c. similarities in customer tastes and preferences d. competitors that are based in high-cost locations e. host government demands Which of the following is an advantage of franchising? a. it gives the franchisor the same level of tight control over franchisees as does chaining b. it can help the franchisor expand his or her business rapidly c. it allows for the franchisor to earn all of the profits made by franchisees d. it is beneficial for franchisees because they do not have to face higher capital costs e. it helps the franchisees by relieving them of the responsibility of running operations What advice would you give to a firm that wants to exploit network effects a. create incentives for other firms to develop complementary products b. charge heavy license fee for new technology c. refrain from using technical standards d. do not use aggressive marketing strategies for killer applications e. increase switching costs Companies that pursue a _____ strategy are trying to develop a business model that simultaneously achieves low costs, differentiates that product offering across geographic markets and fosters a flow of skills between subsidiaries in the company's global network of operations a. international b. transnational c. global standardization d. localization e. centralization A company, to maintain profitability, uses _____ when it focuses on pockets of demand that are declining more slowly than the industry as a whole a. acquisition strategy b. chaining c. divestment strategy d. niche strategy e. franchising Marginal cost refers to the costs of: a. switching to a new technology b. producing one extra unity of product c. adhering to technical standards d. product promotions e. licensing new technology An embryonic industry is one that: a. includes a number of small and medium sized companies b. is just beginning to develop and customer demand is initially limited c. has sufficiently developed so that early industry leaders have already been identified d. has initial government backing because of its importance to the general populace e. is characterized by intense rivalry among established companies Which of the following is NOT true of high-technology industries: a. first movers have higher pioneering costs than later entrants b. later entrants can avoid the mistakes made by first movers c. first movers have an advantage because their customers avoid switching costs d. first movers that create a revolutionary product are in a monopoly position e. first movers run the risk of building the wrong resources and capabilities Relish is a large fast food chain that operates in many countries. As there are several competitors in the fast food sector, the company has been facing intense pressures for achieving low cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. In order to achieve both low costs and product differentiation, the company should aim to pursue a ______ strategy. a. global standardization b. transnational c. localization d. international e. corporate differentiation Who among the following is most likely to fall under the category of laggards in the context of customer groups: a. Phillip is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity b. Lauren is tech-savvy and tends to actively seek out for new and innovative products in the market c. Suresh appreciates technology but tends to refrain from trying products that are extremely new d. Charlotte is aware of the value that technology offers, she tends to weigh costs and benefits of a product before making a buying decision e. Maria tends to be a little apprehensive about buying new technology but buys nevertheless when he observes that a lot of people are using the new technology A technological paradigm shift is most likely to occur in which stage of the industry life cycle a. embryonic b. maturity c. shakeout d. decline e. growth Which of the following is an advantage of international licensing a. it enables the company to realize scale economies and location economies through manufacturing products in a centralized location b. it allows the company to collect profits from one license and use those profits to support others c. it takes away from the company the pressure of development costs and risks associated with opening up a foreign market d. it eliminates the risk of losing control over a technology that the company owns e. it enables the company to coordinate its strategy efficiently to achieve competitive advantage Which of the following statements is true about customer categories in growing industries a. laggards frequently adopt new products even when the benefits are not obvious b. innovators are the customers who are the last ones to adopt a new product c. customers in the early majority generally do not understand the value of new technology d. a typical late majority customer group is a behaviorally conservative set of customers e. laggards form the leading wave or edge of the mass market Which of the following statements is true about new entrants in the context of a technological paradigm shift? a. new entrant often face the risks of product cannibalization b. new entrants do not need to worry about their established customer base c. pressures to continue the existing out-of-date business model hamstring new entrants d. it is difficult for new entrants to focus all their energies on the opportunities offered by the new disruptive technology e. new entrants are not constrained by lack of capital Which entry mode gives a multinational the tightest control over foreign operations? a. exporting from the home country and letting a foreign agent organize local marketing b. setting up a wholly owned subsidiary c. licensing d. franchising e. entering into a joint venture with a foreign company to set up overseas operations Tom tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well-established and familiar in the market. However, Tom slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Tom is most likely to fall under which of the following categories of customers a. early majority b. late majority c. early adopters d. innovator e. laggard An adequate supply of complements to a product results in: a. higher switching costs b. more customers opting for the product c. a significant decrease in the sales of the product d. a significant decrease in customer demand for the product e. the company failing to win a format war Which of the following is a disadvantage of strategic alliances? a. they do not allow for sharing of risks and fixed costs b. they do not facilitate entry into a foreign market c. they give potential competitors a low-cost route to new technology and markets d. they mandate that the companies do not share complementary competencies and assets e. they cause problems when it comes to establishing technological standards for the industry Music CDs and newspaper sales have been falling as users turn to the Internet for their music and news. Which of the following is NOT a strategy for companies in these declining industries? a. chaining b. leadership c. niche d. divestment e. harvest Which of the following statements is true about technological paradigm shifts? a. They often do not change the nature of competition in an industry b. they have the potential to threaten the survival of established industries c. they occur when government regulations restrict the use of certain technologies d. they can often be handled by established companies without adopting new strategies e. they strongly deter new entrants Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called: a. early adopters b. the early majority c. innovators d. laggards e. the late majority Nutrimax Corp., a breakfast cereal company, has designed extensive and elaborate advertising campaigns for its existing products. The campaigns mainly focus on the aspects and benefits of the products that make them better than other products. The massive advertising and marketing initiatives are also intended to intimidate new entrants and rivals. Nutrimax Corp. is most likely to be using which of the following strategies? a. Market penetration b. Product development c. Product proliferation d. Market development e. Capacity control The real estate industry is comprised of different firms in several locations. Some are independent and popular locally while others are affiliated to national chains. The real estate industry is most likely to be: a. an oligopolistic industry b. pure competition industry c. a fragmented industry d. consolidated industry e. a monopolistic industry A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies a. joint ventures b. new ventures c. long-term contracting d. acquisitions e. taper integration A criticism of stock-based compensation plans is that: a. they discourage empire building b. they reduce motivation among agents c. they do not align management and stockholder interests d. they dilute stockholder's equity e. they adversely affect the earnings of principals The managers of most companies often consider ___ when they are generating free cash flow a. diversification b. taper integration c. full integration d. long-term contracts e. strategic alliances When managers of a firm seek to unilaterally rewrite the terms of contracts with suppliers, buyers, or complement providers in a way that is more favorable to their firm, they are engaging in: a. information manipulation b. opportunistic exploitation