BUS 189 Midterm Exam 3 | Questions with complete solutions

BUS 189 Midterm Exam 3 | Questions with complete solutions Phillip Morris capitalized on the growing health consciousness trend when it acquired Miller Brewing Company, and then redefined competition in the beer industry with its introduction of low calorie beer (Miller Lite). This health trend represents a ______ force. a. social b. political c. technological d. demographic e. legal Which of the following allows a company to lower cost through functional strategy and organization? a. customizing the product offering and marketing mix to different market segments b. implementing just-in-time inventory control systems c. focusing marketing efforts on brand building and perceived differentiation from rivals d. designing strategies to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world e. adopting rigid manufacturing technologies GM typically solicits bids from global suppliers to produce a particular component and awards a 1-year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for bid, and once again the lowest cost supplier is most likely to win the bid. Which of the following is GM using? a. Strategic outsourcing b. Competitive bidding c. Strategic bidding d. Long-term alliance e. Hostage taking 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 wit 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 c. downsizing d. greenmail e. self-dealing 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 The threat from potential competitors is greatest in the _____ stage of the industry life cycle. a. embryonic b. growth c. shakeout d. maturity e. decline Which of the following is NOT a principal danger of a low-cost position approach a. powerful buyers b. technological change c. imitation of production techniques d. changes in consumer tastes e. rivals lowering their costs In which of the following is a firm most likely to lose direct control over value creation activities a. merger b. outsourcing c. acquisition d. vertical integration e. strategic alliance Company leaders that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities a. unrelated b. not comparable c. related d. opposed e. identical Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often taken funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario? a. corporate governance b. on-the-job consumption c. greenmail d. information asymmetry e. information manipulation Which of the following is true of growth industries a. they typically have high barriers to entry b. they are characterized by low demand c. They increase prices because customers are more aware of the industry's product d. they tend to be characterized by weak rivalry e. they inhibit the development of distribution channels A disadvantage of pursuing a low-cost strategy is that: a. price wars make it hard to compete with differentiators b. it costs more than a differentiation strategy because of the necessity of high capital investments c. powerful buyers are a major threat d. it reduces customer retention e. it makes it difficult for firms to customize their product offerings Outsourcing occurs when a firm: a. buys one of its rivals. b. merges with one of its suppliers. c. enters into a joint venture with a rival. d. hires another firm to perform value creation activities. e. enters into contracts with two suppliers simultaneously. Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create a. a new business unit in a different industry b. a new business unit in the same industry c. lower costs in various business units d. differentiation in various business units e. new customers in the same industry Which of the following statements is true in the context of stock-based compensation a. stock options usually result in informative asymmetry b. stock-based compensation schemes for executives can align management and stockholder interests c. a particular cause for concern is that stock options are often granted at extremely high strike prices d. critics deny that stock-based compensations motivate managers to improve company performance e. granting more stock options often results in the increase of stockholder equity To a large degree, any organizations tasks are a function of its: a. market area b. labor supply c. strategies d. labor supply e. compensation plan Entry barriers in embryonic industries tend to be based on: a. brand loyalty b. economies of scale c. absolute cost advantages d. technological knowhow e. regulatory advantage In which of the following situations is a differentiation strategy used: a. customer needs are primarily satisfied by the price of the product b. a company's cost structure needs to be reduced c. there is a demand for deep price discounts from powerful buyers d. the industry is not allowed to charge a premium price for its products e. the industry is fragmented into customer groups based on needs Long-term contracts: a. are preferable to short-term contracts when there is a minimal need for cooperation b. are preferable to vertical integration when it is not feasible to exchange hostages c. generally result in lower prices than competitive bidding d. are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers e. achieve exactly the same outcomes as vertical integration, but they incur higher bureaucratic costs Product bundling refers to: a. preparation of products for shipment b. a complete package of related products c. a method of stocking products efficiently d. an inventory procedure for ensuring effective counting of products e. a package of unrelated products Which of the following is NOT a responsibility of the Board of Directors a. monitor corporate strategy and ensure that they are consistent with stockholder interests b. apply sanctions on management when appropriate c. develop targets for divisional managers d. hire, fire, and compensate the CEO e. make sure the audited financial statements present a true picture of the company's financial situation 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 Mobility barriers: a. allow industries to change their strategy and compete in that strategic group. b. inhibit the movement of companies between strategic groups in an industry. c. inhibit companies from shifting between suppliers for the raw materials. d. are factors that operate outside of an industry. e. exclude the barriers to entry into a group and the barriers to exit from a company's existing group. A low-cost position is most appropriate when: a. the power of buyers is low and barriers to entry are high b. economies of scale are relatively unimportant in manufacturing products c. industry rivalry is high and customers are very sensitive to prices d. customers have very different needs and uses for the industry's products e. product innovation is the key competitive factor John's surfboard shop has a long-term relationship with two surfboard makers. John is using a. cross selling b. product bundling c. vertical integration d. parallel sourcing e. horizontal integration Miller Brewing was related to Philip Morris's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following? a. Transferring competencies b. Leveraging competencies c. General organizational competencies d. Economies of scope e. Organizational design skills Which of the following governance mechanisms is regarded as the option of last resort a. strategic control systems b. board of directors c. takeover constraint d. stock-based compensation e. financial statements and auditors A drawback of the functional structure is: a. that each worker must report to more than one superior b. too much decentralization of decision-making authority c. the difficult in communicating and coordinating across functions d. its lack of flexibility in decision-making e. the need to downsize before implementing this structure Suppliers in an industry are most powerful when: a. switching costs are low b. companies in an industry threaten to enter the suppliers industry c. their profitability is significantly affected by the purchases of companies in a particular industry d. there are few substitutes for the products that they sell e. they refrain from entering their customers industry because of lack of resources To build trust in a cooperative relationship, both firms can: a. make mutual investments in specialized assets b. rely on competitive bidding c. write short-term contracts that must be renewed frequently d. increase their vertical integration e. use outsourcing of noncore activities What is perhaps the most important reason why acquisitions fail a. the timing of the acquisition b. the expense of the acquisition c. managements unwillingness to make the necessary effort to make the acquisition work effectively d. incompetence on the par of workers in the acquired firm e. difficulties in coordinating manufacturing activities Jacob is a senior manager at Aries LLC. Jacob has been earning a lot of money in addition to his salary. He often misrepresents the financial information about the operations he handles; he acquires more financial resources than he actually needs to run operations. Which of the following concepts is illustrated in this scenario? a. Glass-ceiling effect b. Self-dealing c. Agency strategy d. Takeover constraints e. Stock options What would be the result is a company were to successfully align its organizational structure with its business-level strategy a. performance will decline b. flexibility will improve c. performance will improve d. stability will decline e. there would be improvements in bureaucratic controls The level of industry demand: a. has little effect on competition in the industry b. is one of the determinants of the intensity of rivalry in the industry c. increases when customers exit a marketplace d. does not impact the market share that established companies held e. decreases the rivalry among established companies, when in decline Delta Airlines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic strategy is represented by this advertisement? a. rapid growth b. broad low-cost c. broad differentiation d. vertical integration e. right-time marketing Credible commitments refer to: a. the merging of two companies that have an equal market share b. obtaining of goods, services or work from an external source c. the acquisitions of one company by another company d. believable promises that support the development of a long-term relationship between companies e. the outsourcing of after-sale services to a different company Acquisitions often fail because of: a. poor commercialization. b. pre-acquisition screening that increases the time it takes to enter a market c. large-scale entry. d. differences in corporate culture. e. slowness in establishing significant market presence. To make sure that ethical issues are considered in business decisions: a. companies should eliminate the principal-agent approach b. companies should have a no-layoff policy c. top managers should generously grant tock options d. companies should hire and promote employees with a strong focus on economic gains e. top managers should articulate and model ethical behaviors Essentially, centralization or decentralization are concepts that refer to the: a. levels where decisions are made in the hierarchy of an organization. b. number of hierarchical levels existing in an organization. c. tools that allow an organization to monitor and evaluate if its strategies and structure are working as intended. d. business models oriented at expanding nationally and managing a wide range of products. e. strategies implemented by an organization to create, market and distribute its products. An industry's buyers have high bargaining power when: a. they purchase in small quantities b. is it economically impossible for them to purchase an input from several companies at once c. the supply industry depends upon buyers for a very small percentage of its total orders d. switching cots are low e. the industry is a monopoly The advantage that focused companies have over their broad market rivals is that they: a. can sell on non-price factors, such as design or customer service b. can respond to demands for deep price discounts c. can initiate a price war in order to grow volume and drive its weaker rivals out of the industry d. can absorb cost increases that may be passed on downstream by powerful suppliers e. sell fewer products in bulk to outsell their rivals An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event one of the suppliers adopts an uncooperative attitude. Which of the following concepts is illustrated in this scenario? a. parallel sourcing b. outsourcing c. vertical integration d. horizontal integration e. full integration If a company is to increase the probability of a new product's commercial success, the company must foster close links between: a. marketing and sales b. engineering and advertising c. quality assurance and inventory management d. research & development and marketing e. accounting and industrial engineering Which of the following statements is true in the context of unethical behavior a. business ethics significantly differ from personal ethics b. an individual with a strong sense of personal ethics is more likely to engage in self-dealing c. focusing only on applying straightforward business calculus can completely eliminate ethical concerns d. an organizational culture that fosters decision making on purely economic terms eliminates unethical practices e. a personal ethical code will exert a profound influence on the way individuals behave as businesspeople To reduce costs, companies pursuing a cost leadership strategy prefer to use ___ to closely monitor and evaluate functional performance a. output controls b. personal controls c. behavioral controls d. cultural controls e. input controls Common exit barriers include: a. minimal investment in assets like specific machines. b. emotional attachments to an industry. c. low fixed costs associated with leaving an industry. d. the lack of bankruptcy regulations. e. economic independence of a company production of a large product variety without a large cost penalty is known as: a. market concentration b. market segmentation c. focused differentiation d. mass customization e. mass production A strategy of vertical integration may be a risky strategy for a company to pursue when demand is: a. predictable b. stable