SIE 367 Final Exam | Complete Solutions (Verified Answers)

SIE 367 Final Exam | Complete Solutions (Verified Answers) Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage? A. W. L. Gore & Associates organizes its employees into project-based teams. B. Apple develops high-tech products that are preferred by consumers across the world. C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D. GM offers compensation if its products do not meet a consumer's expectations. StickOn Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies C. co-opetition. A. exploration. D. competition. B. exploitation. Which of the following statements best supports the view that GE's ecomagination strategy is in line with the shared value creation framework? A. The ecomagination strategy is the brainchild of the founder of the company. D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage. B. The ecomagination strategy helps GE spend more on research and development than other similar companies. C. The ecomagination strategy generated $3 billion in revenues for GE during 2012. W. L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in the U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate? A. W. L. Gore is pursuing a cost-leadership strategy. C. W. L. Gore is using a simple structure. B. W. L. Gore is using a multidivisional structure. D. W. L. Gore is pursuing an integration strategy. A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? B. The bank is not aware of the investments made by the customer. A. The bank knows that the customer will be unable to pay the loan if the interest rate rises. C. The bank has the financial statements of the customer, but it is not aware of each source of income. D. The bank is depending on the customer to pay back the loan before term completion. The informational advantage that agents possess over principals is often based on the fact that B. public stock companies are characterized by information symmetry. C. insiders are the first to learn about important developments before the information is released to the public. A. the information is extremely secure and protected from exposure to anyone outside the company. D. agents are legally permitted to freely trade the information in exchange for benefits, unlike principals. Which of the following did management at Zappos do to reduce the level of formalization in their organization? D. They put an end to the practice that enabled employees to horizontally rotate to different jobs once they had mastered a particular job. A. They avoided asking their customer service reps in call centers to follow a detailed script. C. They established top-down management as their primary strategy. B. They increased their reliance on drop-shipment orders. Adverse selection in a public stock company occurs when D. an agent manipulates information to benefit stockholders. B. a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. A. information asymmetry increases the likelihood of selecting inferior alternatives. C. a principal is not aware of the context from which information from an agent is derived. While working a night job at a call center, Carlos creates an app called DineSmart, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on DineSmart. He creates a start-up called TYOP and hires three people to help him improve DineSmart and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure. C. mechanistic B. matrix A. simple D. functional In a public stock company, senior executives, such as the CEO, face agency problems when D. the firm designs work tasks, incentives, and employments that minimize opportunism. C. the board of directors possesses more information about the company than they do. A. they delegate authority of strategic business units to general managers. B. they decide to get involved in the day-to-day operations of a company. Employees learn about an organization's culture through the process of C. co-opetition. D. acculturation. A. socialization. B. exploitation. The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database B. JASON C. EDGAR D. PARMER A. GAAP Which of the following statements is true of strategy in an organization? A. Strategy implementation is considered unsuccessful if it requires changes within an organization. B. To implement a strategy successfully, an organization's structure must be rigid. C. Strategy implementation does not affect resource allocation and power distribution within an organization. D. Organizational structure must follow strategy in order for firms to achieve superior performance. Which of the following global strategies best matches with a multidivisional structure? B. multidomestic C. global-standardization A. international D. transnational Kaito is the CEO of Henson and Fukui Consulting Inc. Kaito's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting. What does this scenario best exemplify? D. initial public offering B. merger A. buyback C. leveraged buyout Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? D. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics. B. It allows the firm to reduce its cost below that of competitors while offering acceptable value. A. It allows the firm to create incentives to foster process innovation in order to drive down cost. C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. Jamiro Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? C. Shareholders of Jamiro are responsible to the company only for the capital they have invested. D. Shareholders of Jamiro are not permitted to trade their company stock at the New York Stock Exchange (NYSE). A. Employees of Jamiro are legally permitted to invest their capital in the company's stock. B. Employees of Jamiro are also the owners of the company. Which of the following is not true of corporate governance in public stock companies? B. Corporate governance provides rules for making decisions on corporate affairs. A. Corporate governance seeks to benefit multiple stakeholders, not just shareholders. D. Corporate governance seeks to create a separation between ownership and control. C. Corporate governance attempts to address the principal-agent problem. Which of the following is a major issue at the forefront of CEO compensation in recent years? C. the absolute size of the CEO pay package compared with the pay of the average employee B. the performance of the CEO as an employee versus the performance as a board member D. a comparison of the compensation of senior management hired during and before the CEO's tenure A. a comparison of the performance of the organization before and after the CEO's tenure W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has C. organizational inertia. D. a top-down management style. B. a decentralized structure. A. a formalized structure. Which of the following accurately describes GE's ecomagination initiative? A. Ecomagination decreases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services B. Ecomagination decreases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services. C. Ecomagination increases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services. D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services. GreenValue Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, GreenValue defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, GreenValue developed a C. significant value gap. B. innovative approach. D. holacratic system. A. resistance to change. Which of the following best defines duality in a board of directors? A. A person holds both the role of CEO and chairperson of the board. D. A person holds the role of CEO on the boards of two companies. B. A person holds both the role of inside director and outside director of the board. C. A person holds both the role of director and shareholder of the company. Why did W. L. Gore reorganize itself into a functional structure from a simple structure? D. A functional structure has a tall hierarchical structure that relies on bottom-up communication. B. A functional structure is more decentralized. C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth. A. A simple structure was too formalized, specialized, and centralized to really facilitate any kind of productivity. Zappos established its unique organizational culture C. by closely monitoring employees calls with customers. D. by giving employees gift cards to shop at Zappos and Amazon. A. through explicitly stated values that are connected to its reward system. B. through input control systems that mandated adherence to organizational values. According to the perspective of shareholder capitalism, C. shareholders in public stock companies have significant decision-making power. B. shareholders in public stock companies have the most legitimate claim on profits. A. shareholders in public stock companies are restricted from buying shares of two competing companies D. shareholders in public stock companies have unlimited financial liability. Which of the following is not true about the members of the board of directors in a public stock company? B. They may hire and fire top management. D. They are not responsible to shareholders. C. They oversee the firm's operations. A. They represent the shareholders' interests. To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly B. specialized. A. formalized. D. mechanistic. C. organic. Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? C. practicing effective corporate governance B. separating economic interests and social needs A. adopting a narrow shareholder perspective D. adopting the principles of shareholder capitalism Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by B. refining the budgeting process to encourage more department collaboration. D. using output controls only when the goal is to ensure a predictable outcome. A. introducing results-only-work-environments to tap intrinsic motivations. C. updating standard operating procedures to allow more process flexibility Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify? A. transferability of investor ownership D. separation of legal ownership and management control B. legal personality C. limited liability for investors In which of the following ways does Zappos achieve organizational control? C. It encourages employees to be creative and innovate and to go the extra mile to deliver a wonderful customer experience. B. It refrains from monitoring its employees' calls. A. It continually changes the organizational values that guide its employees. D. It enforces that each group member's compensation depends in part on the group's overall productivity. A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) _____ in the context of a principle-agent problem. A. adverse selection C. moral hazard D. shared value creation B. stakeholder strategy Which of the following accurately describes an organic organization? B. an inflexible organization that fosters fast decision making and high employee motivation A. an inflexible organization that fosters slow decision making and high employee motivation D. a flexible organization that fosters fast decision making and high employee motivation C. a flexible organization that fosters slow decision making and high employee motivation The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after D. Goldman Sach's code. C. the Hippocratic oath in medicine. A. Level-5 leadership. B. the Sarbanes-Oxley pledge. Which of the following is an unintended side effect of a high degree of specialization in an organization? C. reduced employee satisfaction due to repetition of tasks D. reduced productivity A. decreased trade-off between breadth and depth of knowledge B. decreased opportunities for the division of labor Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? B. Frank cannot serve as a director on Spinson Locomotives' board. A. Frank is a part-time employee at Lofloy Greens. D. Frank is a stockholder of Lofloy Greens. C. Frank is an outside director on Lofloy's board of directors. Walmart is an example of a(n) _____ organization. D. informal C. decentralized B. mechanistic A. organic Which of the following is true of the board of directors in a public stock company? B. Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. D. The functions of the board of directors are limited to ensuring the hiring and firing of CEOs. A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors. C. The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. Fast Call Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, Fast Call has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, Fast Call Inc. is most likely an organization that is C. centralized. D. organic. B. mechanistic. A. formalized. Digital photography replacing film photography would be an example of a(n) radical innovation. disruptive innovation. architectural innovation. regressive innovation. A(n) _____ leverages new technologies to attack existing markets. incremental innovation architectural innovation radical innovation disruptive innovation Incumbent firms favor incremental innovation over radical innovation because their business decisions are independent of the other parties in their innovation ecosystem. radical innovation will disturb the existing power distribution within the firms. incumbent firms do not have formal organizational structures and processes like the way new entrants do. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage. When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in regressive innovation. radical innovation. disruptive innovation. architectural innovation. As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? social benefits network externalities first-mover advantages fringe benefits Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry? The cable news industry was in the maturity stage of the industry life cycle. The second movers imitated CNN's incremental innovation to continuously improve their offering. It failed to cross the large competitive chasm between the early adopters and early majority. Its business model relied heavily on crowdsourcing for its user-generated content. It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they have the highest purchasing power when compared to the other customer segments. influence the purchase decisions of early adopters. enter into the market in large numbers, creating a herding effect. are driven by technology concerns rather than the practicality of a new product. Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? The framework believes that the life cycle of industries is unpredictable. The framework does not explain everything about changes in industries. The framework is based on the tenet that industries can be rejuvenated even in the declining stage. The framework believes that the number and size of competitors remain constant throughout the life cycle. Which of the following is a feature of the maturity stage of the industry life cycle? The competitive intensity within the industry is at its peak. The market reaches its maximum size. The industry structure is more monopolistically competitive. The focus on product innovation is higher than that on process innovation. While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario? The market size for 3-D televisions is extremely large, while the market size for CRT televisions is moderate. While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry. The focus in the 3-D television industry will be on cost-leadership, whereas in the CRT television industry, the focus will be on differentiation. While the strategic objective of the CRT television industry will be achieving market acceptance, the strategic objective of the 3-D television industry will be pursuing a harvest strategy. The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to move toward product innovations and away from process innovations. achieve market acceptance. survive by drawing on "deep pockets." reduce the barriers to entry in the industry. A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) venture capitalist. category captain. early adopter. intrapreneur. When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a franchise. promissory bill. patent royalty. Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process. Four Two Three One Which of the following customer segments as described in the chasm framework make up the mass market? the technology enthusiasts and laggards together the technology enthusiasts alone the early and late majority together the early adopters alone Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on? The low end of a market is highly vulnerable to competitive attacks. Since the best people, the smartest people in the industry work for P&G, the best discoveries must be invented at P&G. Combining the best of internal and external R&D will more likely lead to a competitive advantage. Almost 40 percent of sales comes from 80 percent of product selection found in the short head. Which of the following is a feature of the growth stage of the industry life cycle? The basis of competition moves away from process innovation. The number of competitors decreases. The consumer demand increases. The prices of goods begin to rise. Which of the following statements is true of laggards? They make up the largest customer segment for any business. They are customers who adopt a new product even if it is not necessary. They tend to enter the market frequently during the decline stage. They do not like waiting too long for new technology to release. When firms innovate by leveraging existing technologies into new markets, they are said to be involved in incremental innovations. radical innovations. architectural innovations. disruptive innovations. A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called reverse innovation. open capacity. disruptive innovation. absorptive capacity. The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? start-up capital required and stage of industry life cycle relative market share and speed of market growth economic value created and costs incurred amount of debt financing and equity financing How does a conglomerate benefit from following an unrelated diversification strategy? The conglomerate can solely depend on its primary business activity for a major portion of its revenues. The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. The conglomerate can limit the learning- and experience-curve effects it faces. The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will introduce different products and services in an existing single market. sell its products in several different regional, national, and international markets. operate from multiple headquarters across the globe. depend solely on its in-house facilities for all its production purposes. Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing? product diversification strategy geographic diversification strategy product-market diversification strategy process diversification strategy _____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. Fixed costs. Influence costs Opportunity costs Coordination costs Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? It is targeting the chasm between the early adopter and early majority market segment. It is redeploying and recombining existing core competencies to compete in markets of the future. It is leveraging existing core competencies to improve current market position. It is building new core competencies to protect and extend its current market position. _____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. Reverse engineering Restructuring Rebooting Reverse brainstorming White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM? a conglomerate a subsidiary a dominant-business firm a single-business firm Which of the following is an example of an external transaction cost? the cost of recruiting and retaining employees the cost of setting up a production unit the cost of maintaining plant and machinery the cost of searching for a contract manufacturer TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business. Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage. Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of monopsony. crowdsourcing. geographic diversification. taper integration. Investments in specialized assets tend to incur high opportunity costs because the assets can be profitably used for multiple purposes. threat of one of the partners pursuing his or her self-interest is high. social costs associated with these assets are high. firms can avoid backward integration by investing in these assets. Which of the following firms is most prone to experiencing a diversification discount? a company that deals in petroleum as well as natural gas a company that derives its revenues from selling aerated drinks and health drinks a company that pursues unrelated diversification a company that pursues related-constrained diversification