Members of Boards of Directors

Q1. Members of Boards of Directors are: a. Appointed by the Securities and Exchange Commission b. Elected by the shareholders as their representatives c. Elected by the public d. Only allowed to serve one term of four years Q2. There are several perspectives of competition. One perspective is zero-sum thinking. Zero-sum thinking means that: a. All parts of the organization gain at no loss b. In order for someone to gain others must experience no gain or benefit c. One can only gain at the expense of someone else d. Everyone in the organization shares gains and losses equally Q3. Organizational vision statements are the beginning point for the hierarchy of goals throughout the organization. An organization’s vision statement should be massively inspiring, overarching, and long-term. a. true b. false Q4. Strategic objectives are more specific than vision statements. a. true b. false Q5. Effective vision statements include: a. All strategic directions of the organization b. A brief statement of the company’s direction c. Strategic posturing and future objectives d. Financial objectives and projected figures Q6. According to Michael Porter, management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because: a. Companies that have implemented these techniques have lost money b. There is no proof that these techniques work c. They cost too much money and effort to implement d. Every company is trying to implement them and hence it does not make a company different from others Q7. According to the text, formulating strategy includes taking into consideration strategy at the business, international, and corporate levels. In addition managers must formulate effective entrepreneurial initiatives. a. true b. false Q8. Objectives in organizations should be clear, stated, and known by employees throughout the organization. a. true b. false Q9. The ‘organizational versus individual rationality’ perspective suggests that: a. What is good for a functional area is always good for the organization b. What is good for the organization is always good for a functional area c. What is best for a functional area may not be best for the organization d. The ‘incremental’ perspective may be best for functional areas while the ‘rational’ perspective may be best for the organization Q10. Environmental scanning and competitor intelligence provide important inputs for forecasting activities. a. true b. false Q11. Technological innovations can create entirely new industries and alter the boundaries of industries. a. true b. false Q12. A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of: a. Backward integration b. Economies of scale c. Forward integration d. Product differentiation Q13. Because the Internet lowers barriers to entry in most industries, it: a. Decreases the threat of new entrants b. Increases the threat of new entrants c. Makes it easier to build customer loyalty d. Increases supplier power Q14. A supplier group would be most powerful when there is/are: a. Many suppliers b. Few substitute products c. Low differentiation of products supplied d. High threat of backward integration by the buyers Q15. An independent group of suppliers, such as farmers, gather to form a cooperative to sell their products to buyers directly, replacing their former distributor. This is an example of: a. Threat of entry b. Backward integration c. Forward integration d. Threat of substitute products Q16. To illustrate interrelationships among different segments of the general environment: The persistence of large U.S. trade deficits (__________) has led to greater demand for protectionist measures, such as trade barriers and quotas (__________). These measures lead to higher prices for U.S. consumers and fuel inflation (__________). a. Macroeconomic, sociocultural, political/legal b. Macroeconomic, political/legal, macroeconomic c. Macroeconomic, technological, macroeconomic d. Macroeconomic, global, macroeconomic Q17. Porter’s Five Forces model helps to determine both the nature of competition in an industry and the industry’s profit potential. a. true b. false Q18. Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry. a. true b. false Q19. In value chain analysis, finance and accounting are considered part of a firm’s general administration. a. true b. false Q20. A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon: a. Social complexity b. Path dependency c. Physical uniqueness d. Tangible resources Q21. Leverage ratios provide measures of a firm’s capacity to meet its long-term financial obligations. a. true b. false Q22. __________ are typically embedded in unique routines and practices that have evolved and accumulated over time – such as trust and effective work teams. a. Tangible resources b. Intangible resources c. Reputational resources d. Organizational capabilities Q23. Historical comparisons are most appropriate during periods of recession or economic boom. a. true b. false Q24. Value chain analysis assumes that a firm’s basic economic purpose is to create value and it is a useful framework for analyzing a firm’s strengths and weaknesses. a. true b. false Q25. One strength of the balanced scorecard is that it is very easy to implement and that there is little need for executive sponsorship. a. true b. false Q26. Customer service would include: a. Product promotion b. Product distribution c. Parts supply d. Procurement of critical supplies Q27. The difference between the market value and book value of a firm is its social capital. a. true b. false Q28. In the knowledge economy, if a large portion of a firm’s value is in intellectual and human assets, the difference between the company’s market value and book value should ___________ a company with mostly physical and financial assets. a. Be equal to b. Be smaller than c. Be larger than d. Not be correlated with Q29. Attracting and retaining human capital is a challenge for many firms today. Firms experiencing high turnover should: a. Focus on increased recruiting b. Decrease money spent on human capital c. Make their work environment less stimulating d. Adopt effective retention strategies Q30. In today’s economy, reliance on the three traditional financial statements: income statement, balance sheet, and statement of cash flow, has increased. a. true b. false Q31. According to the text, effective e-teams identified group members with a proper balance of technical and interpersonal skills. a. true b. false Q32. The use of email can be distracting to employees. Some firms limit the time that employees spend using email. a. true b. false Q33. According to the text, for most of the twentieth century, most managerial efforts were directed toward the efficient allocation of labor and capital – the two traditional factors of production. a. true b. false Q34. An internal labor market (to increase an employee’s mobility within a firm) is one means of increasing employee retention. a. true b. false Q35. Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to: a. Respond quickly to customer requests b. Provide more services and features c. Access markets less expensively d. Access niche markets in a highly specialized fashion Q36. Focus, by itself, often constitutes a competitive advantage. a. true b. false Q37. A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage? a. Introduction b. Growth c. Maturity d. Decline Q38. One way the Internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization. a. true b. false Q39. An important advantage of first movers or ‘pioneers’ in a market is that they may establish brand recognition that may later serve as an important switching cost. a. true b. false Q40. A manufacturing business pursuing cost leadership will likely: a. Focus on a narrow market segment b. Rely on experience effects to raise efficiency c. Use advertising to build brand image d. Put heavy emphasis on product engineering Q41. The experience curve concept suggests that production costs tend to increase as production increases regardless of where an industry is at in its life cycle. a. true b. false Q42. The example of Lexus automobiles in the text points out that a firm can strengthen its differentiation strategy by achieving integration at multiple points along the value chain. a. true b. false Q43. One of the risks of vertical integration is that there may be problems associated with unbalanced capacities or unfilled demands along a firm’s value chain. a. true b. false Q44. A firm should consider vertical integration when: a. The competitive situation is highly volatile b. Customer needs are evolving c. The firm’s suppliers willingly cooperate with the firm d. The firm’s suppliers of raw materials are often unable to maintain quality standards Q45. Vertical integration is attractive when market transaction costs are higher than internal administrative costs. a. true b. false Q46. A firm that incorporates more processes toward the original source of raw materials is an example of forward integration. a. true b. false Q47. Which of the following statements regarding internal development as a means of diversification is false? a. Many companies use internal development to extend their product lines or add to their service offerings b. An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services c. The firm is able to capture the wealth created without having to ‘share the wealth’ with alliance partners d. Firms can often develop products or services at a lower cost if they rely on their own resources instead of external funding Q48. When firms diversify into unrelated businesses, the primary potential benefits are horizontal relationships, i.e., businesses sharing tangible and intangible resources. a. true b. false Q49. Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller’s market share. This justification for diversification is best described as: a. Utilizing common infrastructures b. Capitalizing on core competencies c. Reducing corporate risk d. Using portfolio analysis Q50. Portfolio management should be considered as the primary basis for formulating corporate-level strategies. a. true b. false Q1. Typically, the best method of entry into a foreign market is the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control. a. true b. false Q2. Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy. a. true b. false Q3. Which of the following is a disadvantage of a transnational strategy? a. Less ability to realize cost savings through scale economies b. Limited ability to adapt to local markets c. Unique managerial challenges in fostering knowledge transfer d. Single locations may lead to higher tariffs and transportation costs Q4. Among Theodore Levitt’s assumptions that would favor a global strategy is that consumers around the world are becoming less price-sensitive. a. true b. false Q5. A franchise generally expires after a few years whereas a license is designed to last into perpetuity. a. true b. false Q6. A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization. a. true b. false Q7. As in the case of Siebel Systems (now part of Oracle), elements of a global strategy may facilitate the competitive advantage of differentiation by: a. Increased freedom of individual business units to adapt to local tastes b. The creation of a worldwide network to achieve consistent service regardless of location c. Flexibility in applying R&D to meet country-specific needs d. Tailoring products to meet country-specific needs Q8. The trend towards worldwide markets makes it easier to predict where competitors will spring up. a. true b. false Q9. The term ‘angel investors’ refers to private individuals who provide seed capital to young ventures. a. true b. false Q10. Venture capital is a form of public equity financing used to help young firms rapidly grow. a. true b. false Q11. ‘Doing more with less’ by holding down costs or making more efficient use of resources is one of the ways entrepreneurs achieve success. This is an example of how entrepreneurs use: a. An imitative strategy b. A low cost leader strategy c. A differentiation strategy d. A combination strategy Q12. Market commonality refers to the extent to which competitors are vying for the same customers in the same markets. a. true b. false Q13. The majority of entrepreneurial start-ups are financed with personal savings and the contributions of family and friends. a. true b. false Q14. Netflix CEO Reed Hastings made this important observation about dealing with rivals: a. ‘In a highly competitive marketplace, firms must be paranoid about the multitude of potential rivals.’ b. ‘You can afford to ignore rivals in small markets, but you can never ignore rivals in large markets, such as on-line video companies like YouTube.’ c. ‘There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix’s lunch. The challenge for a management team is to figure out which are real threats and which aren’t.’ d. ‘Netflix’s position is so strong that I don’t worry about new entrants.’ Q15. The evaluation phase of opportunity recognition includes the ‘Aha!’ experience that often leads to new venture development. a. true b. false Q16. Because new ventures are typically small, they usually don’t have high economies of scale relative to competitors. a. true b. false Q17. Founders using a pioneering new entry strategy look for opportunities to capitalize on proven market successes. a. true b. false Q18. When countercultures emerge that have shared values opposite from the dominant culture of an organization: a. Organizational cohesiveness increases b. Information is shared rather than hoarded c. Individuals begin working at cross purposes d. Individuals gain insights into overarching goals and objectives Q19. The Sarbanes-Oxley Act of 2002 stipulates that executives of a firm will still be able to sell their shares in the firm when other employees cannot. a. true b. false Q20. Continuous monitoring enhances an organization’s ability to respond with speed and flexibility. a. true b. false Q21. The collective sum of individual behaviors of an organization’s employees generally results in what is best for the organization; thus, individual rationality assures organizational rationality. a. true b. false Q22. Product diversification by a company is a cheaper way to reduce shareholder risk than portfolio diversification by shareholders. a. true b. false Q23. Most successful organizations minimize the need for explicit rules, regulations, and other boundaries by: a. Posting written statements of the organization’s goals and objectives b. Discouraging the formation of subcultures that isolate work groups c. Designing effective reward systems d. Encouraging employees to see themselves as free agents Q24. Boundaries and constraints are just used to maintain order in an organization and have little effect on the organization’s strategic priorities. a. true b. false Q25. An organization’s reward system is typically a weak method of motivating employees. a. true b. false Q26. The late Sam Walton, founder of Wal-Mart, used to give pep rallies at local Wal-Mart stores. What purpose did this serve? a. It was used to remind employees of Wal-Mart’s rules and regulations b. It helped reinforce and sustain Wal-Mart’s culture c. It demonstrated to employees the importance of articulating explicit goals and objectives d. It made Wal-Mart’s reward system very explicit Q27. Nike is a company that makes use of the concept of ‘product expatriates.’ Product expatriates are: a. Managers from the home country sent abroad to oversee the marketing of a company’s products b. Managers from suppliers who come to work at a company’s headquarters c. Managers of the company sent abroad to work at the plants of its suppliers d. Local nationals hired by the company in the countries from which it sources products Q28. As firms grow, owner managers often need to hire functional specialists to handle the increased information-processing burden. a. true b. false Q29. If an international firm has a multidomestic strategy and a relatively high level of product diversity, the best choice for its organizational structure is: a. Worldwide functional b. Worldwide product division c. Worldwide matrix d. International division Q30. Complete the following sentence: ‘Strategic business unit (SBU) structures are best suited for corporations pursuing __________, whereas holding company structures are best suited for companies with __________ strategies.’ a. Product-market diversification, international b. International diversification, product-market c. Related diversification, unrelated diversification d. Unrelated diversification, related diversification Q31. An organization such as ConAgra that has dozens of different divisions with similar products will probably have the greatest success with which form of organization structure? a. Functional structure b. Matrix structure c. Strategic business unit structure d. Holding company structure Q32. The virtual organization is characterized by participating firms which pursue a collective strategy that enables them to cope with environmental uncertainty through cooperative efforts. a. true b. false Q33. A worldwide product division structure is used when global strategies require that each division be responsible for overall efficiency and performance. a. true b. false Q34. A major disadvantage of adopting a divisional structure is the tendency for managers to focus on short-term objectives. a. true b. false Q35. In order to create an environment where employees can achieve their potential as they move the organization towards its goals, the manager’s role needs to be that of: a. Resource allocator b. Resource controller c. A flexible resource d. An advocator of the status quo Q36. ‘Open book’ management is a technique for gathering and disseminating internal information so that all employees can be involved in decision making and management. a. true b. false Q37. ‘Referent power’ refers to a manager’s identification with his or her employees. a. true b. false Q38. As a manager, when faced with ethical crises you should: a. Focus on issues most relevant to stockholders b. Wait for the other party to make the first move c. Take the initiative to address the problem d. Cover up as much as possible Q39. Systemic barriers to change refer to elements of an organization’s design, structure, and reporting relationships that impede the flow of information. a. true b. false Q40. Emotional intelligence (EI) is one of the components of a high intelligence quotient (IQ). a. true b. false Q41. Barriers associated with a manager’s tendency to look at issues from a biased or limited perspective are known as: a. Systemic barriers b. Behavioral barriers c. Political barriers d. Barriers to exit Q42. Setting a direction is the leadership activity that involves developing a strategic vision of what the organization could become. a. true b. false Q43. According to the text, firms that want to enhance their entrepreneurial position by being competitively aggressive should: a. Enter markets with drastically lower prices b. Foster creativity and experimentation c. Continuously seek out new products or services d. Research risk factors to minimize uncertainty Q44. Process innovations are often associated with a low cost leadership strategy. a. true b. false Q45. A manager whose role is to question the viability of corporate venture projects is know as a(n): a. Product champion b. Exit champion c. Rising star d. Mentor Q46. Dispersed approaches to corporate entrepreneurship are often found in organizations with a strong spirit of entrepreneurship. a. true b. false Q47. Two common forms of a focused approach to corporate entrepreneurship include: a. Internal collaboration and internal venturing b. Social capital and collaboration capital c. Business incubators and new venture groups d. Focus groups and business incubators Q48. One of the pitfalls of real options analysis is that managers may have an incentive and know-how to ‘game the system’ and ‘back-solve’ a formula to get a proposal approved. This can give rise to: a. Managerial conceit b. The illusion of control c. Escalation of commitment d. Agency problems Q49. The strategic goals of corporate entrepreneurship are often just as important as the financial goals. a. true b. false Q50. Corporate ventures that use real options logic in decision making tend to keep total investment low in order to minimize the downside risk of a project. a. true b. false

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