1. There is little vertical integration between steel producers and shipbuilders because:
A. The market for steel has many suppliers and buyers, good information flows, and
little need for transaction-specific investments
B. High powered incentives are critical spurs to efficiency in the steel industry
C. Steel production and shipbuilding are strategically very different industries
D. Both (a) and (c) above
2. When a firm uses input or output control, which of the following statements is true?
A. They must be used together
B. They cannot be used together
C. There is an unavoidable trade-off between
the two
D. They are similar
1. The need for “social legitimacy” implies that businesses should:
A. Replace shareholder value maximization by stakeholder value
maximization
B. Follow accepted ethical codes
C. Seek permission from the local community to operate
D. Adapt to societal pressures in order to survive and prosper
1. Product strategies that reconcile the exploitation of global scale economies with adaptation to
distinct national preferences typically involve:
A. Developing a global product platform that is then produced with locally-
differentiated variants
B. Developing a standardized global product that is then produced at multiple plants
throughout the world
C. Developing a standardized global product that is produced using local ingredients
D. Adapting packaging, promotion, and pricing to meet local conditions
1. An implication of complexity theory for the top management of business enterprises is implies
that:
A. Organizations in the future will not need a CEO
B. In the future, organizational hierarchies will be inverted
C. Future CEOs will be unimportant
D. Future CEOs should relinquish rigid control and foster significant degrees of
autonomy among more junior managers
1. The different stages of the industry life cycles are defined primarily on the basis of:
A. The rate of growth of industry sales
B. The pace of innovation within the industry
C. The characteristics of competition within the industry
D. The average of the industry
1. Global industries are those where:
A. Technology transfers are high
B. International trading is high
C. Both trade and direct investment are
high
D. Foreign direct investment is low
1. Diversification whose sole impact is to reduce the variability of profits does not create value for
shareholders because:
A. Shareholders are interested in return more than in risk
B. The
most important risks (such as a global financial crisis or the collapse of
the Euro) are systemic in nature, against which diversification offers little
protection
C The risk which is relevant to stock market valuations is perceived risk–this bears little relationship to
. profit variability
D
.
Investors can spread risk by diversifying their portfolios, diversification adds
no additional value in terms of risk spreading
1. In Porter’s national diamond framework, Porter emphasizes that domestic rivalry within an
industry plays a key role in:
A. Diverting the attention of national firms from the international market to the
domestic market
B. Complicating government efforts to support the industry
C. Preventing the emergence of a national champions
D. Driving innovation, efficiency and the upgrading of competitive advantages
1. The main cause of downsizing, refocusing, and outsourcing during the latter part of the
20th century were:
A. Developments in IT—especially the advent of the internet
B. A loss of confidence in the organizational capabilities of corporate
managers
C. A greater turbulence in the environment
D. Financial crises
1. Acquisition is the preferred mode of diversification for most firms because:
A. The alternative of setting up a new enterprise in the target industry involves
excessive time and risk
B. The alternative of acquiring a minority stake does not give the diversifying firms
significant decision-making influence over the target firm
C. The stock market confers with high price/earnings ratios on companies that pursue
diversifying acquisitions
D. Emperical research shows that diversifying acquisitions typically create significant
value for the acquiring firm
1. The primary factor determining the degree of vertical integration in a firm is:
A. Transaction costs
B. The nature of an industry
C. Administrative costs
D. The relative level of transaction costs to administrative
costs
1. If competition, market turbulence, and accelerating technological change are increasing the
pace at which firms’ competitive advantage is eroded, to sustain competitive advantage
companies need to:
A. Build strength in intellectual property
B. Create multiple sources of competitive advantage
C. Adopt global strategies that arbitrage the resource advantages of multiple
countries
D. Become intensely-focused upon continual cost reduction
1. The internal labor market within a large, diverse firm provides it with the
chance to make savings, by:
A. Developing senior managers with wide experience
B. Relying less on external recruitment consultants
C. Having first-hand knowledge of a large pool of internal recruits for transfer
between businesses
D. All of the above
1. Mergers and acquisitions represent paradoxes in the sense that:
A. The stock market remains suspicious of them, despite widespread evidence of their
effectivess as tools of corporate strategy
B. Companies continue to be enthusiastic in initiating acquisitions despite empirical evidence
that acquisition destroy shareholder value for acquirers
C Both (a) and (b)
.
D Neither (a) nor (b)
.
1. Acquiring companies often pay excessive prices to acquire target companies because:
A. To gain acceptance of the bid by the majority of a target company’s shareholders, acquirers must pay a
significant premium over the target company’s stock market valuation
B. Information asymmetry: acquiring companies knows less about the true value of target
companies than do these companies themselves
C Acquirer are often drawn into a competitive bidding wars
.
D All the above
.
1. The costs of national differentiation can be low if:
A. A “global customer” exists
B. A firm does not differentiate its products very much
C. The firm has a strong brand
D. A common basic design and common components are
employed
1. Besides managing the overall corporate portfolio of businesses, corporate management can
add value to individual businesses by:
A. Designing strategic orientations, and developing detailed operational plans for
each business
B. Enhancing the management of individual businesses, exploiting linkages between
businesses, and managing change
C. Communicating the strategic orientations to the main stakeholders, and managing
conflicts at lower divisional levels
D. Developing and managing corporate-level capabilities
1. Many retailers that have been outstandingly successful in their how markets have
experienced much poorer performance when they have entered overseas markets. These
include: Tesco, Marks& Spencer, Laura Ashley, and Body Shop in the UK); Best Buy, Sears,
Macy’s and Wal-Mart in the US. This reflects:
A. The lack of major efficiency benefits from international scope in retailing
B. Limited opportunities for exploiting learning benefits in retailing (e.g. by
transferring best practices)
C. The lack of scale economies in retailing
D. The lack of major efficiency benefits from international scope combined with the
need for national differentiation
1. The value chain for a product will tend to be dispersed across different countries when:
A. Different stages of the value chain require different types of resources and
capabilities
B. The product is knowledge-intensive
C. The product is subject to import tariffs and quotas
D. The different stages of the value chain need to be closely coordinated
1. Implementing corporate strategy is concerned with the fundamental issue of:
A. How the multibusiness company can best create value for its different businesses
B. Exploiting linkages among the different businesses
C Where the firm should be competing
.
D Managing the business portfolio
.
1. Vendor partnerships based on relational contacts—such as the relationships between Toyota
and its major component suppliers—are more successful than either pure market contracts or
vertical integration because:
A. They combine the coordination benefits of vertical integration with the incentive
and flexibility benefits of market contracts
B. They give the buyer immense bargaining power over its suppliers
C. They offer similar benefits of high-powered incentives and flexibility that market
contracts
D. They offer similar coordination benefits as vertical integration
1. The ability of firms such as BASF, Exxon, and General Electric to be industry leaders for over
a century indicates:
A. Size is the key predictor of resource superiority
B. Their capacity for adaptation to changes in their environment
C. The power of economies of scale to drive performance
D. A firm’s age is an indicator for capabilities developed through
learning
1. The creation of “shared service organizations” is an example of diversified firms creating
value by:
A. Economizing on transaction costs by providing business services internally rather
than relying on third-party suppliers
B. Reducing risk by ensuring that key business services are controlled by the
corporate HQ
C. Exploiting economies of scope in business services
D. Transferring best practices between their businesses
1. The fact that acquisitions impose substantial costs on acquiring firms (including both the
acquisition premium and legal and advisory fees) implies that:
A. Acquisitions need to have a clear strategic rationale
B. Acquisitions are typically in the interests of managers but contrary to the interests
of shareholders
C. Small acquisitions are better than large acquisitions
D. Boards of directors should oppose acquisition proposals
1. The theory of comparative advantage is concerned with:
A. The competitive advantages of low-wage countries
B. The impact of national resource availability on competitiveness in particular industries
C The sources of real income differentials among countries
.
D The determinants of capital flows between countries
.
1. “Shakeout”–a period when many firms exit from an industry following a period of intense
competition—characterizes an industry’s transition from:
A. From product innovation to process
innovation
B. From maturity to decline
C. Introduction to growth stage
D. From growth to maturity
1. A number of large corporations have separated their corporate headquarters into a corporate
management unit and a shared services organization. The anticipated benefit of this
separation is:
A. Encourage the corporate units supplying business services to be more responsive
to the needs of the businesses
B. Encourage the identification and transfer of best practices
C. Ensure that all business receive standardized support services
D. Eliminate duplication in the provision of business services such as legal 聽 services,
IT, and HR
1. Which of the following developments is not a typical feature of the transition from the
“introductory” to the “growth” phase of the industry life cycle?
A. The shift of production from mature to emerging
countries
B. The emergence of a dominant design
C. Rapid market penetration
D. The shift from product to process innovation
1. According to systems theory, high levels of interconnectedness can lead to:
A. A tendency for the system to amplify small initial movements in unpredictable
ways
B. More pressure on governments to regulate the economy and increase their
interventionism
C. Greater stability in the whole system
D. A spiral of economic catastrophes and business failures
1.
According to institutional sociologists, the propensity for organizations to adopt similar structures
(“institutional isomorphism”) is primarily a result of
A. The complementarity among different managerial practices within firms’
“activity systems”
B. The propensity of firms to imitate one another in order to gain legitimacy
C. Bounded rationality
D. Common key success factors within an industry
1. Nokia, Swatch, AP Moller-Maersk, BHP, and Research In Motion are examples of firms
that illustrate:
A. Different industries’ profitability
B. The opportunities offered to firms with small domestic markets to become global
leaders
C. The ability of firms in mature industrialized countries to fend off emerging market
competitors
D. The complexity of the analysis of competitive advantage in global markets
1. Diversification decisions by firms involve the following key issues:
A. The potential for the diversification to increase growth and reduce risk
B. The opportunities for exploiting economies of scope in resources and capabilities
C. The attractiveness of the industry to be entered and the potential for competitive
advantage
D. The benefits of synergy relative to the costs or coordination
1. The capitalist economy comprises two forms of economic organization, the market
mechanism operated by prices and the administrative mechanism of firms.
A. The notion of the capitalist economy as governed by market processes is a myth.
In reality the global capitalist economy is controlled by large corporations
B. The simultaneous operation of both “hands” means that the capitalist system is
often referred to as an “ambidextrous organization”
C. The market mechanism is referred to as the “visible hand” while the
administrative mechanism of firms is referred to as the “invisible hand”
D. The market mechanism is referred to as the “invisible hand” while the
administrative mechanism of firms is referred to as the “visible hand”
1. The emergence of “conglomerates”—widely diversified companies—during the 1960s
and 1970s was a result of:
A. The desire of companies in low growth industries to diversify into higher growth
industries
B. The willingness of some CEOs to ignore shareholder interests and order to build
large corporate empires
C. Loose monetary policies that increased the availability of corporate finance
D. The belief that the tools of strategic and financial management could be applied to
any type of business
1. The primary concern of corporate strategy is decisions over:
A. The optimal degree of product diversification of
the firm
B. The scope of the firm’s activities
C. Establishing competitive advantage
D. The geographical boundaries of the firm
1. Firms internationalize through two mechanisms:
A. Trade and direct investment
B. Trade in goods (visible trade) and trade in services (invisible trade)
C Direct and indirect investment
.
D Exports and imports
.
1. The main reason that a strategic alliance are often an attractive alternative to a merger or
acquisition is:
A. Alliances allow a firm to create growth options
B. Alliances permit firms to access one another’s resources and capabilities without
the costs and risks of a merger or acquisition
C. Alliances avoid government restrictions relating to antitrust and foreign direct
investment
D. Alliances allow risk sharing in giant projects
1. The reason that most food processing firms do not backward integrate into farming is that:
A. Most food products are available on competitive markets where transaction costs
are low
B. Farming and food processing are strategically dissimilar businesses 聽
C. Both (a) and (b)
D. Both (a) and (b) together with the fact that agriculture is subject to a variety of
government subsidies and support measures
1. The main purpose of a portfolio planning matrix is to:
A. Evaluate the group’s marketing position relative to its rivals
B. Forecast the future performance of the different businesses
C. Optimize resource allocation between the different businesses
D. Represent graphically the different businesses in terms of key strategic variables
that determine their potential for profit
1. Which of the following is not a key difference between a multidivisional company and a
holding company?
A. The parent of a holding company appoints the boards of directors of its
subsidiaries; the HQ of a multidivisional company directly appoints divisional
managers
B. Multidivisional companies have a centralized treasury; holding companies do not
C. Multidivisional corporations typically have a single, integrated strategic planning
process; holding companies do not
D. The subsidiaries of a holding company are responsible for their own financing
decisions; the divisions of a multidivisional company need only to consider their
credit ratings
1. The failure of empirical research to find unambiguous evidence that related
diversification outperforms unrelated evidence points to:
A. The fact that firm performance is the 聽 outcome 聽 of many factors of which
diversification strategy is only one
B. Reverse causation: it may be that poorly performing firms are more likely to take
the risk of unrelated diversification
C. Difficulties in determining whether diversification is related or unrelated
D. All the above
1. When diversification combines two businesses in different industrial sectors, the key
determinant of whether the diversification creates value is whether the diversification:
A. Causes management to lose its focus on its core business 聽
B. Change the debt/equity ratio of the combined company
C. Is between culturally-compatible businesses
D. Enhances the competitive advantage of either or both of the two
businesses
1. Digital technologies are increasing the intensity of competition in the markets for electronic
hardware because they are causing:
A. Production costs to fall
B. The markets for once-separate products to converge
C. Chinese companies that were once contract manufactures for Western and
Japanese electronics producers to become direct competitors
D. Entry barriers to fall
1. Strategic Milestones, the Balanced Scorecard, and Strategy Maps are all devices which aim
to:
A. Improve the effectiveness of strategy execution
B. Ensure more effective corporate control over divisional financial
performance
C. Overcome agency problems in multibusiness corporations
D. Empower divisional and business unit managers
1. The most significant limitation of the BCG matrix in guiding corporate strategy is:
A. The fact that neither market growth nor relative market share are reliable
indicators of a businesses’ future profitability
B. Its long history renders it obsolete
C. Difficulties in defining the market in which the business’s market share and growth
rate are measured
D. The assumption that each business has synergistic links with every other business
within the portfolio
1. The concept of “parenting advantage” means:
A. That the primary criterion for company’s continued ownership of a business is its
ability to add more value than other corporate parent could
B. That the group excels at corporate coaching
C. That corporate managers should emulate the role and skills of good parents in
reaction to their children
D. That the group has spawned many successful subsidiaries
1. As organizations and their environments become more complex and less predictable, the kind
of leadership that fosters effective organizational adaptation is increasingly characterized by:
A. Willingness to take tough decisions
B. Commitment clear performance goals
C. Management of detail
D. Management of identity, meaning, and the emotional climate of the
organization
1. Large countries have an advantage over small countries in technology-intensive and capitalintensive industries, because:
A. Large countries tend to have superior educational systems
B. A large home market means development costs can be recovered more quickly
and supports a more fully-developed industry infrastructure of specialist service
providers
C. They may influence the rest of the world’s technical standards
D. Small markets keep firms from being too ambitious
1. The key difference between economies of scale and economies of scope:
A. There is no practical difference
B. Economies of scale relate to manufacturing activities; economies of scope relate to
a wide range of functions
C. Economies of scale relate to expanding the output of a single product; economies
of scope relate to expansion across multiple products
D. Scale economies are relevant to business strategy; economies of scope to
corporate strategy
1. Despite the heterogeneity of the goods and services supplied by General Electric (e.g.
locomotives and consumer credit), we can consider GE’s diversification to be into
strategically related industries because:
A. It applies similar general management capabilities across all its businesses
B. It operates a balanced portfolio of cash generating and cash using
businesses
C. It operates a balanced portfolio of cash generating and cash using
businesses
D. Most products are supplied under the GE brand
1. Where do general management capabilities generally reside within the diversified firm?
A. External sources
B. At the corporate level
C. At the operational entity
level
D. At the divisional level
1. A dominant design is best described as:
A. The culmination of the process of commodification that accompanies industry
evolution
B. A technical standard
C. The product design chosen by the leading firm in an industry
D. A common product architecture
1. The vertical scope of a firm relates to:
A. The proportion of the firm’s inputs that are produced in-house
B. The extent to which a firm spans stages of the industry value
chain
C. The number of hierarchical layers of the firm’s management
structure
D. The size of the firm’s value added
1. What distinguishes a joint venture from other types of strategic alliance is that in a joint
venture:
A. The partners hold equity stakes in one another
B. The partners are from different countries
C. The partners create a new company which they
jointly own
D. The partners combine their top management teams
1. The main reason why a firm’s distinctive capabilities reflect the conditions that the firm faced
during the early years of its development is because:
A. Most managers adhere to the old adage: “If it ain’t broke, don’t fix it”
B. New skills are difficult to acquire because of the propensity of senior
organizational members to hire and promote junior employees who resemble
them
C. Exploitation tends to dominate exploration
D. Capabilities that develop early become embedded in a firm’s organizational
culture
1. The growth in the size and scope of business enterprises for most of the 19th and 20th
centuries can be attributed to a drop in administrative costs of firms relative to the transaction
costs of market. This resulted from:
A. The growing costs of using markets as a result of taxes and litigation 聽
B. The impact of information and communications technology and new management
techniques in increasing the efficiency and scope of business management
C. The ability of the United States to impose market capitalism throughout the world
D. The power of large firms to push down wages
