Strategy – FAQ – 04

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List of FAQs

Q1

The need to create _____ for stakeholders is a primary influence on a firm’s decisions to engage in merger and acquisition activity.

  1. growth
  2. value
  3. profitability 
  4. shares

Q2

When a target firm does not solicit an acquiring firm’s bid, it is known as a(n):

  1. acquisition
  2. merger
  3. takeover
  4. cross-border acquisition

Q3

What are the three basic benefits that firms can enjoy by successfully using international strategies?

  1. Increased market size, increased economies of scale and learning, and development of a competitive advantage through location
  • Decreased market size, decreased economies of scale and learning, and development of a competitive disadvantage through location
  • Increased market size, decreased economies of scale and learning, and development of a competitive advantage through location
  • Decreased market size, increased economies of scale and learning, and development of a competitive disadvantage through location

Q4

When a firm buys a competitor, supplier, distributor, or business in a highly related industry so a core competency can be used to gain competitive advantage, this demonstrates an acquisition strategy to gain:

  1. decreased market power
  2. resources
  3. higher profitability
  4. increased market power

Q5

A strategy through which the firm sells its goods or services outside its domestic market is called a(n) _____ strategy.

  1. local
  2. international
  3. national
  4. domestic

Q5

Which of the following statements best explains how shareholders are affected by acquisitions?

  1. Acquired firms’ shareholders often earn above-average returns as a result of acquisitions, whereas acquiring firms’ shareholders often earn below-average returns as a result of acquisitions.
  2. Acquired firms’ shareholders often earn above-average returns as a result of acquisitions, whereas acquiring firms’ shareholders often earn returns that are close to zero as a result of acquisitions.
  3. Acquired firms’ shareholders often earn below-average returns as a result of acquisitions, whereas acquiring firms’ shareholders often earn above-average returns as a result of acquisitions.
  4. Both acquired and acquiring firms’ shareholders often earn above-average returns as a result of acquisitions.

Q6

Which of the following is an example of a problem that can prevent an acquisition from being successful?

  1. Ability to achieve synergy
  2. Little to no debt
  3. Adequate evaluation of target
  4. Too much diversification

Q7

What does it mean when an acquisition is unable to achieve synergy?

  1. When a firm finds itself in extraordinary debt as the result of acquiring another firm 
  2. When the acquiring firm and acquired firm do not effectively share resources, economies of scale, and economies of scope across the businesses
  3. When a firm has too many business units and no clear method of measuring their performance
  4. When a firm becomes so large it does not have the economics necessary to manage the complexity of the organization made by the acquisition

Q8

Which of the following is not a managerial function for top-level executives during the acquisition process?

  1. Searching for viable acquisition candidates
  2. Identifying and pursuing other opportunities with external stakeholders
  3. Preparing for negotiations
  4. Managing the integration process after the acquisition

Q9

Which of the following statements does not describe a challenge associated with the integration process of an acquisition?

  1. Meld two or more similar businesses’ cultures
  2. Link different financial and control systems
  3. Build effective working relationships
  4. Determine the leadership structure and those who fill it for the integrated firm

Q10

A popular juniors clothing store features young designers and has been very successful. To gain strategic competitiveness, the clothing store frequently acquires young social-media sensations’ designs and brings their designs to life in the store. What type of acquisition is the store using to increase its strategic competitiveness?

  1. Unrelated acquisition
  2. Related acquisition
  3. Cross-border acquisition
  4. Vertical acquisition

Q11

A large car manufacturer has acquired its tire supplier through a vertical acquisition. Unfortunately, instead of realizing economies of scale by adding to its value chain, the manufacturer has had a very small return on its investment. The firm is struggling to prioritize its efforts between manufacturing and acting as a tire supplier for outside businesses. With so much production power and so little use of it, the manufacturer’s operations have become ineffective. What common problem of acquisitions has the manufacturer encountered?

  1. Inability to achieve synergy
  2. Too much diversification
  3. Too large
  4. Inadequate evaluation of target

Q12

When a firm makes continual improvements to the processes used to produce, sell, distribute, and service its products across country borders, its ability to learn how to reduce costs and increase the value of its products for its customers is enhanced. The firm is:

  1. increasing its market size
  2. achieving strategic competitiveness
  3. developing economies of scale and learning
  4. gaining a local advantage

Q13

A jewelry firm has recently acquired its gem supplier. The jewelry firm prides itself on always being the first to predict and serve new trends. For example, the firm was one of the first to introduce rose gold jewelry pieces after research predicted a large demand. Which of the following attributes of the firm helps it to maintain a long-term competitive advantage in markets?

  1. Merged firm maintains a low to moderate debt position
  2. Acquisition is friendly
  3. Acquiring firm has financial slack
  4. Acquiring firm has a sustained and consistent emphasis on research and development (R&D) and innovation

Q14

A large software company is in the process of acquiring a small tech startup that has built an app for developers to code websites on their smartphones. It is rumored that the software company has grossly overestimated the future growth as a result of the acquisition. If this turns out to be true, what common acquisition problem has the software company encountered?

  1. Integration difficulties
  2. Inability to achieve synergy
  3. Too much diversification
  4. Inadequate evaluation of target

Q15

The strategy through which a firm changes its set of businesses or its financial structure is called:

  1. downsizing
  2. restructuring
  3. an acquisition
  4. a merger

Q16

Which of the following is a positive effect of downscoping?

  1. Firms have fewer employees that they have to compensate.
  2. Managerial effectiveness decreases. 
  3. Firms spend less in operations costs.
  4. Firms refocus on their core business.

Q17

Environmental trends, such as liability of foreignness, can impact a firm’s choice of _____ strategy.

  1. international corporate-level
  2. national
  3. domestic
  4. business-level

Q18

In which of the following scenarios would a firm choose to down size rather than down scope?

  1. A firm has excess resources after acquiring another firm.
  2. A firm wants to cut business units that are unrelated to its core business.
  3. A firm wants to correct managerial mistakes.
  4. A firm wants to build resources and expand operations.

Q19

_____ generally leads to more positive outcomes in both the short and long term.

  1. Downsizing
  2. Down scoping
  3. A leveraged buyout
  4. A non leveraged buyout

Q20

A firm seeks to implement an international strategy in a location with which it is unfamiliar. The firm is unaware of the economics and cultural preferences of the location. The firm is influenced by which of the following environmental trends?

  1. Insensitivity to foreign culture
  2. Liability of foreignness
  3. Regionalization
  4. Localization

Q21

Which of the following is an attribute of a successful acquisition?

  1. Merged firm maintains moderate to high debt position
  2. Acquisition is unfriendly
  3. Acquiring firm conducts ineffective due diligence to select target firms and effectively evaluate the target firms’ health
  4. Acquiring firm has financial slack

Q22

A publishing company publishes books, magazines, and scholarly journals. It is making far more money from its magazines and journals, so the firm has decided to down scope its book business, which will enable it to focus exclusively on new developments and growth in magazines and journals. What is the long-term outcome of the firm’s decision?

  1. Lower performance
  2. Higher performance
  3. Reduced workforce
  4. Higher risk

Q23

Based on the various long-term outcomes, which restructuring strategy is the least recommended to implement?

  1. Downsizing
  2. Leveraged buyouts
  3. Down scoping
  4. Corporate restructure

Q24

Which of the following characteristics can be used to describe licensing as an entry mode?

  1. Low risk
  2. Shared costs
  3. Maximum control
  4. Time consuming

Q25

A semiconductor company has established a plant overseas in South Africa, where the power grid is somewhat unreliable. Which of the following economic risks is most relevant to the circumstances of the semiconductor company?

  1. Infrastructure
  2. Potential naturalization of private assets
  3. Lack of natural resources
  4. Security risk

Q26

What is an international diversification strategy?

  1. A strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into a potentially large number of geographic locations or markets
  2. An international strategy through which the firm seeks to achieve both global efficiency and local responsiveness
  3. An international strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries or regions for allowing each unit the opportunity to tailor its products to the local market
  4. A strategy through which the firm sells its goods or services outside its domestic market

Q27

A firm owns a wide variety of consumer goods businesses. Its portfolio includes a grocery store, shoe store, and gas station. How might the diversification of its businesses impact its ability to have successful acquisitions?

  1. Managers are unequipped to evaluate the success of businesses on a deeper level than finances.
  2. Managers are too focused on new acquisitions to maintain the success of the firm’s current businesses.
  3. The firm is used to service-based businesses.
  4. Managers have been successful at juggling several different businesses.

Q28

Which of the following is the result of a merged firm that maintains a low to moderate debt position?

  1. Lower financing cost
  2. Higher risk
  3. Inevitable trade-offs that are associated with high debt
  4. Maintenance of long-term competitive advantage in markets

Q29

All of the following are incentives for pursuing an international strategy except:

  1. extending a product’s life cycle
  2. gaining easier access to raw materials
  3. gaining access to consumers in emerging markets
  4. gaining a bigger share of the national market

Q30

When a firm takes over another firm in an unfriendly acquisition process, what is a challenge to its future success?

  1. The firm will have a high probability of synergy and competitive advantage by maintaining strengths.
  2. The firm will struggle to maintain long-term competitive advantage in markets.
  3. The firm will struggle to effectively integrate its operations.
  4. Financing will be harder to obtain.

Q31

The four determinants of national advantage are factors of production; demand conditions; firm strategy, structure, and rivalry; and:

  1. nature and size of domestic market
  2. related and supporting industries
  3. factors of distribution
  4. unrelated industries

Q32

Interactions among the four determinants of national advantage influence a firm’s:

  1. ability to be successful in its domestic market
  2. choice of international business-level strategy
  3. choice of national business-level strategy
  4. competency within its domestic market

Q33

Germany is known for its excellent technical training system, which has a strong emphasis on continuous product and process improvements. If Germany did not have such a system, it would lack which of the following determinants of national advantage?

  1. Firm strategy, structure, and rivalry
  2. Demand conditions
  3. Related and supporting industries
  4. Nature and size of domestic market

Q34

In which of the following international strategies are strategic and operating decisions decentralized to the strategic business units in individual countries or regions in order to allow each unit the opportunity to tailor its products to the local market?

  1. International business-level strategy
  2. Transnational strategy
  3. Multidomestic strategy
  4. Global strategy

Q35

An appliance company is considering entering the global market. It is unsure of what steps to take and is looking for a cost-effective method to work with a company that is already in the hosting country. Based on these preferences, which of the following modes of entry should the company choose?

  1. Exporting
  2. Setting up a greenfield venture
  3. Entering into a strategic alliance
  4. Making a cross-border acquisition

Q36

A company is looking to expand internationally in the least costly way as possible. Which entry mode should it choose?

  1. Licensing
  2. Exporting
  3. A greenfield venture
  4. A cross-border acquisition

Q37

A firm whose operations are human-capital intensive would most likely use which of the following entry modes?

  1. Licensing
  2. A cross-border acquisition
  3. Exporting
  4. A greenfield venture

Q38

The short-term outcomes of downscoping include reduced debt costs and an emphasis on strategic controls. What is the long-term outcome that results from the short-term outcomes?

  1. Higher risk
  2. Higher performance
  3. Lower performance
  4. Loss of human capital

Q39

The long-term outcomes of a leveraged buyout are higher performance and higher risk. What two short-term outcomes lead to these long-term outcomes?

  1. Reduced labor costs and reduced debt costs
  2. Reduced debt costs and emphasis on strategic controls
  3. Emphasis on strategic controls and high debt costs
  4. Reduced labor costs and high debt costs

Q40

One of the biggest economic risks of international strategy that can reduce the value of a firm’s assets is:

  1. security risk
  2. currency fluctuations
  3. sufficient access to electrical power
  4. the potential nationalization of invested assets

Q41

The probability of disruption of the operations of multinational enterprises by political forces or events whether they occur in host countries, home country, or result from changes in the international environment describes which of the following risks associated with international strategy?

  1. Economic risk
  2. Reputational risk
  3. Political risk
  4. Financial risk

Q42

Your company, which transports medical equipment to emerging nations, is conducting a political risk analysis before signing a contract to transport equipment within a South American country. Which of the following findings in the political risk analysis would indicate that the company should not sign the contract?

  1. Potential nationalization of invested assets
  2. Devaluation of the country’s currency 
  3. Uncertain prices for critical commodities
  4. High government debt

Q43

A large car manufacturer has cut all but two of the employees in its marketing department to save money and return to profitability. What is the likely long-term outcome of this move?

  1. Loss of human capital and lower performance
  2. Loss of human capital and higher risk
  3. Higher performance and higher risk
  4. Lower performance and higher risk

Q44

Strategic competitiveness is achieved when a firm successfully manages political, economic, and other institutional risks while implementing its international strategies. The degree to which a firm achieves strategic competitiveness through international strategies is increased when they successfully implement:

  1. a national diversification strategy
  2. an international expansion strategy
  3. an international diversification strategy
  4. political and economic risk analysis

Q45

An international diversification strategy creates the potential for firms to do all of the following except:

  1. sustain a competitive advantage without the need to continually upgrade it
  2. generate the resources required to sustain a large-scale research and development (R&D) operation
  3. achieve greater return on their innovations
  4. reduce the often-substantial risks of R&D investments

Q46

A firm can cope with differences in governmental policies and practices in the host country in which it has implemented an international strategy by:

  1. forming a strategic alliance
  2. setting up a wholly owned subsidiary
  3. setting up in a host country where governmental policies and practices are similar to the firm’s home market
  4. establishing clear lines of communication between the firm and the host country’s government

Q47

How can firms implementing an international strategy become limited by diversification?

  1. Too many consumer cultures start to mirror one another as customers mold themselves to demand the same thing as a result of international diversification of the same products.
  2. Eventually, too many firms implement an international diversification strategy for similar products, making the market too saturated for any firm to be successful.
  3. Greater geographic dispersion across country borders results in increased costs of coordination between units and distribution of products.
  4. As a firm becomes more geographically dispersed, it loses its ability to keep track of its operations in terms of organization and costs.

Q48

A strategy in which firms collaborate to achieve a shared objective is known as:

  1. corporate strategy
  2. a strategic alliance
  3. cooperative strategy
  4. international strategy

Q49

The main objective of the collaborating firms in a cooperative strategy is to:

  1. increase competitive advantage
  2. neutralize each other’s competitive advantage
  3. decrease the other’s competitive advantage
  4. decrease both partners’ competitive advantage

Q50

Why would a firm in a standard-cycle market want to pursue a strategic alliance?

  1. To gain access to a restricted market
  2. To speed up new market entry
  3. To share risky R&D expenses
  4. To overcome trade barriers

Q51

Because the resources and relationships among partners is complex, most R&D strategic alliances are what type?

  1. Equity
  2. Nonequity
  3. Cross-border
  4. Joint venture

Q52

In order to remain relevant, firms must explore opportunities to maintain or increase their competitive advantage at all times. In doing so, some opportunities may be out of reach of the firm’s normal capabilities. By entering into strategic alliances, how can a firm achieve competitive advantage?

  1. Partnering with another firm in a strategic alliance and trading valuable resources enables both firms to further develop their products or markets to gain competitive advantage.
  2. Both firms can achieve competitive advantage over one another, even if they are operating in the same product market, by using each other’s most valuable resources.
  3. Both firms can behave opportunistically towards one another to keep the other from gaining competitive advantage.
  4. One firm can gain competitive advantage by taking advantage of its partner’s resources and giving its partner less valuable resources.

Q53

What is explicit collusion?

  1. A form of competition-reducing strategy in which several firms indirectly coordinate their production and pricing decisions by observing each other’s actions and responses
  2. A form of competition-reducing strategy in which two or more firms negotiate directly to determine the amount to produce and the prices for the product
  3. A form of competition-reducing strategy in which firms do not take competitive actions against rivals
  4. A form of competition-reducing strategy in which firms share some of their resources from different stages of the value chain to create competitive advantage

Q54

Why would firms choose to use complementary strategic alliances?

  1. To reduce competition
  2. To launch competitive responses to their competitor’s actions
  3. To expand operations
  4. To focus on long-term product development and distribution opportunities

Q55

A tech startup is exploring ways to develop an app that allows patients to visit their doctors virtually. The startup is partnering with a local practice to compile data, including symptoms, common ailments, and clinical expertise, to be accessible through the interface of the app. The company anticipates the project will take two to three years. What type of business-level strategy best fits this partnership?

  1. Competition-reducing strategy
  2. Vertical complementary strategic alliance
  3. Uncertainty-reducing strategy
  4. Competition response strategy

Q56

What are the advantages of choosing a vertical complementary strategic alliance versus a horizontal complementary strategic alliance?

  1. Firms can partner to share resources for separate parts of the value chain, which helps them if they are pursuing projects in which they do not have previous experience in specific stages of the value chain.
  2. Firms can partner to share resources for the same parts of the value chain, which helps them if they are pursuing projects in which they do not have previous experience in specific stages of the value chain.
  3. Firms can prevent their partners from having access to their most valuable resources, which helps the firms prevent opportunistic behavior by their partners.
  4. A firm can give its partner access to its most valuable resources, which enables both partners to maximize its success.

Q57

A strategy through which a firm collaborates with one or more companies to expand its operations is called:

  1. corporate-level cooperative strategy
  2. diversifying strategic alliance
  3. synergistic strategic alliance
  4. cross-border strategic alliance

Q58

When a firm uses a franchise as a form of corporate-level strategy, the franchisee gains the license of the franchisor’s trademark and method of doing business through a(n):

  1. one-time royalty fee
  2. ongoing franchise royalty rate
  3. initial franchise fee and ongoing royalty rate
  4. initial franchise fee

Q59

Based on what you know about the various cooperative strategies, which is the most costly to implement?

  1. Corporate-level cooperative strategy
  2. Business-level cooperative strategy
  3. Strategic alliance
  4. Network cooperative strategy

Q60

A cross-border strategic alliance is:

  1. a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets.
  2. an alliance in which firms share some of their resources from the same stage of the value chain.
  3. a strategy in which firms share some of their resources to create economies of scope.
  4. a strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage.

Q61

A common reason firms enter into cross-border strategic alliances is:

  1. complete control over their foreign operations.
  2. limited domestic growth opportunities and foreign government economic policies.
  3. abundance of domestic growth opportunities and foreign government economic policies.
  4. help from domestic partners from an operational perspective.

Q62

If firms did not participate in cross-border strategic alliances, what might happen for firms expanding internationally?

  1. Firms would be more successful in entering foreign markets because they would be minimally influenced by other firms.
  2. Firms would be more successful in their domestic markets because they would not be as concerned with establishing themselves in a foreign market.
  3. There would be no measurable impact if firms did not implement cross-border strategic alliances.
  4. Firms would struggle to implement international strategies without the ability to use the resources and expertise of local firms in the foreign markets they were trying to enter.

Q63

The complexities of cooperative strategies increase the challenge of effectively implementing them and may contribute to alliance:

  1. success
  2. failure
  3. partnerships
  4. extensions

Q64

A stable alliance network is formed primarily to do what?

  1. Explore new ideas that may lead to product innovation
  2. Allow partners to develop new markets
  3. Exploit economies of scale and/or scope that exist between the partners
  4. Enable partners to gain entry into new markets

Q65

A small software firm has formed a cooperative strategic alliance with a startup company to develop the startup’s product, an app for smartphones. The startup promised to connect the software firm with other startup companies looking for software services. So far, the startup has not followed through, while the software firm has neared completion of its portion of the app development. Based on this scenario, which risk has manifested in the alliance between the software firm and the startup company?

  1. The software firm has misrepresented its resources to the startup.
  2. The startup has failed to make its resources available to the software firm.
  3. The software firm has failed to make its resources available to the startup.
  4. The startup is acting opportunistically towards the software firm.

Q66

Risks associated with cooperative strategies include a partner’s failure to present its resources to the other, as well as one firm acting opportunistically towards the other with the use of the partner’s resources. How can these two risks be a result of each other?

  1. If a firm acts fairly towards its partner, the partner might misrepresent its resources in order to keep the firm from gaining any more access.
  2. If one firm feels that the other will act opportunistically, it might withhold its promised resources to keep the partner from gaining access to proprietary information.
  3. If one firm presents its resources first, the other will not present its resources to compete against the partner.
  4. When one firm doesn’t present its resources, it is likely that it is going to try to act opportunistically towards its partner.

Q67

Two approaches used to manage cooperative strategies are:

  1. cost minimization and opportunity maximization
  2. cost maximization and opportunity maximization
  3. cost minimization and opportunity minimization
  4. cost maximization and opportunity minimization

Q68

When a company in a cooperative strategy is implementing mechanisms to ensure that its partner does not use its trade secrets to benefit outside the relationship alone, a firm is practicing which cooperative strategy management practice?

  1. Cost maximization
  2. Cost minimization
  3. Opportunistic minimization
  4. Opportunity maximization

Q69

A car manufacturer and its partner in a cooperative strategic alliance have very minimal contract terms. Both firms are hoping to learn from each other to develop new, value-creating, innovative products. By implementing very few contractual terms in their alliance, the two firms are managing their cooperative strategy using which approach?

  1. Cost maximization
  2. Cost minimization
  3. Opportunity maximization
  4. Opportunity minimization

Q70

How is an opportunity maximization approach a more effective alternative to the cost minimization approach of managing cooperative strategy?

  1. Opportunity maximization comes with a high level of trust between partners, which leads to an increased likelihood of success.
  2. Opportunity maximization enables firms to decrease their cost structure, which leads to an increased likelihood of success.
  3. Opportunity maximization leads to more definite contractual obligations for each partner, which leads to an increased likelihood of success.
  4. Opportunity maximization allows firms to take advantage of each other’s resources without limitations imposed by one another.

Q71

In what type of strategy do several firms form multiple partnerships in order to reach their shared objectives?

  1. Complementary strategic alliance
  2. Cross-border strategic alliance
  3. Network cooperative strategy
  4. Uncertainty reducing strategy

Q72

Corporate governance is:

  1. a group of elected individuals whose primary responsibility is to act in the owners’ best interests by formally monitoring and controlling the firm’s top-level managers.
  2. a means by which firms collaborate to achieve a shared objective.
  3. the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.
  4. defined by the number of large-block shareholders and the total percentage of the firm’s shares they own.

Q73

Which of the following statements about the recent global emphasis on corporate governance is not true?

  1. Corporate governance is of concern to nations as well as to individual firms.
  2. Although corporate governance reflects company standards, it also collectively reflects the societal standards of nations.
  3. Research shows that firms seek to invest in nations with national governance standards that are acceptable to them.
  4. The recent global emphasis on corporate governance stems mainly from the need to give shareholders more power in organizations.

Q74

Managerial opportunism occurs when managers:

  1. seek the counsel of internal or external advisors
  2. make decisions to satisfy their own self-interests
  3. make strategic decisions to improve performance
  4. agree to serve on other firms’ boards of directors

Q75

What is an agency relationship?

  1. A group of people who are in disagreement
  2. A situation in which one party is responsible for the actions of another in a workplace setting
  3. A situation in which two parties decide to invest and act as one for a united goal
  4. A situation in which one party delegates decision-making responsibility to a second party for compensation

Q76

What is the definition of ownership concentration?

  1. The ratio of owners and their specialty fields of training to the industry of the company
  2. The number of large-block shareholders and the total percentage of the firm’s shares they own
  3. The total number of shareholders of a company
  4. The percentage of shareholders who are internal versus external

Q77

After a recent round of share releases, many individuals bought up shares and reduced the number of large-block shareholders. The company’s managers recently had the luxury of performing without much interference or monitoring by their shareholders. The managers are now engaging in risky strategic tactics that may not be in the best interest of shareholders. What type of ownership does this company have?

  1. Universal ownership
  2. Diverse ownership
  3. Diffuse ownership
  4. Hostile ownership

Q78

An institution that holds 15 percent of shares in a company in order to be a powerful governance mechanism is an example of a(n):

  1. internal shareholder
  2. institutional owner
  3. external shareholder
  4. corporate sponsor

Q79

Shareholder activists are very unhappy with a certain board of directors’ recent pattern of decisions. The activists believe they need to be given more decision-making capabilities, have their voices heard, and have the opportunity to nominate another board member. What should the shareholder activists propose?

  1. A proxy vote
  2. A hostile takeover
  3. A coup d’état
  4. A dumping of shares to drop stock price and force actions by the board

Q80

Which of the following is not a form of executive compensation?

  1. Salaries
  2. Stock performance
  3. Stock options
  4. Stock awards

Q81

Why is it challenging for firms using international strategies to effectively use executive compensation as a mechanism for corporate governance?

  1. Communication barriers
  2. Cultural differences in expectations
  3. Differences in currency conversion rates
  4. The diversity and complexity of compensation plans across a corporation

Q82

What is the market for corporate control?

  1. An external governance mechanism that is active when a firm’s internal governance mechanisms fail
  2. A term that describes the power that purchasers have when buying shares of stocks
  3. A set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations
  4. The pool of prospects who are qualified to become CEO

Q83

Which is an alternate definition for “poison pill”?

  1. A contract between the target firm and the potential acquirer specifying that the acquirer will not purchase additional shares of the target firm for a specified period of time in exchange for a fee paid by the target firm
  2. The repurchase of the target firm’s shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover
  3. A strategy whereby a company decides to increase the number of overall shares, which will both dilute the hostile company’s shares and increase the cost of the company overall, making the company less appealing to take over
  4. A lump-sum payment of cash that is given to one or more top-level managers when the firm is acquired in a takeover bid

Q84

_____ has _____ success as a hostile takeover defense strategy and _____ effects on shareholder wealth.

  1. A golden parachute; high; positive
  2. A standstill agreement; low; positive
  3. A capital structure change; high; inconclusive
  4. Greenmail; medium; negative

Q85

Why are corporate governance mechanisms important to foreign investors?

  1. To prove that the organization being invested in is legitimate
  2. To protect their investments
  3. To prevent exposure for investors who might otherwise place their money in a legal gray area
  4. To ensure that the country’s government is in control of the business, which protects shareholders’ investments

Q86

Who are seen as the most significant stakeholders in the United States?

  1. Employees
  2. Communities
  3. Shareholders
  4. Suppliers

Q87

What is the main reason why bribery is a major issue for governments, especially countries with emerging economies?

  1. Bribery tends to limit entrepreneurial activity that could help a country’s economy grow.
  2. Bribery negatively impacts the performance of firms by eating up profits.
  3. Bribery is impossible to monitor.
  4. Bribery makes firms less competitive, which negatively impacts a country’s economy.

Q88

What are the benefits of having strong corporate governance?

  1. Because managers and employees fear for their jobs, it allows fear to improve productivity.
  2. It shifts accountability and responsibility for developing an ethical organizational culture and making sure the firm performs effectively from top-level managers to the board of directors.
  3. It encourages top-level managers to be strategically competitive.
  4. There are no benefits to corporate governance, which is seen as an unneeded expense.

Q89

_____ is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

  1. Strategic power
  2. Strategic leadership
  3. Influence
  4. Teamwork

Q90

A CEO wants to implement a new strategy for her firm. Previously, the company’s strategy was differentiation and focused on having the highest quality product. Now, instead of increasing the quality of the product, she wants to maintain quality but drive down cost per unit. What term defines this scenario?

  1. Strategic change
  2. Strategic leadership
  3. Organizational change
  4. Industry shift

Q91

What is quite possibly the most critical skill for a strategic leader to possess?

  1. The ability to create a context in which stakeholders can perform efficiently
  2. The ability to think innovatively
  3. The ability to respond to changes in the external environment
  4. The ability to attract and manage human capital

Q92

Lisa is the CEO of her company and has a distinct leadership style. In order to empower her employees, she delegates responsibility for many things to them, and she strengths their capabilities through continuous training. She has built a team culture in which the team and the company are more important than personal interests. What type of manager is Lisa?

a. Micromanager

b. Performance leader

c. Transformational leader

d. Laissez faire

Q93

A _____ is composed of individuals who are responsible for making certain a company uses the strategic management process, especially to select and implement strategies.

  1. Strategy implementation team
  2. Strategy department
  3. Business development team
  4. Top management team

Q94

A technology firm has had some issues in its decision making. The company is the leader in innovation and is always ahead of the curve on technological advances. But the business struggles with operations and marketing decisions. The leadership team is the same group of five people that started in a garage after meeting in a computer science class. What would you suggest to this company?

  1. Create a more homogeneous top management team
  2. Create a more heterogeneous top management team
  3. Leave all decision making to a single leader
  4. Continue operations as is

Q95

What tends to happen when the board of directors is involved in shaping the strategic direction of a firm?

  1. The firm’s performance improves.
  2. There is a high rate of turnover among top-level managers.
  3. There is a high rate of turnover among middle-level managers.
  4. The firm is unable to respond quickly to market changes.

Q96

Why would a company want to have a heterogeneous top management team?

  1. To make it easier to cohesively implement strategies 
  2. To increase the speed of decision making 
  3. To ensure the CEO does not have too much power 
  4. To make better decisions

Q97

Which of the following is a potential benefit of establishing CEO duality?

  1. Higher performance
  2. Faster response to change
  3. Increased crisis management
  4. Higher CEO monitoring

Q98

What is the term for a company’s options outside the firm for managerial positions?

  1. Job market
  2. External managerial labor market
  3. Resignation market
  4. Internal managerial labor market

Q99

A CEO has just resigned and quickly vacated his role for a more lucrative opportunity. The company, with the rapid change, is in limbo and needs leadership. What is the board of directors’ next logical action?

  1. Cautiously hiring a CEO
  2. Rapidly hiring a CEO
  3. Hiring an external interim CEO
  4. Hiring an internal interim CEO

Q100

Not all CEO changes are successful. Which one of the following scenarios has the greatest chance of failure?

  1. Hiring an external CEO
  2. Hiring an international external CEO
  3. Hiring an international internal CEO
  4. Hiring an internal CEO