BSG Comprehensive Exam Answers » Business Strategy Game

Managers are well-advised to consider whether the company can operate more profitably by selling some/all plant capacity in one or more geographic regions when

global demand for branded and private-label footwear is so far below global plant capacity that it will be Impossible for most all companies to profitably operate their plants at full capacity for many years to come.

Brinker International operates restaurants in several different segments of the casual dining market. This is a. a relatively high level of diversification. b. an example of product diversification. c. unlikely to reduce variability in the firm’s profitability since the restaurants are all in the casual dining category. d. an example of related linked diversification.

b. an example of product diversification.

On the most basic level, corporate-level strategy is concerned with ____ and how to manage these businesses. a. whether the firm should invest in global or domestic businesses b. what product markets and businesses the firm should be in c. whether the portfolio of businesses should generate immediate above-average returns or should be troubled businesses which will create above-average returns only after restructuring d. whether to integrate backward or forward.

b. what product markets and businesses the firm should be in

Which acquisition would be considered the LEAST related? a. a candy manufacturer purchases a chemical laboratory specializing in food flavorings. b. a chain of garden centers acquires a landscape architecture firm. c. a hospital acquires a long-term care nursing home. d. an upscale “white-tablecloth” restaurant chain acquires a travel agency

d. an upscale “white-tablecloth” restaurant chain acquires a travel agency

The more “constrained” the relatedness of diversification, a. the less likely the firm’s portfolio of businesses will reduce the firm’s variability in profitability. b. the wider the variation in the portfolio of businesses owned by the firm. c. the more links there are among the businesses owned by an organization. d. lower the proportion of total organizational revenue derived from the dominant-business.

c. the more links there are among the businesses owned by an organization.

Which of the following is NOT a limit to vertical integration? a. bureaucratic costs b. the loss of flexibility through investment in specific technologies c. capacity balance and coordination problems from changes in demand d. imitation of core technology by potential competitors

d. imitation of core technology by potential competitors

Horizontal acquisitions in the video rental industry are typically intended to a. take advantage of innovations created by the other firm. b. reduce some of the overcapacity in the industry. c. control more parts of the value chain. d. overcome barriers to entry

b. reduce some of the overcapacity in the industry.

Foreign firms seeking to acquire U.S. firms are interested in all of the following EXCEPT a. gaining access to the U.S. company brand names. b. gaining access to critical resources held by U.S. companies. c. diversifying into unrelated industries in order to broaden their market scope. d. acquiring relationships with dealers through horizontal acquisitions.

d. acquiring relationships with dealers through horizontal acquisitions.

Researchers have found that shareholders of acquired firms often a. earn above-average returns. b. earn below-average returns. c. earn close to zero as a result of the acquisition. d. are not affected by the acquisition.

a. earn above-average returns.

The fastest and easiest way for a firm to diversify its portfolio of businesses is through acquisition because a. of barriers to entry in many industries. b. it is difficult for companies to develop products that differ from their current product line c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition

b. it is difficult for companies to develop products that differ from their current product line

Related acquisitions to build market power a. are likely to undergo regulatory review. b. are rarely permitted to occur across international borders. c. typically involve a firm purchasing one of its suppliers or distributors. d. concentrate on capturing value at more than one stage in the value chain.

a. are likely to undergo regulatory review.

International strategy refers to a(an) a. action plan pursued by American companies to compete against foreign companies operating in the United States. b. strategy through which the firm sells products in markets outside the firm’s domestic market. c. political and economic action plan developed by businesses and governments to cope with global competition. d. strategy American firms use to dominate international market

b. strategy through which the firm sells products in markets outside the firm’s domestic market.

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness due to a. increasing rejection of American culture across much of the world. b. the sophistication of the international consumer due to the Internet c. customization required by cultural differences. d. the increasing loss of economies of scale

c. customization required by cultural differences.

Which of the following is NOT a motive for firms to become multinational? a. to take advantage of potential opportunities to expand the market for the firm’s products. b. to secure needed resources. c. to avoid high domestic taxation on corporate income. d. increasing universal product demand

c. to avoid high domestic taxation on corporate income.

Which of the following is NOT a factor pressuring companies for local responsiveness? a. the need for local repair and service to customers b. customization due to cultural differences c. government pressure for firms to use local sources for procurement d. availability of low labor costs

d. availability of low labor costs

The choices that a firm has for entering the international market include all of the following EXCEPT: a. exporting. b. licensing. c. leasing. d. acquisition.

c. leasing.

Firms participate in strategic alliances for all the following reasons EXCEPT to a. enter markets more quickly. b. acquire technology. c. create values they could not develop acting independently. d. retain tight control over intangible core competencies

d. retain tight control over intangible core competencies

When using business-level and corporate-level cooperative strategies, a firm’s primary intent is to develop strategic alliances that a. enhance the firm’s reputation in the marketplace. b. are long-lived. c. will reduce the firm’s political risk. d. create a competitive advantage.

d. create a competitive advantage.

In a(an) ____ the firms involved own equal shares of a newly-created venture. a. equality-based strategic alliance b. non-equity strategic alliance c. joint venture d. equity strategic alliance

c. joint venture

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of ____ resulting from an alliance. a. explicit collusion. b. economies of scale. c. opportunistic behavior. d. distribution opportunities.

b. economies of scale.

Firms entering into synergistic strategic alliances expect to attain a. technological complexity. b. economies of scope. c. monopolistic market power. d. learning curve efficiencies

b. economies of scope.

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for a. increased diversification of Sierra Infusion. b. the addition of outside directors to the board. c. increased shareholder participation in decision making. d. greater concentration on Sierra’s core industry.

a. increased diversification of Sierra Infusion.

The separation between firm ownership and management creates a(n) ____ relationship. a. governance b. control c. agency d. dependent

c. agency

A primary objective of corporate governance is to a. determine and control the strategic direction of an organization, so that the top executives are focused on maximizing corporate profits. b. ensure that the interests of top-level managers are aligned with the interests of shareholders. c. lobby legislators to pass laws that are aligned with the organization’s interests. d. resolve conflicts among corporate employees.

b. ensure that the interests of top-level managers are aligned with the interests of shareholders.

Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

d. the market for corporate control

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____. a. generate free cash flows, reduce the risk of total firm failure b. increase the price of the firm’s stock, increase the dividends paid out from free cash flows c. reduce the risk of total firm failure, reduce their total portfolio risk d. reduce their employment risk, increase the company’s value

d. reduce their employment risk, increase the company’s value

In the US, monitoring by shareholders is usually accomplished through a. management consultants. b. government auditors. c. the firm’s top managers. d. the board of directors.

d. the board of directors.

Generally, a board member who is a source of information about a firm’s day-to-day activities is classified as a(an) ____ director. a. lead independent b. inside c. related d. encumbered

b. inside

A primary objective of corporate governance is to a. determine and control the strategic direction of an organization, so that the top executives are focused on minimizing corporate profits. b. ensure that the interests of top-level managers are aligned with the interests of shareholders. c. lobby legislators to pass laws that are aligned with the organization’s interests. d. resolve conflicts among corporate employees.

b. ensure that the interests of top-level managers are aligned with the interests of shareholders.

Executive compensation is a governance mechanism that seeks to align managers’ and owners’ interests through all of the following EXCEPT a. bonuses. b. long-term incentives such as stock options. c. salary. d. penalties for inadequate firm performance

d. penalties for inadequate firm performance

Which of the following is NOT an internal governance mechanism? a. the board of directors b. ownership concentration c. executive compensation d. the market for corporate control

d. the market for corporate control

The separation between firm ownership and management creates a(n) ____ relationship. a. governance b. control c. agency d. dependent

c. agency

Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm’s stock. a. 5 b. 25 c. 50 d. 75

a. 5

d. reduce their employment risk, increase the company’s value

Managerial employment risk is the a. risk that managers will behave opportunistically. b. risk undertaken by managers to earn stock options. c. managers’ risk of job loss, loss of compensation, and/or loss of reputation. d. risk managers will not find a new top management position if they should be dismissed.

c. managers’ risk of job loss, loss of compensation, and/or loss of reputation

a. increased diversification of Sierra Infusion.

The market for corporate control serves as a means of governance when a. the firm is overpriced in the market. b. internal controls have failed. c. the corporation has greatly exceeded performance expectations. d. the top management team’s interests and the owners’ interests are aligned.

b. internal controls have failed. .

Corporate governance is all of the following EXCEPT a. mechanisms used to determine and control the strategic direction and performance of organizations. b. a means to establish and maintain harmony between owners and top managers whose interests may conflict. c. ensuring that top managers’ interests are aligned with the interests of stockholders. d. resolve conflicts among corporate employees.

d. resolve conflicts among corporate employees.

T or F? Collusion is a form of cooperative strategy.

T or F? Firms who are competitors can form cooperative strategies

T or F? If a large Asian cosmetics firm was to engage in a 50-50 partnership with a large American chemical company to form a new company focused on creating advanced skin care products, this would be considered a joint venture.

T or F? Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage

T or F? Being (and having) a trustworthy partner increases the probability of alliance success

T or F? Equity strategic alliances exist when one firm acquire another firm

T or F? Nonequity strategic alliances are formed when one partner owns a much larger (or inequitable) share of the joint venture than do the remaining partner(s).

T or F? Cooperation in slow-cycle markets is destructive, especially in emerging markets.

T or F? Mergers are the most popular cooperative strategy used in standard-cycle markets

T or F? Standard-cycle markets are often large and gain economies of scale through cooperative alliances.

T or F? In a horizontal complementary strategic alliance, one firm enters a nonequity strategic alliance with another to help in the design, manufacture, or distribution of its product

Which of the following is NOT a motive for firms to become multinational? a. to take advantage of potential opportunities to expand the market for the firm’s products b. to secure access to low-cost factors of production c. to reduce domestic country political pressures to expand d. to secure key input resources

c. to reduce domestic country political pressures to expand

The increased pressures for global integration of operations have been driven mostly by: a. new low cost entrants. b. universal product demand. c. increased levels of joint ventures. d. the rise of governmental regulation

b. universal product demand.

. Moving into international markets is a particularly attractive strategy to firms whose domestic markets: a. demand a differentiation strategy for success. b. are limited in opportunities for growth. c. have developed unfriendly business attitudes toward the industry. d. have too much regulation.

b. are limited in opportunities for growth.

Factors of production in Porter’s model of international competitive advantage include all of the following EXCEPT: a. labor. b. capital. c. infrastructure. d. quality of demand.

d. quality of demand.

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the __________ in Porter’s model. a. strategy, structure and rivalry among firms b. related and supporting industries c. demand conditions d. factors of production

b. related and supporting industries

All of the following are international corporate-level strategies EXCEPT the ___________ strategy. a. multidomestic b. differentiation c. global d. transnational

b. differentiation

A multidomestic corporate-level strategy is one in which: a. a corporation chooses not to compete internationally but where there are a number of international competitors in the firm’s local marketplace. b. there are a relatively large number of local firms which choose not to compete internationally. c. strategic and operating decisions are decentralized to the strategic business unit in each country. d. strategic and operating decisions are centralized across the firm’s international strategic business units.

c. strategic and operating decisions are decentralized to the strategic business unit in each country

A global corporate-level strategy assumes: a. increasing demand for products in the world. b. a rise in income levels across the world. c. increasing levels of cultural differences among nations. d. more standardization of products across country markets.

d. more standardization of products across country markets.

. The choices that a firm has for entering the international market include all of the following EXCEPT: a. exporting. b. licensing. c. leasing. d. aquisition

c. leasing.

Which of the following is NOT a disadvantage associated with exporting? a. high costs associated with acquiring foreign production facilities b. high transportation costs c. loss of control over distribution activities d. tariffs imposed by local governments

a. high costs associated with acquiring foreign production facilities

A licensing agreement: a. occurs when two firms agree to share the risks and the resources of a new venture. b. is best way to protect proprietary technology from future competitor. c. allows a foreign firm to purchase the rights to manufacture and sell a firm’s products within a host country. d. is often called a greenfield venture.

c. allows a foreign firm to purchase the rights to manufacture and sell a firm’s products within a host country.

The means of entry into international markets that offers the greatest control is: a. licensing. b. acquisitions. c. joint ventures. d. greenfield ventures.

d. greenfield ventures.

Political risks in international diversification include: a. the changes that a domestic government forces on a domestic firm. b. changes in exchange rates. c. those related to instability in national governments. d. the inflation rate in given countries and how the local national bank responds.

c. those related to instability in national governments.

The benefits of pursuing a strategy of social responsibility and corporate citizenship include

· The positive impact that such a strategy has on the company’s image rating, provided the company spends a meaningful amount on socially responsible activities and such spending is sustained over a multi-year period

If a company’s managers want to succeed in creating a differentiation-based competitive advantage (And a potential cost advantage in achieving the differentiation) that is difficult for rivals to quickly or easily copy (because every strategic move a company makes to outcompete rivals and gain a competitive advantage is not apparent from information contained in the FIR and the competitive intelligence Report), then the managers have to

· Do a better job then rivals in identifying and implementing ways to become very cost-efficient in producing and marketing 350-500 models/styles of branded footwear that also have the highest S/Q rating in the industry

Valid reasons to consider building a new plant in Latin America include

· Low tariff costs on footwear sales in Latin America (because no import tariffs are paid on footwear produced at the Latin American plant and shipped to the distribution warehouses in Latin America)

A company stands a better chance of achieving a sustainable cost-based competitive advantage over rivals if its managers

· Pursue a number of cost-reducing initiatives that can be concealed from rivals (because such initiatives are not part of the information contained in the FIR and the competitive intelligence report)

Which of the following actions does not help a company’s social responsibility strategy result in a higher image rating?

· Reducing the prices, the company charges its customers for branded footwear

What does help a company’s social responsibility strategy and results in a higher image rating

· Using environmentally friendly or ‘Green’ materials in producing footwear at the company’s plants · Using recycled packaging materials to box each pair of athletic footwear at the company’s distribution centers · Making donations to charities and charitable causes · Investing to improve energy efficiency and the use of renewable sources at company facilities.

It makes good economic sense for company managers to consider investing $3.5 million per million pairs of capacity for a plant facilities upgrade that will boost labor productivity by 25%.

· At a plant that currently has labor productivity of 3,200 pairs per worker and total employee compensation of $20,000 annually because the upgrade will cause labor costs per pair produced to decline from $6.25 to $5.00 o Labor cost per pair = Compensation/Productivity o Labor cost per pair initially = 20,000/3,200 = $6.25 o After increase in productivity = 20,000/ (3,200*1.25) = $5.00 o Reduction = 6.25 * 5.00 = $1.25

Which of the following combinations of actions will likely provide the biggest competitive benefits in helping a company achieve a differentiation-based competitive advantage over some/many of its rivals?

· Offering 400 or more models/styles to buyers in all four geographic regions, maintaining a celebrity appeal rating of 200 or higher in all four geographic regions, selling branded footwear with a 7-star or higher S/Q rating in all four geographic regions, and offering a rebate of $9 in all four geographic regions

It is both reasonable and wise for a company to consider shifting away from pursuit of a strategy to strongly differentiate its branded footwear from the offerings of rival companies and sell its footwear at a premium price when

· A big percentage of industry rivals are trying to outcompete each other with copycat differentiation strategies that include high S/W ratings, many models/styles, high celebrity appeal ratings, and above-average advertising expenditures

Which of the following is NOT of much significance to company manager in deciding whether profitable opportunity exist to build (or purchase) additional plant capacity in the upcoming decision round?

· Information in the most recent FIR indicates that more than half of the companies in the industry have expanded their plant capacity since year 10

What IS significant to company managers in deciding whether profitable opportunity exist to build (or purchase) additional plant capacity in the upcoming decision round?

· The growth in branded demand and private-label demand over the next 3 years (as reported in each year FIR) · How branded pairs available for sale in each geographic region in the past year compared with projected branded demand and private label demand in each geographic region over the next three years as shown in each year FIR · The size of beginning inventories of branded footwear in each geographic region reported in the most recent FIR · Whether the most recent years FIR shows that the industry already has more than enough production capacity worldwide to supply the combined demand for branded footwear and private-label footwear worldwide for each of the next three years

If a company’s actual results for revenues, net profits, EPS, and ROE turn out to be worse than projected then it is usually because

· The competitive efforts exerted by rival companies to capture sales and market share for themselves in one or more geographic regions proved stronger than company manager anticipated, given the estimates they entered for the various industry averages affecting internet sales and branded wholesale sales on the sales forecast screen

Which of the following are affective ways for manager to try to boost a company’s stock price?

· Increase the company’s dividend payment to shareholders, each year by at least $ per share, repurchase shares of common stock, and make every effort to achieve annual increases in earnings per share.

Which of the following is an advantage of having plants to manufacture athletic footwear in all four geographic regions?

· Reduced exposure to adverse exchange rate cost adjustments (because having plants in all four geographic regions typically enables a company to reduce cross region shipments of pairs that are subject to unfavorable shifts in exchange rates)

One of the lessons about competing in a globally competitive marketplace that comes from “playing” the Business strategy game is that

· The dynamic, ever evolving nature of competition makes it advisable for managers to make strategic adjustments of one kind or another on an ongoing basis to improve the companies competiveness vis-à-vis rivals and boost its overall performance

One of the benefits of contracting with celebrities to endorse the company’s brand of athletic footwear is

· The assist that celebrity endorsement provides in increasing a company’s sales and market share of branded footwear

Which one of the following is NOT a way to reduce costs and strive to achieve a competitive advantage based on lower overall costs per pair sold than rival companies?

Avoiding the use of overtime at the company’s plants

Which one of the following is IS a way to reduce costs and strive to achieve a competitive advantage based on lower overall costs per pair sold than rival companies?

· Searching for the lowest cost way to achieve the target S/Q rating · Spending (but also taking care not to overspend) on best practices training for workers in all of the companies’ plants · Striving to operate at full production capacity so as to help spread fixed costs over more pairs of footwear. · Investing in one or more plant upgrades that have the effect of lowering manufacturing costs per pair produced

It is reasonable for a company’s management team to abandon efforts to win contract to supply private label footwear to chain retailers in a given year when.

· It believes the company has good prospect to profitably sell all the branded pairs it can produce at its existing plants (including full use of overtime)

Which of the following is a valid reason or strong signal that a company should consider changing from a low-cost/low price strategy to a different strategy?

· The low-price segment for branded footwear becomes so overcrowded with competitors that fierce competition makes it very difficult to earn attractive profits in the low-price end of the branded footwear marketplace

Which of the following is most likely to be an effective or attractive way to try to reduce manufacturing costs per pair produced at a particular plant?

Investing in one or more plant upgrades

Which of the following options is usually an appealing way to try to increase a company’s ROE?

· Pursuing actions to boost the company’s total profits and maintaining a high (above 75% payout ratio

Which of the following results from the latest decision round are least important in providing guidance to company managers in making their strategic moves and decision to improve their company’s competiveness and ranking among the top-performing companies in the upcoming decision round?

· The dividend data, the credit rating data, the income statement data, and the balance sheet data for each company that are part of the Financial Performance Summary on p. 5 of the FIR

Managers are well-advised to consider whether the company can operate more profitably by selling some/all plant capacity in one or more geographic regions where

· Global demand for branded and private-label footwear is so fare below global plant capacity that it will be impossible for most all companies to profitably operate their plants at full capacity for many years to come.

A company cannot effectively differentiate its branded footwear from the brands of rivals by

· Spending more money on corporate social responsibility and citizenship activities than most all other rivals

If a company has an unappealing low branded market share in north America because it is being outcompeted by various rival companies, then company manager should

· Immediately review the company’s competitive weaknesses in north America as shown at the bottom of the competitive intelligence report and explore the merits of action to correct most or all of them: in addition, they should take actions that they believe will result in the company having at least two important competitive strengths vis-à-vis its north American rivals in the upcoming decision round

Flawed ways to pursue a differentiation strategy include

· Striving only to achieve weak differentiation (as opposed to strong differentiation) from the branded footwear offerings of other companies also pursuing a differentiation strategy

A company’s strategy to be a low-cost provider of branded footwear can fail to produce good company performance when

· Managers do not operate the company’s plants cost efficiently and achieve manufacturing costs per branded pair sold that is no equal to the industry low in each geographic region are at least close to the industry low in each geographic region

In which one of the following instances do the industry low, industry average, and industry high values for the cost benchmarking data in each issue of the FIR signal that one or more elements of a company’s costs are likely to be too high relative to those of rival companies?

· When the company’s operating profit per pair sold in the internet and wholesale segments are the lowest in the industry of all four geographic regions

Which of the following action sis unlikely to help boost a company’s market share in all four geographic regions?

· Pursuing efforts to boost labor productivity at each of the company’s plants.

Which of the following actions is LEAST likely to increase labor productivity by an amount that is large enough to result in lower labor costs per pair produced at a particular plant?

· Increasing worker base pay by the allowed maximum of 15% each and every year until the company’s base pay compensation per employee exceeds the total compensation per employee ($/year) of all other companies in the industry

The plant upgrade option that reduces production run setup costs by 50% each year and costs $8 million per million pairs of plant capacity (which causes depreciation costs at the plant to rise by 5% of the capital cost of the upgrade) merits immediate consideration by company managers when

· The company has a new 1 million-pair plant in Europe-Arica ready to go into production in Year 14 and the company’s strategy calls for this plant to produced 500 models/styles (which entails annual production run setup costs of $14 million) every year through year 20.

The industry low, industry average, and industry high benchmarks for the costs per branded pair sold in each geographic region (including manufacturing costs, shipping, import tariffs, and exchange rate adjustments), warehouse expenses pe branded pair sold, marketing expenses per branded pair sold, and administration expenses per branded pair sold that appear in each issue of the footwear industry report

· Are worth careful scrutiny by the managers of all companies because when the benchmarking data signals that a company’s costs for one or more of the benchmarks are out of line, managers are well advised to take corrective action in the next decision round.

While contracting with celebrities to endorse a company’s brand adds to the competitive power of its product offering vis-à-vis the offerings of rivals

· One of the big risks of bidding to win contracts for celebrity endorsements is that it is easy to end up overspending to win a contract because it is so hard to judge just how big the actual benefit (of value) of winning the contract for a particular celebrity will prove to be.

Company managers should give strong consideration to bidding for private label contracts in one or more geographic regions in the upcoming decision round when

· They expect to have idle production capacity at one or more plants after producing all the branded pairs needed to meet anticipated demand in the upcoming year

Which one of the following does NTO help boost a company’s image rating?

· Paying total compensation to plant employees that is below the industry average

What DOES help boost a company’s image rating

· Reducing the price, the company charges for its branded footwear · Sustained spending for social responsibility and corporate citizenship initiatives · Being successful in winning celebrity endorsement contracts and thereby boosting the company’s celebrity appeal ratings · Raising advertising to levels above the industry average in each geographic region

The most attractive way to reduce or eliminate the impact of paying tariffs on pairs imported to a company’s distribution warehouse in Latin America is to

· Build a plant in Latin America and then expand its capacity as may be needed so that the plant has the capability to supply all (or at least most) of the pairs the company intends to try to sell in Latin America

An appealing strategy that a company can use to reduce exposure to adverse exchange rate adjustments to the costs of pairs shipped to a distribution warehouse from a plant in a different geographic region is to

· Build sufficient plant capacity in each of the four geographic regions to greatly reduce (maybe even eliminate) the need to ship pairs to a distribution warehouse from a plant in a different geographic region – such a strategy has the added benefit of cutting tariff payments on imported footwear

If a company is pursuing a strategy to produce branded footwear at a low-cost relative to any other rival firm, then it should regularly review the plant and production cost benchmarking data in each year’s footwear industry report to

· Gauge whether its efforts to reduce total manufacturing cost per branded pair produced have been more/less successful than other companies pursuing much the same outcome and to learn what areas of plant operations may warrant further actions to reduce costs

Which of the following statements about striving to reduce labor costs per pair produced at each of the company’s plants is true?

· To achieve labor costs per pair produced at a particular plant that are “low” compared to their plants in the same geographic region, company manager must – each decision round- seek out a combination of base pay increases, piecework incentives per non-defective pair produced, and expenditure for best practices training at the plan that is projected to drive down labor costs even further

Which one of the following will NOT help a company boosts its credit rating from a A- to A?

· A decline in the company’s current ration from 2.0 to 1.5

What WILL help a company boost its credit rating from A- to A?

· An increase in the company’s interest coverage ratio from 2.0 to 12.5 · A decline in the company’s debt to asset ration from 0.30 to 0.15 · An increase in the company’s default risk ration from 5.0 to 10.0 · A change in the company’s default risk rating from medium to low

Which on of the following is a way to improve the S/Q rating of branded pairs produced at a particular plant

· Increasing expenditures for TQM/Six Sigma Programs

A dependable and appealing way for managers to try and boost their company’s EPS is to

· Achieve a sizable cost based competitive advantage over rivals that company managers are savvy enough to sustain; as the market demand for branded footwear grows and the company exploits its cost advantage by underpricing most/all rivals in all four geographic regions, the resulting sales volume and revenue gains will typically spur increases in EPS

Brinker International operates restaurants in several different segments of the casual dining market. This is

an example of product diversification.

On the most basic level, corporate-level strategy is concerned with ____ and how to manage these businesses.

what product markets and businesses the firm should be in

Which acquisition would be considered the LEAST related?

an upscale “white-tablecloth” restaurant chain acquires a travel agency

The more “constrained” the relatedness of diversification,

the more links there are among the businesses owned by an organization.

Which of the following is NOT a limit to vertical integration?

imitation of core technology by potential competitors

What is a limit to vertical integration?

bureaucratic costs the loss of flexibility through investment in specific technologies capacity balance and coordination problems from changes in demand

Horizontal acquisitions in the video rental industry are typically intended to

reduce some of the overcapacity in the industry.

Foreign firms seeking to acquire U.S. firms are interested in all of the following EXCEPT

acquiring relationships with dealers through horizontal acquisitions.

When a foreign firm seeks to acquire U.S. firms they are interested in

gaining access to the U.S. company brand names. gaining access to critical resources held by U.S. companies. diversifying into unrelated industries in order to broaden their market scope.

Researchers have found that shareholders of acquired firms often

earn above-average returns.

The fastest and easiest way for a firm to diversify its portfolio of businesses is through acquisition because

it is difficult for companies to develop products that differ from their current product line

Related acquisitions to build market power

are likely to undergo regulatory review.

International strategy refers to a(an)

strategy through which the firm sells products in markets outside the firm’s domestic market.

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness due to

customization required by cultural differences.

Which of the following is NOT a motive for firms to become multinational?

to avoid high domestic taxation on corporate income.

What is a motive for firms to become multinational

to take advantage of potential opportunities to expand the market for the firm’s products. to secure needed resources. increasing universal product demand

Which of the following is NOT a factor pressuring companies for local responsiveness?

availability of low labor costs

What is a factor pressuring companies for local responsiveness

the need for local repair and service to customers customization due to cultural differences government pressure for firms to use local sources for procurement

The choices that a firm has for entering the international market include all of the following EXCEPT:

leasing.

The choices that a firm has for entering the international market include

exporting. licensing. acquisition.

Firms participate in strategic alliances for all the following reasons EXCEPT to

retain tight control over intangible core competencies

Firms participate in strategic alliances for?

enter markets more quickly. acquire technology. create values they could not develop acting independently.

When using business-level and corporate-level cooperative strategies, a firm’s primary intent is to develop strategic alliances that

create a competitive advantage.

In a(an) ____ the firms involved own equal shares of a newly-created venture.

joint venture

economies of scale.

Firms entering into synergistic strategic alliances expect to attain

economies of scope.

increased diversification of Sierra Infusion.

The separation between firm ownership and management creates a(n) ____ relationship.

agency

A primary objective of corporate governance is to

ensure that the interests of top-level managers are aligned with the interests of shareholders.

Which of the following is NOT an internal governance mechanism?

the market for corporate control

What is an internal governance mechanism

the board of directors ownership concentration executive compensation

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____.

reduce their employment risk, increase the company’s value

In the US, monitoring by shareholders is usually accomplished through

the board of directors.

Generally, a board member who is a source of information about a firm’s day-to-day activities is classified as a(an) ____ director.

inside

A primary objective of corporate governance is to

ensure that the interests of top-level managers are aligned with the interests of shareholders.

Executive compensation is a governance mechanism that seeks to align managers’ and owners’ interests through all of the following EXCEPT

penalties for inadequate firm performance

Executive compensation is a governance mechanism that seeks to align managers and owners interests through

bonuses long-term incentives such as stock options. salary.

Which of the following is NOT an internal governance mechanism?

the market for corporate control

What is internal governance mechanism

the board of directors ownership concentration executive compensation

The separation between firm ownership and management creates a(n) ____ relationship.

agency

Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm’s stock.

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____.

reduce their employment risk, increase the company’s value

Managerial employment risk is the

managers’ risk of job loss, loss of compensation, and/or loss of reputation

increased diversification of Sierra Infusion.

The market for corporate control serves as a means of governance when

internal controls have failed.

Corporate governance is all of the following EXCEPT

resolve conflicts among corporate employees.

Corporate governance is

mechanisms used to determine and control the strategic direction and performance of organizations. a means to establish and maintain harmony between owners and top managers whose interests may conflict. ensuring that top managers’ interests are aligned with the interests of stockholders.