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Q:
Boards with many members from the firm's top management team tend to have weak monitoring and control systems for managerial decisions.
a. True
b. False
Q:
The separation of the positions of CEO and chairperson of the Board of Directors reduces the power of the CEO over firm governance practices.
a. True
b. False
Q:
In modern corporationsespecially those in the United States and United Kingdoma primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders.
a. True
b. False
Q:
Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests.
a. True
b. False
Q:
Foreign investors are playing a relatively minor role in the governance of firms in many countries.
a. True
b. False
Q:
Large-block shareholders typically own at least 5 percent of a corporation's issued shares.
a. True
b. False
Q:
Critics advocate reforms to ensure that independent outside directors represent a significant majority of the total membership of the Board. But outsider-dominated Boards may emphasize the use of financial as opposed to strategic controls. The risk of reliance on financial controls is that they may encourage managers to make decisions to maximize their interests and reduce their employment risk.
a. True
b. False
Q:
When the option strike prices in an executive stock option-based compensation plan have been lowered it is usually a defense to a hostile takeover.
a. True
b. False
Q:
DDD MetalWorks plans to go public in the next 2 years. In order to be listed on the New York Stock Exchange, the firm will need to restructure its present Board of Directors, which is made up of a majority outside independent directors to a Board of Directors that is dominated by insiders and related outsiders.
a. True
b. False
Q:
For top-level managers, Board acceptance of the acquiring firm's offer usually leads to job loss because the acquiring firm wants new leadership. If the offer is refused, however, the job loss risk is minimal.
a. True
b. False
Q:
A powerful CEO would oppose the appointment of a lead director on the Board of Directors.
a. True
b. False
Q:
The top management of RavenCrest, Inc. have significant stock options in RavenCrest. They are therefore more likely to gain in making an agreement to be acquired, especially if they have golden parachutes.
a. True
b. False
Q:
The market for corporate control may not be as efficient as a governance device as theory suggests because takeover targets are not always low performers with weak governance.
a. True
b. False
Q:
Failures of corporate internal controls and inadequate internal control systems allowed unethical executives at such companies as Enron and WorldCom to act in their own self-interest.
a. True
b. False
Q:
Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders.
a. True
b. False
Q:
Scandals at Enron, WorldCom, and HealthSouth illustrate the negative effects of poor ethical behavior on a firm's efforts to satisfy stakeholders.
a. True
b. False
Q:
Amelia Smith is the sole owner of the successful restaurant chain, Amelia's Caf . Ms. Smith has taken a no-interest loan from the company in order to build a luxurious seaside house for herself in Carmel, California. This constitutes a classic agency problem.
a. True
b. False
Q:
Long-term incentives facilitate a Board of Directors' pay-related decisions designed to avoid potential agency problems by linking managerial compensation to the wealth of common shareholders.
a. True
b. False
Q:
Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders.
a. True
b. False
Q:
A Board composed primarily of outside directors will have better insights as to the firms intended strategic initiatives, the reasons for the initiatives, and the outcomes expected from them than will inside directors.
a. True
b. False
Q:
Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentive compensation such as stock awards and options.
a. True
b. False
Q:
Generally, the Board of Directors can be classified as insiders, unrelated insiders, outsiders, and unrelated outsiders.
a. True
b. False
Q:
In the modern U.S. corporation, the ownership and managerial control of the firm are separated.
a. True
b. False
Q:
In the United States, the members of the Board of Directors are a firm's key stakeholders and a company's legal owners.
a. True
b. False
Q:
While the implementation of the Sarbanes-Oxley Act in 2002 has been controversial to some, most believe that it has had positive results in terms of protecting stakeholders and certain stockholder interests.
a. True
b. False
Q:
Awareness by top managers of the existence of external investors in the form of individuals (e.g., Carl Icahn) and groups (e.g., hedge funds) often positively influences them to align their interests with shareholders.
a. True
b. False
Q:
What is corporate governance and how is it used to monitor and control managers' decisions?
Q:
Briefly compare and contrast corporate governance in the United States, Germany, and Japan, and China.
Q:
Discuss the effect of the separation of ownership and control in the modern corporation.
Q:
Define the three internal corporate governance mechanisms and how they may be used to control and monitor managerial decisions.
Q:
Discuss the difficulties in establishing performance-based compensation plans for executives.
Q:
How does corporate governance foster ethical strategic decisions and how important is this to top-level executives?
Q:
Describe the market for corporate control and its implications for organizations.
Q:
Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers.
a. True
b. False
Q:
Cooperation in slow-cycle markets is extremely rare because these industries are declining.
a. True
b. False
Q:
The Renault Nissan approach to managing its collaboration involves less reliance on contracts and more reliance on trust, respect, and transparency (i.e., the opportunity-maximization approach to managing cooperative strategies).
a. True
b. False
Q:
Explain the rationales for a cooperative strategy under each of the three types of basic market situations (i.e., slow, standard, and fast cycles).
Q:
Why are cooperative strategies often used when firms pursue international strategies? What are the advantages and disadvantages of international cooperative strategies?
Q:
Identify the competitive risks associated with cooperative strategies.
Q:
Describe the two strategic management approaches to managing alliances.
Q:
Identify and define the two different types of network strategies.
Q:
Identify the four types of business-level cooperative strategies and the advantages and disadvantages of each.
Q:
Identify the three types of corporate-level cooperative strategies.
Q:
Identify and define the different types of strategic alliances.
Q:
BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture?
a. BPM will own more than 50 percent of the venture and a new company will be formed.
b. J3 will own more than 50 percent of the venture and a new company will be formed.
c. BPM and J3 will both own 50 percent of the venture and a new company will be formed.
d. BPM and J3 will both own 50 percent of the venture but no new company will be formed.
Q:
Within the Renault Nissan alliance (Chapter 9 Mini Case), both Renault and Nissan have each formed ____________ strategic alliances at the business-unit level with other companies.
a. vertical complementary
b. horizontal complementary
c. synergistic
d. diversifying
Q:
The Renault Nissan alliance (Chapter 9 Mini Case) is an example of a _______ created to gain economies of scope by sharing resources and capabilities.
a. diversifying strategic alliance
b. vertical complementary alliance
c. synergistic strategic alliance
d. nonequity-based horizontal complementary alliance
Q:
Why are alliances in the airline industry unstable?
a. Unstable industries make for unstable alliances.
b. The potential for firms to take opportunistic actions is too widespread.
c. The industry is declining and profits are not sufficient to divide among alliance partners.
d. The alliances require cooperation among firms that must also compete with one another.
Q:
To increase the likelihood of success between partners assuming that trust exists, ____ approach(es) should be used to manage cooperative strategies.
a. the cost minimization
b. the opportunity maximization
c. both the cost minimization and opportunity maximization
d. None of the these options are correct.
Q:
McDonald's, Hilton International, and Subway all heavily rely on the ____ strategy.
a. transnational
b. network cooperative
c. cross-border alliances
d. franchising cooperative
Q:
In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's:
a. brand name.
b. capital resources.
c. access to a consolidated market.
d. geographic locations.
Q:
The risks of being accused of collusion are MOST likely under what type of alliance?
a. Equity-based vertical complementary alliance
b. Equity-based horizontal complementary alliance
c. Nonequity-based vertical complementary alliance
d. Nonequity-based horizontal complementary alliance
Q:
Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this?
a. Joint venture
b. Equity strategic alliance
c. Nonequity strategic alliance
d. Competition reduction alliance
Q:
A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n):
a. equity strategic alliance.
b. joint venture.
c. nonequity strategic alliance.
d. cooperative arrangement.
Q:
Which of the following statements is TRUE?
a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies.
b. As many as 50 percent of cooperative strategies fail.
c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources.
d. Problems with international cooperative strategies usually concern financial-system differences between the partners.
Q:
A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with:
a. low-cost labor production facilities in another country.
b. similar products who could help the firm establish economies of scale.
c. access to franchises in new markets.
d. excess resources for investing.
Q:
Reduction of competition can be accomplished through all of the following EXCEPT:
a. predatory alliances.
b. explicit collusion.
c. tacit collusion.
d. mutual forbearance.
Q:
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
Q:
Firms entering into synergistic strategic alliances expect to attain:
a. technological complexity.
b. economies of scope.
c. monopolistic market power.
d. learning curve efficiencies.
Q:
The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are:
a. engaging in tacit collusion.
b. following uncertainty reducing strategies.
c. monitoring business competitors for opportunistic behaviors.
d. following a competitive response strategy.
Q:
In some countries, the only legal way for foreign firms to invest in the country is through:
a. acquisitions.
b. mergers.
c. greenfield ventures.
d. strategic alliance with a local firm.
Q:
For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT:
a. a host nation may forbid a merger or acquisition.
b. opportunistic behaviors are less likely.
c. cooperative strategies require fewer resources.
d. cooperative strategies allow greater flexibility in diversifying the firm's portfolio.
Q:
Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 5050 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross-border alliance, this partnership can be called a(n):
a. nonequity strategic alliance.
b. joint venture.
c. horizontal complementary alliance.
d. equity strategic alliance.
Q:
A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to:
a. get venture capital from Pet Resort.
b. gain access to Pet Resort's tacit knowledge.
c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta.
d. join in a vertical complementary alliance with Pet Resort.
Q:
DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will:
a. insist on excessively close monitoring of DDD's actions.
b. gain access to DDD's core competencies and use them to become a future competitor.
c. not fully share its intangible resources.
d. not make equivalent investments to the alliance as does DDD.
Q:
Which of the following is NOT a risk for firms engaged in cooperative strategies?
a. Misrepresentation of a partner's competencies
b. Partner acts opportunistically
c. Insufficient variation in firms' core competencies
d. Failure of partners to make complementary resources available to the partnership
Q:
Which type of strategic alliance is best at passing tacit knowledge between firms?
a. primary cooperative strategic alliances
b. Joint ventures
c. Equity strategic alliances
d. Nonequity strategic alliances
Q:
In a(n) ____, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage.
a. equality-based strategic alliance
b. non-equity strategic alliance
c. joint venture
d. equity strategic alliance
Q:
The Renault Nissan alliance discussed in the Mini Case is an example of a ________ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan.
a. joint venture
b. synergistic alliance
c. horizontal complementary alliance
d. dynamic alliance network
Q:
The two types of complementary strategic alliances are:
a. vertical and horizontal.
b. macro and micro.
c. outsourcing and insourcing.
d. network and complementary.
Q:
In managing cooperative strategies, research indicates that ____ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage.
a. extensive capitalization
b. stability
c. trustworthiness
d. Internet competency
Q:
The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT:
a. laws.
b. culture.
c. trade policies.
d. technology.
Q:
A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ____ advantage.
a. economic
b. collusive
c. alliance
d. relational
Q:
Mutual forbearance is:
a. illegal in the United States.
b. a type of competition-reducing strategy.
c. a variety of risk-sharing by firms in highly fragmented industries.
d. exercised when alliance partners refrain from opportunistic behaviors.
Q:
U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter markets in Europe and Asia. The steel industry is an example of a ________ market in which firms typically use alliances to gain market access.
a. fast-cycle
b. standard-cycle
c. slow-cycle
d. intermediate-cycle
Q:
Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a ________, which is effective at transferring ________.
a. nonequity strategic alliance; explicit knowledge
b. joint venture; tacit knowledge
c. joint venture; explicit knowledge
d. equity strategic alliance; tacit knowledge
Q:
The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the _______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Mini Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures.
a. cost minimization; opportunity maximization
b. opportunity maximization; cost minimization
c. cost maximization; opportunity minimization
d. bureaucratic; organic
Q:
In the Chapter 9 Mini Case, the cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple functions.
a. synergistic
b. opportunistic
c. horizontal
d. diversifying
Q:
A nonequity strategic alliance exists when:
a. two firms join together to create a new company.
b. two or more firms have a contractual relationship to share resources and capabilities.
c. two partners in an alliance own unequal shares in the combined entity.
d. the partners agree to sell bonds instead of stock in order to finance a new venture.
Q:
Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT:
a. Has AsiaFoods accurately represented its competencies?
b. Will AsiaFoods make alliance-specific investments?
c. Can Greentech expect opportunistic behavior from AsiaFoods?
d. Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?