MGMT 352 Exam 2

Agency problems in a public stock company are worsened by

• information asymmetry.

• corporate governance.

• executive compensation.

• shareholder value.

Which of the following is a disadvantage of a horizontal integration corporate strategy?

• It increases the costs associated with increasing value.

• It increases the threat of new entrants in an industry.

• It increases the potential for legal repercussions.

• It increases competitive intensity within an industry.

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon?

• superior customer service

• price

• product differentiation

• local responsiveness

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement?

• a global-standardization strategy

• a transactional strategy

• a multidomestic strategy

• an international strategy

Which of the following firms is most prone to experiencing a diversification discount?

• a company that derives its revenues from selling petroleum and natural gas

• a company that derives its revenues from discounted products

• a company that enjoys economies of scale and scope

• a company that derives its revenues from fast food and banking businesses

The professor has tried hard (she really has...) to make this course as easy, fun, applicable, and fair as possible.

• True

• False

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal?

• A. People are highly unlikely to buy clothes from a store run by a fashion design student.

• B. The online admiration of her designs will not translate into sales.

• C. Once the firm starts growing and attracting more customers, she is likely to feel overloaded.

• D. She has a high administrative cost in running the firm.

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n)

• tall hierarchical structure.

• flat hierarchical structure.

• organic organizational structure.

• decentralized organizational structure.

Which of the following is an important external corporate-governance mechanism?

• market for corporate control

• Information asymmetry

• board of directors

• executive compensation

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?

• It leads to competition between SBUs.

• It helps evaluate each SBU as a stand-alone profit-and-loss center.

• It allows a high level of integration.

• It helps contain the core competencies within a strategic business unit (SBU).