1, A few efficient and strong firms in the laptop industry have remained and emerged

successful from the shakeout stage. Which of the following stages of the industry life
cycle will they move to next?

A. Growth stage
B. Introduction stage
C. Maturity stage
D. Decline stage

2, Which of the following reasons led to the launch of Procter & Gamble's "Connect +
Develop," a web-based interface that connects the company's internal-innovation
capability with the distributed knowledge in the global community?

A. The company wanted to focus on process innovation rather than product innovation.
B. The company was no longer able to generate adequate growth through closed
innovation.
C. The company wanted to carefully protect its intellectual property.
D. The supply and mobility of unskilled workers within the industry had increased
drastically.

3_____ is best described as moving one or more internal value chain activities outside
the firm's boundaries to other firms in the industry value chain.
A. Strategic outsourcing

B. Reverse engineering

C. Forward integration

D. Horizontal integration
4.Win Goods Inc. is a large multinational conglomerate. As a single business unit, the
company's stock price is estimated to be $200. However, by adding the actual market
stock prices of each of its individual business units, the stock price of the company as
one unit would be $300. What is Win Goods experiencing in this scenario?
A) diversification discount
B) learning-curve effects
C) experience-curve effects
D) economies of scale
5.When the market for photo film negatives declined with the arrival of digital cameras,
Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that
were planning to exit. This allowed the company to get rid of all the excess capacity and
acquire a monopolistic market power in the declining industry. Which of the following
strategies has Momento Films adopted in this scenario?
A. harvest strategy
B. maintain strategy
C. consolidated strategy
D. differentiation strategy
6.Process innovation is more important than product innovation during the growth stage
because:
A. companies produce very few products during the growth stage, often just prototypes
or beta versions.
B. technological and commercial uncertainties about a new product still exist during this
stage.
C. it is more crucial to adopt the integration strategy during this stage.
D. a standard, in terms of engineering features and design choices, has been set across
the industry.
7.Which of the following is true of a disruptive innovation?
A. It targets existing markets.
B. It initially provides high-cost solutions to existing problems.
C. It introduces a radical idea and creates a new industry.
D. It attacks the market through a top-down process.
8. Which of the following is an advantage of non-equity alliances?
A) They facilitate the sharing of tacit knowledge between the alliance partners.
B) They are based on ownership rather than contracts.
C) They are flexible and easy to initiate and terminate.
D) They produce strong ties between alliance partners as they are permanent in
nature.
9.In the context of the long tail phenomenon, what does the short head represent?
A. It represents products that appeal to the largest segment of the market with
homogenous tastes.
B. It represents products that are manufactured from minimal input resources.
C. It represents products that contribute only 20 percent to a firm's total revenue.
D. It represents products that online retailers offer in order to increase their product
portfolio and not their revenues.
10.The 3D television division of a large consumer electronics company has been
recognized as a question mark. The company's LCD television division has been
categorized under dogs. Which of the following statements will hold well in this
scenario?
A. The strategic recommendation for the 3-D television division is to harvest it, and the strategic
recommendation for the LCD television division is to invest further in it.
B. The 3-D television division will have a high market share in its industry, whereas the LCD
television division will have a low-market share in its industry.
C. The 3-D television division operates in a high-growth market, whereas the LCD television
division operates in a low-growth market.
D. The LCD television division will benefit by pursuing a differentiation strategy, and the 3-D
television division will benefit by following a cost-leadership strategy

11.In the U.S., the time period for the right to exclude others from the use of a patented
technology is _____ from the filing date of a patent application.
A. 20 years
B. 25 months
C. 15 months
D. 25 years
12.While the personal computer industry is flooded and growing with laptops and
tablets, John recently bought a desktop, his first personal computer. He realized that a
computer at home would be helpful for his children for their school projects, and he
could use it to maintain the simple accounts of his plumbing business. Which of the
following customer segments does John best represent?
A.Early adopter
B. Category captains
C. Laggards
13.How does a conglomerate benefit from following an unrelated diversification
strategy?
A) The corporation can depend only on its core business to generate the majority of its
revenue.
B) The corporation can share most of its capabilities in products, services, technology or
distribution among all its businesses.
C) The corporation can overcome institutional weaknesses, such as the lack of capital
markets in emerging economies.
D) The corporation can limit the effects of the learning and experience curves it faces.
14.In the market for used cars, which of the following is a reason behind the crowding
out of desirable cars by lemons or inferior ones?
A. experience-curve effects
B. time compression diseconomies
C. principal-agent problem
D. information asymmetry
15.How was Wikipedia able to outperform both Encyclopedia Britannica and Microsoft
Encarta?
A. By lowering its network effects
B. By launching an electronic encyclopedia that included a variety of entries
C. By leveraging first-mover advantages
D. By allowing any person, expert or novice, to generate and edit content
16. Which of the following is an example of an internal transaction cost?
A.The cost of searching for a contract manufacturer
B.The cost of signing a contract with a supplier
C.The cost of buying raw materials
D.The cost of maintaining a production unit
17. Which of the following statements accurately describes social entrepreneurs?
A. Social entrepreneurs are individuals who invest in start-up businesses in order to
earn huge returns.
B. Social entrepreneurs are individuals who rely primarily on social networking sites to
generate revenues.
C. Social entrepreneurs are employees within organizations who are responsible for
carrying out lean production.
D. Social entrepreneurs are those who consider financial, ecological, and social metrics
to evaluate their firm's performance.
18.Which of the following is an advantage of joint ventures?
A. They create strong ties, trust, and commitment between the partners.
B. They are based on contractual agreements rather than partial ownership.

C. They require the lowest amount of investment relative to the other alliance types.

D. They can be easily initiated and terminated.

19.As a research scholar, Richard had built a helicam as part of his project. The
helicam could capture aerial images. Realizing the potential use of this product in
movie production and military and rescue operations, he started a new venture
where he could customize these helicams to fit the specific needs of the buyers
and sell them. Richard can be best described as a(n) _____.
A. entrepreneur
B. category captain
C. franchisor
D. early adopter
20.The _____ is a strategic management framework that proposes that critical
resources and capabilities frequently are embedded in strategic alliances that
span firm boundaries.
A. real-options perspective

B. stakeholder strategy

C. relational view of competitive advantage

D. non-differentiation strategy
21.Which of the following firms is most prone to experiencing a diversification discount?
a) A company that derives its revenues from selling aerated drinks and health
drinks.
b) A company that pursues unrelated diversification
c) A company that pursues related-constrained diversification.
d) A company that deals in petroleum as well as natural gas.
22.When large, incumbent firms buy startup companies, the transaction is
generally described as a(n) _____.
A. Non-equity alliance
B. Equity alliance
C. Acquisition
D. Merger
23.Sara can be categorized under the late majority customer segment. Which of the
following behaviors is she most likely to exhibit?
A. She will be confident in her ability to master any new technology.

B. She will prefer to buy from well-established brands rather than unknown new
ventures.

C. She will not rely on endorsements by the early majority or early adopters.
D. She will buy beta versions of new products and technology.

1. When does a merger between companies typically occur?

A. When two firms of comparable size join to form a combined entity

B. When large, incumbent firms buy startup companies

C. When a target firm does not want to be acquired

D. When two or more firms enter a temporary vertical strategic alliance

2. By introducing Vscan, a small, wireless ultrasound device, GE Healthcare
(General Electric) was primarily trying to:
A. cater to the healthcare needs of the developed countries over developing
countries.

B. invade the healthcare market from the bottom up.

C. leverage existing technologies to attack new markets.

D. find a market for high-end, high-price diagnostic devices.

3. The demand for video recorders has drastically reduced, and there are only a
few consumer electronics companies selling them at extremely low prices. Also,
the current buyers of video recorders are mainly categorized under laggards.
Which of the following stages of the industry life cycle is the video recorder
industry in currently?
A. Growth stage

B. Maturity stage

C. Decline stage

D. Commercialization stage
4. Which of the following stakeholders of a company would most likely be
responsible for formulating a corporate strategy?
A. the first-line employees

B. the creditors

C. the chief executive officer

D. the middle manager

5. Which of the following statements is true of explicit knowledge?
A. Explicit knowledge is about knowing how to do a certain task.
 B. Explicit knowledge is knowledge that cannot be codified.

C. Explicit knowledge is shared in non-equity alliance firms.

D. Equity knowledge is acquired only through actively participating in a

process.

6. In Eli Lilly's Office of Alliance Management, the _____ is a senior,

corporate-level executive responsible for high-level support and oversight.
A. alliance manager

B. alliance leader

C. alliance regulator

D. alliance champion
7. When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical
composition was disclosed at the back of the drug's cover. However, any
attempts by competitors to copy the chemical composition would result in
infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is
protected by a _____.
A. promissory bill
B. patent
C. franchise
D. royalty
8. In Eli Lilly's Office of Alliance Management, who is responsible for providing
alliance training and development?
A. The alliance champion

B. The alliance leader

C. The alliance manager

D. The alliance boss

9. Which of the following is an example of an external transaction cost?
A. the cost of setting up a production unit

B. the cost of searching for a contract manufacturer

C. the cost of recruiting and retaining employees

D. the cost of maintaining plant and machinery

10. A _____ is best described as a form of intellectual property that gives the
inventor exclusive rights to benefit from commercializing a technology for a
specified time period in exchange for public disclosure of the underlying idea.
 A. patent

B. promissory note

C. franchise

D. royalty
11. Galaxi Products Inc. is a U.S.-based consumer electronics company. It owns
smaller firms in Japan and Taiwan where most of its cell phone technology is
developed and manufactured before being released worldwide. Which of the
following alternatives to integration does this best illustrate?
A. Venture capitalism
B. Franchising
C. Joint venture
D. Parent-subsidiary relationship

12. To position itself more strongly after the 2001 bursting of the Internet and
tech stock bubble, Cisco Systems embarked on a(n) _____.
A. harvest strategy

B. acquisitions-led growth strategy

C. unrelated diversification strategy

D. exit strategy
13. In which of the following stages of the industry life cycle is a standard first
established?
A. Maturity stage
B. Growth stage
C. Shakeout stage
D. Introduction stage
14. Dow Corning is a company owned by Dow Chemical and Corning. This is
most likely an example of a(n) _____.
joint venture
15. Which of the following is true of acquisitions?
A. Acquisitions can be friendly or hostile.

B. Acquisitions can occur only when the involved entities are of comparable size.

C. In acquisitions, two independent companies join to form a separate third

entity.

D. Acquisitions increase the competitive intensity in an industry.

16. When executives of a firm consider business opportunities only where they
can leverage their existing competencies and resources, it can be
concluded that the firm is using _____.
 A. related-constrained diversification.

B. related-linked diversification.

C. strategic outsourcing.

D. offshore outsourcing.
17. When does a firm fall into the large competitive chasm between early adopters
and early majority?
A. when the early majority create herding effects for its products
B. when it cannot attract technological enthusiasts to try the beta versions of its
products
C. when it fails to successfully launch a mass-market version of its product
D. when it creates strong network effects during the growth stage

18. Which of the following is a disadvantage of equity alliances?

A) They do not permit the exchange of explicit knowledge.
B) They can entail significant investments.
C) They can bring about a lack of commitment.
D) They are reflective of weaker ties between firms.
19. Which of the following is stated by the long tail phenomenon?
A. When production is increased by 80 percent, the decrease in cost is close to
20 percent due to economies of scale.

B. To gain a competitive advantage, it is necessary for a business to internalize

80 percent of its R&D, and outsource the remaining 20 percent.

C. For an incumbent firm, 80 percent of its revenue comes from existing

customers, and new customers account for the remaining 20 percent.

D. Almost 80 percent of sales in a given product category come from only 20

percent of the offerings in that category.
20. Which of the following statements is true of firms pursuing a closed
innovation?
A. Firms following the closed innovation model are less likely to be prone to the
not-invented-here syndrome.

B. Firms in the closed innovation model are extremely protective of their

intellectual property.

C. Firms in the closed innovation model focus on building a more effective

business model to commercialize R&D, rather than focusing on being first to
market.
 D. Firms following the closed innovation model will find activities such as spin-out
ventures or strategic alliances crucial to commercialize their internally developed
R&D.
21. Diversification premium is a situation in which:
A. customers have to pay premium prices on products manufactured by
firms pursuing unrelated diversification due to the lack of economies of
scope.

B. the overall value creation of highly diversified firms is more than the
sum of the value created by individual business units.

C. the stock price of related-diversification firms is valued at greater than

the sum of their individual business units.

D. shareholders are benefitted from the market capitalization of a highly

diversified firm because of its economies of scale.
22. Which of the following is a drawback of Wikipedia's business model?

A. The company's superior differentiated appeal is highly correlated to its cost.

B. The user-generated content may be unreliable and unauthoritative.
C. The company relies on the wisdom of the experts rather than the public.
D. The chances of falling in the competitive chasm, between the early adopters
and early majority, are high
23. ElectraSync Inc., a large consumer electronics company, has divided each
product in its portfolio into a separate strategic business unit (SBU). The desktop
SBU has been experiencing drastic decline in its cash flow, and its market share
has also reduced to an insignificant 10 percent. This has been attributed to the
low-growth in the desktop market after the arrival of tablet computers and
laptops. In the context of the Boston Consulting Group (BCG) growth-share
matrix, the desktop SBU will be categorized under:
A) stars.
B) question marks.
C) dogs.
D) cash cows

24. Which of the following corporate strategies did ExxonMobil pursue by acquiring
XTO Energy, a natural gas company?
A. Taper integration strategy
B. Differentiation strategy
C. Related diversification strategy
D. Cost-leadership strategy
25. In the Boston Consulting Group (BCG) growth-share matrix, strategic business
units categorized under dogs:
A. compete in a low-growth market but hold considerable market share.
B. hold a high market share in a fast-growing market.
 C. compete in a high-growth market but have low and unstable earnings.
D. hold a small market share in a low-growth market.
26. What did Microsoft do to gain a foothold in the online search and advertising
market dominated by Google?
A. It acquired Yahoo.

B. It entered into a strategic alliance with Yahoo.

C. It sold part of its equity to Yahoo.

D. It outsourced its non-core business activities to Yahoo.

27. Which of the following statements accurately brings out the difference between
closed innovation and open innovation?
A. Firms following the open innovation model are much more likely to be prone to
the not-invented-here syndrome than firms pursuing a closed innovation model.

B. While open innovation focuses on building an effective business model to

commercialize R&D, closed innovation focuses on being first to market.

C. Firms following the open innovation model are more protective about their
intellectual property than firms pursuing a closed innovation model.

D. While open innovation means introducing new technologies to new markets,

closed innovation refers to introducing new technologies to existing markets.
28. A _____ is best described as an approach to strategic decision making that
breaks down a larger investment decision into a set of smaller decisions
that are staged sequentially over time.
A. cost-leadership approach

B. break-even analysis

C. market risk framework

D. real-options perspective
29. _____ are best described as contractual alliances in which the participants
regularly exchange codified knowledge.
A. Cartels

B. Licensing agreements

C. Equity alliances

D. Acquisitions
30. The partnership between Toyota and Tesla Motors, in which Toyota has
made a $50 million investment in the California startup company to learn
 new knowledge and gain a window into new technology, is an example of
a(n) _____.
A) joint venture
B) non-equity alliance
C) equity alliance
D) acquisition
31. In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1
billion to purchase a controlling interest in the biotech startup Genentech.
In 2009, after witnessing the success of Genentech's drug discovery and
development projects, Roche spent $47 billion to purchase the remaining
minority interest in Genentech, making it a wholly owned subsidiary. In
terms of strategic alliances, this scenario best indicates _____.
A.the real-options perspective
B.explicit knowledge.
C.co-opetition.
D.the stakeholder strategy.

32. While the industry for e-book readers is in its growth stage, the industry for
landline telephones is in the decline stage of the industry life cycle. Which of
the following can be inferred from this?
A. While firms in the e-book reader industry will focus on pursuing a harvest
strategy, firms in the landline telephone industry will focus on product
innovations.

B. The e-book reader industry is at a more advanced stage than the landline
industry of the industry life cycle.

C. While firms in the e-book reader industry will attract customers categorized
under late majority, firms in the landline telephone industry will attract the early
majority customers.

D. The number of competitors in the e-book reader industry will be larger when
compared to the landline telephone industry.

33. Which of the following is a feature of the shakeout phase of the industry life
cycle?
A. There is rapid industry growth during this stage.

B. Market demand in this stage primarily consists of first-time adopters.

C. Competitive intensity within the industry increases.

D. The mode of competition shifts from price to non-price in this stage.

34. Which of the following statements is true of strategic alliances?
A. They are always focused on joining the same value chain activities.
 B. They enable firms to achieve goals faster, but at higher costs.

C. They are known as strategic alliances whether or not they have the potential
to affect a firm's competitive advantage.

D. They are most beneficial when they join together resources and knowledge in
a combination that obeys the VRIO principles.
35. Today, many companies use PeopleSoft and EDS to avoid maintaining a human
resource management system. By doing this, these firms are:
A.engaging in strategic outsourcing.
B. Increasing their level of vertical integration
C offshoring their core activities
D engaging in unrelated diversification

36. How do firms benefit from vertical integration?

A. Vertical integration allows firms to reduce organisational complexity and
administrative costs.
B. Firms that vertically integrate will have increased strategic flexibility when
faced with technological changes.
C. Firms that vertically integrate do not have to make transaction-specific
investments.
D. Vertical integration allows firms to increase operational efficiencies through
improved coordination of adjacent value chain activities.
37. Which of the following firms is least integrated?
A. a firm that enters a joint venture with another company to develop a new
technology
B. a firm that owns production subsidiaries across the globe
C. a firm that makes equity investments in its supplier's company
D. a firm that buys all the required raw materials from multiple external
vendors. In the make-or-buy-continuum, the "make" and "buy" choices
anchor each end of a continuum from markets to firms.
38. Which of the following statements is true of internal transaction costs?
A.Internal transaction costs arise when companies transact in the open market.
B.When the internal costs involved in pursuing an activity in-house are more than
the costs of transacting, then the concerned firm should vertically integrate.
C.Internal transaction costs tend to increase with organizational size and
complexity.
D.It is beneficial to "buy" goods or services rather than "make" when internal
transaction costs are low.
39. Which alliance type is the Renault-Nissan alliance, where Nissan owns 15
percent of Renault, and Renault owns 44.4 percent in Nissan?
A) Non-equity alliance
B) Equity alliance
C) Greenfield venture
 D) Joint venture
40. How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?
A. Its main strategic focus is now on the domestic market.
B. It opens a market for it that is growing slowly but has high profit margins.
C. It has access to convenience stores and a new distribution channel.
D. It automatically gains monopoly in the chocolate-manufacturing industry.
41. PepsiCo operates in many countries and sells a wide variety of aerated
drinks, other beverages, different types of chips, and Quaker Oats goods to
achieve continuous growth. From this data, we can conclude that PepsiCo
has been involved in _____.
A. strategic outsourcing.
B. lean manufacturing.
C. product-market diversification.
D. process diversification.
42. When a firm pursues a maintain strategy, it:
A. exits a declining industry to maintain the goodwill of its overall brand name.

B. reduces investments in product support and allocates only a minimum of

human and other resources.

C. continues to support marketing efforts even if the demand for the product is
declining.

D. chooses to consolidate the industry by buying rival firms, those who plan to
exit.
43. Which of the following statements is true of transaction costs?
A.When the costs of pursuing an activity in-house are more than the costs of
transacting for that activity in the market, then the concerned firm should
vertically integrate.
B.When companies transact in the open market, they incur internal transaction
costs.
C.Transaction costs exclusively consist of external costs associated with
economic exchanges.
D.Transaction costs are necessary to explain and predict the boundaries of
a firm.
44. Strategic business units that have a relatively low market share but have
the potential to grow are best categorized under _____ in the Boston
Consulting Group (BCG) growth-share matrix.
A.dogs
B.stars
C.cash cows
D.question marks
45. _____ is best described as a firm's ownership of its production of needed
inputs or of the channels by which it distributes its outputs.
A.Venture capitalism
B.Bootlegging
 C.Vertical integration
D.Crowdsourcing
46. Bill is in an interview for a sales job that requires no experience. He is trying to
portray himself as a highly enthusiastic, energetic person with high-level
communication and interpersonal skills. The interviewer is convinced that Bill
should be hired as a sales person in the company. However, in his resume, Bill
had not mentioned his previous work experience as he was fired from that job on
the account of using illegal drugs. Which of the following does this scenario best
illustrate?
A. Information asymmetry
B. Principal-agent problem
C. Experience-curve effect
D. Learning-curve effect
47. In Eli Lilly's Office of Alliance Management, the alliance champion is primarily
responsible for:
A. making sure that an alliance fits within the firm's existing alliance portfolio and
corporate-level strategy.

B. providing technical expertise and knowledge needed for the specific technical
area in an alliance.

C. providing alliance training and development, as well as diagnostic tools.

D. serving as an alliance process resource and business integrator between the

two alliance partners.
48. Which of the following best illustrates site specificity?
A. Equipment necessary for mining bauxite and aluminum smelting B.
Bottling machinery to manufacture bottles with trademarked shapes C.
Investment made in human capital to master procedures of a specific
organization D. Investment made to train employees to operate
computers
49. Which of the following statements is true of taper integration?
A. It is the most integrated alternative to performing an activity within one's own
corporate family.
B. It refers to a situation in which firms narrow their focus on downstream value
chain activities and ignore the upstream value chain activities.
C. It exposes in-house suppliers and distributors to market competition to make
performance comparisons possible.
D. It does not rely on outside-market firms for its supplies.

50. _____ is best described as a situation in which one party is more informed
than another, because of the possession of private information.
A.Information governance
B.Information asymmetry
C.Information deregulation
D.Information piracy
51. How did Apple plan to attack Amazon's stronghold in the e-reader market?
A. It orchestrated a web of strategic alliances with major publishing
houses.
B. It directly imitated Amazon's Kindle product technology.
C. It acquired startup publishing houses prior to launching its iPad
product.
D. It sold e-books at prices lesser than that of Amazon.
52. With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General
Motors (GM) enter into a strategic alliance with Toyota?
A. to transfer its knowledge of a completely new production system

B. to learn the lean manufacturing system pioneered by Toyota

C. to better understand the American workforce

D. to get access to Toyota's distribution system and marketing expertise

53. Investments in specialized assets tend to incur high opportunity costs because
the:
A. assets can be profitably used for multiple purposes.
B. threat of one of the partners pursuing his or her self-interest is high.
C. social costs associated with these assets are high.
D. firms can avoid backward integration by investing in these assets.
54. How can a firm pursuing a diversification strategy enhance its overall corporate
performance by leveraging financial economies?
A. by using internal capital markets as a source of value creation
B. by adding more unrelated businesses into its corporate portfolio
C. by increasing its coordination and influence costs
D. by investing in businesses under the question mark quadrant of the BCG
matrix
55. WJ Group Inc., a large multinational conglomerate, had begun to experience
declining revenues over the years. The top management at the headquarters of
the company decided that it was important for the company to avoid deviating
from its core competencies. Thus, a few of the company's key businesses like
energy, telecommunications, and automobiles were centralized, giving the top
management more control over them. Also, relatively newer businesses like
beverages and food processing were divested. In this scenario, WJ Group is
involved in:
A. reverse engineering.
B. benchmarking.
C. restructuring.
D. crowdsourcing.
56. The _____ business model is best described as one in which companies
can obtain a large part of their revenues by selling a small number of units
from among almost unlimited choices
A. Razor-razor-blade business model
B. Long tail business model
 C. Pay-as-you-go business model
D. Subscription-based business model
57. In the context of industrial growth, which of the following statements is true of
standards?
A. Standards emerge exclusively from bottom-up through competition in the
marketplace.
B. As the size of a market expands, a standard signals the market's agreement
on a common set of engineering features and design choices.
C. Standards are exclusively imposed top-down by government or other
standard-setting agencies such as the Institute of Electrical and Electronics
Engineers.
D. After a standard is established in an industry, the basis of competition tends to
move away from process innovations toward product innovations.
58. It is important for a firm to win over the early majority section of the market to
ensure the commercial success of an innovation because they:
A. are driven by technology concerns rather than the practicality of a new
product.

B. influence the purchase decisions of early adopters.

C. enter into the market in large numbers, creating a herding effect.

D. have the highest purchasing power when compared to the other customer
segments.
59. Which of the following best illustrates forward vertical integration?
A. A firm that manufactured and sold car engines to major automobile
companies launches its own line of cars.
B. A chain of ice cream parlors launches a brand of toys and
accessories for children.
C. A multinational coffee chain sources its coffee beans from plantations
in Brazil and Vietnam.
D. A designer shoe company that previously purchased leather from
external suppliers establishes its own leather tannery.
60. A factor favoring the success of disruptive innovation is that:
A. incumbent firms are slow to change.
B. new entrants have highly formal organizational structures and processes.
C. the low end of the market is highly guarded.
D. incumbent firms focus on radical innovation rather than incremental
innovation.
61. Disney became the world's leading media company to a large extent by pursuing
a corporate strategy of _____.
A. related-linked diversification
B. cost-leadership
C. unrelated diversification
D. hostile takeovers
62. Red Empire Inc., a large multinational company owned by two partners, is active
in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines,
education, automobiles, and consumer electronics industries. The company has
multiple brands and a large product portfolio under its banner. Which of the
following terms would best describe this company?
A. a flagship brand
B. a single-business firm
C. a dominant-business firm
D. a conglomerate

63. Divina Pharma Inc. and MF Electronics Inc. have together invested and created a
new organization, FirstHealth Inc., to focus on developing diagnostic devices.
Through this new firm, both companies are attempting to combine their core
competencies to innovate and reduce their risks associated with transaction-
specific investments. However, the new organization operates independent of
Divina Pharma and MF Electronics. Which of the following alternatives to
integration does this scenario best illustrate?
A. a joint venture
B. a franchisee
C. a licensing contract
D. a corporate acquisition
64. The strategic objective of businesses during the shakeout phase of the industry
life cycle will primarily be to:
A. move toward product innovations and away from process innovations.
B. survive by drawing on "deep pockets."
C. achieve market acceptance.
D. reduce the barriers to entry in the industry.
65. A _____ is best defined as a company that combines two or more strategic
business units under one overarching corporation and follows an unrelated
diversification strategy.
A. conglomerate

B. single-business firm

C. parent company

D. subsidiary
66. A(n) _____ is best used to depict the transformation of raw materials into finished
goods and services along distinct vertical stages.
A. encrypt

B. chain of command

C. industry value chain

D. scatter chart
67. Which of the following statements is NOT true about innovation?
A. Innovation as a competitive weapon can simultaneously create and destroy
value.
B. Successful innovation allows a firm to extract temporary monopoly profits.
C. Innovation has to be high-tech in order to be a potent competitive weapon.
D. Process innovations are made possible through advances such as the
Internet.
68. The four-step innovation process ends with:
A. idea generation.
B. invention.
C. idea testing.
D. imitation.
69. Large companies, such as AT&T, IBM, and GE, have been shifting their
knowledge landscape from closed innovation to open innovation because of the:
A. decreasing capability of external suppliers and vendors.
B. lack of reliability on venture capital.
C. increasing need to internally control research and development.
D. increasing supply and mobility of skilled workers.
70. Silver Weave Inc., an apparel company, operates through a business model in
which individuals can buy the rights to set up Silver Weave stores and sell the
company's merchandise in return for a lump sum fee at the beginning of the
contract and a percentage of revenues every month. The owners of the stores
have to stock the collection approved from the company's headquarters and also
maintain consistent customer service as expected in its flagship store. Which of
the following alternatives to integration does this best illustrate?
A.Crowdsourcing
B. Credit Rationing
C.Franchising
D. Bootstrapping
71. A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation
model, which had greatly benefitted the company. In the light of this information,
we can conclude that A. G. Lafley is a(n):
A. venture capitalist.
B. category captain.
C. intrapreneur.
D. early adopter.
72. A firm follows a(n) _____ when less than 70 percent of its revenues come from a
single business and there are few, if any, linkages among its businesses.
A. related-constrained strategy

B. unrelated diversification strategy

C. differentiation strategy

D. dominant-business strategy
73. Which of the following statements is true of the early majority section of
consumers?
A. They come into the market during the introduction stage.
B. They are unaware that many hyped new product introductions will fade away.
C. They weigh the benefits and costs carefully when adopting a new product.
D. They make up the smallest market segment.
74. Which of the following statements is true of a disruptive innovation?
A. It begins as a low-cost solution to a new problem.
B. It initially performs better than the existing technology.
C. It involves leveraging existing technologies in new markets.
D. It invades the market from the bottom up, by first capturing the low end.
75. Why did Yahoo enter into a strategic alliance with Microsoft?
A. To pursue an unrelated diversification strategy

B. To overcome its competitive disadvantage in comparison to Google

C. To invest its excess cash flow in Microsoft's superior technology

D. To share its continuously updated search technology with Microsoft

76. Hitoro Inc. developed a superior touchscreen technology for tablet computers
that enabled multiple users to operate the screen at the same time. The
technology was leased to Revox Inc., a consumer electronics company, for five
years. Which of the following alternatives to integration does this best illustrate?
A. licensing

B. franchising

C. crowdsourcing

D. bootlegging
77. How did the recent horizontal integration in the U.S. airline industry provide
benefits to the surviving carriers?
A. By facilitating excess capacity in the industry

B. By preventing mergers from taking place

C. By lowering competitive intensity in the industry overall

D. By increasing the threat of entry in the industry

78. Intel's Celeron chip and Atom chip are initiatives to:
A. introduce a new product in a new market to extend its leadership.
B. guard the company against disruptive innovation by protecting the low end of
the market.
C. stall its own disruption strategies and wait for its rivals to introduce disruptive
forces.
D. target that section of the market that is not particularly price sensitive.
79. A(n) _____ is best described as a partnership in which at least one partner takes
partial ownership in the other partner.
A. acquisition

B. non-equity alliance

C. joint venture

D. equity alliance
80. How has Apple been able to sustain its competitive advantage in the smartphone
industry?
A. By reducing its network effects
B. By targeting its new products and services toward laggards
C. By driving the price for the end user to zero
D. By regularly introducing incremental improvements in its products
81. _____ is best described as cooperation by competitors to achieve a strategic
objective.
A. Limited liability

B. Proprietorship

C. Co-opetition

D. Commerce
82. Which of the following companies will be considered as a conglomerate?
A. ExxonMobil, after it acquired XTO Energy—a natural gas company

B. The Tata Group, active in industries such as tea, steel, IT, power, and
automobiles

C. Harley-Davidson, with its Harley-Davidson branded motorcycle clothing and

attire

D. Coca-Cola, which solely focuses on soft drinks but operates in many countries
83. Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will
take place through its equity alliance with Tesla Motors. He is referring to:
A. the lean manufacturing process pioneered by tesla.
B. the entrepreneurial spirit in tesla.
C. the safety measures followed in tesla, recorded in its user manuals.
D. the product information documented in tesla's database.
84. Marva Industries, a U.S.-based large conglomerate, competes in the hospitality,
education, telecommunications, entertainment, airlines, and chemical industries.
It currently operates in about 30 nations, and is planning to expand its portfolio by
investing in rapidly developing countries. Which of the following strategies is
Marva Industries pursuing?
A. Zone pricing
 B. Niche marketing
C. Product-market diversification strategy
D. Process diversification strategy
85. Equity alliances are less common than non-equity alliances because they:
A. depend on contractual agreements.

B. produce weaker ties between partners.

C. fail to facilitate the transfer of tacit knowledge.

D. often require larger investments.

86. The market for 3D televisions is in the introduction stage of the industry life cycle.
What does this imply?
A. There are only a few competitors in the 3D television market.
B. The number of buyers in the market is high.
C. The prices of 3D televisions will be lowest during this stage.
D. The barriers to entry are low in the industry.
87. HK Goods Inc. is a large conglomerate that operates only in its home country.
The company competes in industries like the consumer electronics, health care,
hotel, airlines, education, and steel industries. Which of the following
diversification strategies does this best illustrate?
A. Process diversification
B. Product diversification
C. Geographic diversification
D. Market diversification
88. With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy
is attempting to:
A) move from unrelated diversification to related-constrained diversification.
B) integrate different strategic positions, pursued by different strategic business
units.
C) pursue a focused differentiation strategy over a focused cost-leadership
strategy.
D) depend on a single product market to generate most of its revenues.
89. An intrapreneur is described as a person who:
A. restricts changes within an organization.
B. innovates within existing companies.
C. introduces new products or services by starting his or her own ventures.
D. invests funds in the ideas of another person in the same organization.
90. Which of the following is one of the reasons that led to CNN, an innovator, losing
its leadership position in the 24-hour cable news industry?
A. The cable news industry was in the maturity stage of the industry life cycle.
B. The second movers imitated CNN's incremental innovation to continuously
improve their offering.
C. It failed to cross the large competitive chasm between the early adopters and
early majority.
 D. Its business model relied heavily on crowdsourcing for its user-generated
content.
91. Which of the following statements is NOT true of tacit knowledge?
A. It is concerned with knowing how to do a certain task.

B. It is knowledge that cannot be easily codified.

C. It is regularly shared between partners in a non-equity alliance.

D. It is acquired only through actively participating in the process.

92. White Leo Motors (WLM) Inc. generates a major portion of its revenues by
manufacturing luxury sports cars. However, the company also derives an
insignificant percent of its annual revenues by selling its sports merchandise that
includes apparel, shoes, and other accessories under the same brand name.
Which of the following terms best describes WLM?
A. A conglomerate
B. A subsidiary
C. A dominant-business firm
D. A single-business firm
93. Which of the following types of strategic alliances is the least common in terms of
frequency?
A) Mergers
B) Joint ventures
C) Equity alliances
D) Acquisitions
94. Supply, distribution, and licensing contractual agreements between firms, which
result in vertical strategic alliances, are all examples of _____.
A. cartel arrangements

B. non-equity alliances

C. joint ventures

D. equity alliances
95. In a radical innovation, a firm targets:
A. existing markets by using new technologies.

B. new markets by using existing technologies.

C. new markets by using new technologies.

D. existing markets by using existing technologies.

96. After Jeff Bezos read about how the Internet was growing by 2,000 percent a
month, he set out to use the Internet as a new distribution channel and founded
Amazon, which is now the world's largest online retailer. This is clearly an
example of a(n):
A. firm that uses closed innovation.
B. entrepreneur who commercialized invention into an innovation.
C. business that entered the industry during its maturity stage.
D. exception to the long tail business model.