Question 1

The transfer of intermediate products or services among divisions is usually managed through a transfer-pricing system.

Accepted Answer

A) True 
 B)False

Question 2

Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.

Accepted Answer

A) True 
 B)False

Question 3

In ________ budgeting,corporate executives create a list of all capital allocation requests from divisions in a firm,rank them from "most important" to "least important" and then fund all the projects a firm can afford,given the amount of capital that is available and no project receives funding simply because it was funded in the past.

Accepted Answer

A) cost-plus 
B) activity-based 
C) zero-based 
D) revenue-based 
A) cost-plus 
B) activity-based 
C) zero-based 
D) revenue-based

Question 4

Describe the multidivisional,or M-form structure,and how it is used to implement a corporate diversification strategy.

Accepted Answer

The most common organizational structure

Question 5

Another name for the M-form is the multidivisional structure.

Accepted Answer

A) True 
 B)False

Question 6

Two common agency problems include

Accepted Answer

A) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion. 
B) managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion. 
C) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking. 
D) managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking. 
A) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion. 
B) managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion. 
C) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking. 
D) managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.

Question 7

Managerial risk aversion is not as important in diversified firms where risk is distributed.

Accepted Answer

A) True 
 B)False

Question 8

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a true profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-Kelly Rae's position is SpandoCorp is best described as a(n)

Accepted Answer

A) institutional investor. 
B) senior executive. 
C) division general manager. 
D) member of the board of directors. 
A) institutional investor. 
B) senior executive. 
C) division general manager. 
D) member of the board of directors.

Question 9

When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division,general managers have a strong incentive ________.

Accepted Answer

A) less than; to use the services of shared activities 
B) greater than; to use the services of shared activities 
C) less than; to use the services of an outside supplier 
D) equal to; to use the services of an outside supplier 
A) less than; to use the services of shared activities 
B) greater than; to use the services of shared activities 
C) less than; to use the services of an outside supplier 
D) equal to; to use the services of an outside supplier

Question 10

Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division?

Accepted Answer

A) The process is time-consuming. 
B) The process is fraught with political intrigue. 
C) This approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm. 
D) The use of such a single standard ignores important differences in performance that might exist across divisions. 
A) The process is time-consuming. 
B) The process is fraught with political intrigue. 
C) This approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm. 
D) The use of such a single standard ignores important differences in performance that might exist across divisions.

Question 11

Some scholars suggest that the search for optimal transfer pricing should be abandoned in favor of setting transfer pricing as a(n)________ process.

Accepted Answer

A) negotiation 
B) arbitrary 
C) conflict resolution 
D) marketing 
A) negotiation 
B) arbitrary 
C) conflict resolution 
D) marketing

Question 12

If institutional investors are biopic,they should influence firms to invest in relatively less R&D.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the role of institutional investors in an M-form organization.In addressing this question,be sure to identify who institutional investors are and discuss trends in institutional ownership and whether institutional investors encourage managers to act in ways that are consistent with the interests of equity holders or if institutional investors are overly myopic.

Accepted Answer

Institutional owners are usually pension

Question 14

The most common organization structure for implementing a corporate diversification strategy is the U-form.

Accepted Answer

A) True 
 B)False

Question 15

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a true profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If SpandoCorp decides to use the method of allocating capital where each project receives funding on its merit and not because it received funding the previous year,it is using

Accepted Answer

A) zero-based budgeting. 
B) corporate budgeting. 
C) centralized budgeting 
D) coordinated budgeting. 
A) zero-based budgeting. 
B) corporate budgeting. 
C) centralized budgeting 
D) coordinated budgeting.

Question 16

A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.

Accepted Answer

A) True 
 B)False

Question 17

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

Accepted Answer

A) the interests of all of its stakeholders. 
B) an exclusively short-term perspective. 
C) an exclusively long-term perspective. 
D) the interests of its equity holders. 
A) the interests of all of its stakeholders. 
B) an exclusively short-term perspective. 
C) an exclusively long-term perspective. 
D) the interests of its equity holders.

Question 18

________ is an economic measure of divisional performance.

Accepted Answer

A) Return on assets 
B) Return on a division's sales 
C) Economic value added 
D) A division's growth rate 
A) Return on assets 
B) Return on a division's sales 
C) Economic value added 
D) A division's growth rate

The transfer of intermediate products or services among divisions is usually managed through a transfer-pricing system.

Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.

Describe the multidivisional,or M-form structure,and how it is used to implement a corporate diversification strategy.

Another name for the M-form is the multidivisional structure.

Two common agency problems include

Managerial risk aversion is not as important in diversified firms where risk is distributed.

When the cost of services from a shared activity is the cost of comparable services provided by a division itself or by an outside supplier than the division,general managers have a strong incentive .

Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division?

Some scholars suggest that the search for optimal transfer pricing should be abandoned in favor of setting transfer pricing as a(n)________ process.

If institutional investors are biopic,they should influence firms to invest in relatively less R&D.

The most common organization structure for implementing a corporate diversification strategy is the U-form.

A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

________ is an economic measure of divisional performance.

What Is Strategy and the Strategic Management Process

Evaluating a Firms External Environment

Evaluating a Firms Internal Capabilities

Cost Leadership

Product Differentiation

Flexibility and Real Options

Collusion

Vertical Integration

Corporate Diversification

Strategic Alliances

Mergers and Acquisitions

Filters

Exam 10: Organizing to Implement Corporate Diversification

The transfer of intermediate products or services among divisions is usually managed through a transfer-pricing system.

Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.

Describe the multidivisional,or M-form structure,and how it is used to implement a corporate diversification strategy.

Another name for the M-form is the multidivisional structure.

Two common agency problems include

Managerial risk aversion is not as important in diversified firms where risk is distributed.

When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division,general managers have a strong incentive ________.

Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division?

Some scholars suggest that the search for optimal transfer pricing should be abandoned in favor of setting transfer pricing as a(n)________ process.

If institutional investors are biopic,they should influence firms to invest in relatively less R&D.

The most common organization structure for implementing a corporate diversification strategy is the U-form.

A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

________ is an economic measure of divisional performance.

What Is Strategy and the Strategic Management Process

Evaluating a Firms External Environment

Evaluating a Firms Internal Capabilities

Cost Leadership

Product Differentiation

Flexibility and Real Options

Collusion

Vertical Integration

Corporate Diversification

Strategic Alliances

Mergers and Acquisitions

Filters

When the cost of services from a shared activity is the cost of comparable services provided by a division itself or by an outside supplier than the division,general managers have a strong incentive .