Corporate Strategy
Exam Bank
Course Introduction
Corporate Strategy explores the fundamental decisions and actions taken by organizations to achieve long-term success and competitive advantage across multiple business units and markets. The course examines key concepts such as diversification, mergers and acquisitions, strategic alliances, portfolio management, global strategy, and the role of corporate headquarters in adding value. Students analyze real-world cases to understand the complexities of managing a multi-business enterprise, the impact of organizational structure and culture, and the frameworks used to formulate and implement effective corporate strategies. The course also addresses current challenges faced by corporations in a dynamic and globally interconnected environment.
Recommended Textbook
Economics of Strategy 7th Edition by David Dranove
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15 Chapters
505 Verified Questions
505 Flashcards
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Page 2
Chapter 1: The Power of Principles: A Historical Perspective
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Sample Questions
Q1) What economics game theory concept is demonstrated by the Erie Canal public works project?
A)Nash equilibrium
B)Lock-in
C)Backwards induction
D)Fair division
E)Prisoner's dilemma
Answer: E
Q2) How has Atlanta been able to grow as a center of commerce despite its poor water and rail connections?
A)Widespread air transportation
B)New government regulations
C)Improved Financing
D)Better Communications
E)Better technology and innovation
Answer: A
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Chapter 2: The Horizontal Boundaries of the Firm
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Sample Questions
Q1) Economies of scale are best described as which of the following?
A)The average cost remains constant as output increases
B)The average cost increases as output increases
C)The average cost declines as output increases
D)The average costs are cheaper when a firm produces a wider variety of goods
E)The average cost curve takes the form of a U-shape
Answer: C
Q2) Consolidation of managers often occurs due to which of the following?
A)Increased compensation for senior managers
B)Lower costs in the vertical supply chain
C)Mergers and acquisitions
D)Increased political power of senior managers
E)Social prominence of middle magaers
Answer: C
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4
Chapter 3: The Vertical Boundaries of the Firm
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Sample Questions
Q1) Which of the following is not a method to protect intellectual property?
A)Patents that are specific and complete
B)Complete contracts regarding IP with all suppliers
C)Non-disclosure agreements for employees
D)Limiting access to IP to a few key employees
E)Charging higher prices to limit access to IP
Answer: E
Q2) Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit,annualized cost of investment to build a hard drive factory I=$30 million,and the market price (bailout market price in the event Dell does not buy)Pm=$22/unit.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit and subsequently renegotiates to only purchase for $22.50/unit,what is your company's new "rent"?
Answer: -$5 million
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Chapter 4: Integration and Its Alternatives
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Sample Questions
Q1) What type of strategic alliance involves two or more firms creating and together owning a new independent organization?
A)Partnership
B)Tapered integration
C)Close-knit semi-formal relationship
D)Mutual agreement
E)Joint venture
Q2) What term describes when a firm has minimized the extent to which the exchange of goods and services in the vertical chain has been organized to minimize coordination,agency and transaction costs?
A)Agency efficiency
B)Technical efficiency
C)Lean compliant
D)Economizing
E)Six sigma compliant
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6
Chapter 5: Competitors and Competition
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Sample Questions
Q1) In what type of market structure do sellers set identical prices and are prices generally driven down to marginal costs?
A)Perfect competition
B)Monopolistic competition
C)Oligopoly
D)Monopoly
E)Diversified
Q2) The average PCM (percentage contribution margin)in a Cournot equilibrium is given by the formula PCM=H/ ,where H is the Herfindahl index and is the price elasticity of market demand.Given this equation,which of the following statements is true?
A)The more concentrated the industry,the smaller the PCMs in equilibrium
B)The industry concentration only raises the PCMs in equilibrium
C)The industry concentration has no bearing on PCM size in equilibrium
D)The less concentrated the industry,the larger the PCMs in equilibrium
E)The less concentrated the industry,the smaller the PCMs in equilibrium
Q3) In a three firm market where the market share split is 50%,30% & 20%,what is the Herfindahl index?
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Chapter 6: Entry and Exit
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Sample Questions
Q1) Which of the following is a potential risk of a brand umbrella?
A)The brand umbrella reduces the incumbents sunk cost of introducing a new product
B)The umbrella brand may help the incumbent navigate the vertical chain
C)The brand umbrella allows an incumbent offset uncertainty about the quality of a new product
D)A brand umbrella may make suppliers and distributors more willing to enter relationship specific investments in or sell credit to incumbents
E)If a new product under the umbrella fails,consumers may become disenchanted with the entire brand
Q2) Which of the following best describes an incumbent firm?
A)One that just recently entered a market
B)One that just exited a market
C)One that faces no competition in its market
D)One that is already operating in a particular market
E)None of the above
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8
Chapter 7: The Dynamics Competing Across Time
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Sample Questions
Q1) What term describes a decision that has a long-term impact and is difficult to reverse?
A)Dedicated investment
B)Strategic commitment
C)Critical choice
D)Market investment
E)Firm commitment
Q2) Which of the following best describes a tit-for-tat strategy?
A)A firm charges a fixed price to every customer
B)A firm is prepared to match whatever change in strategy a competitor makes
C)A firm offers discounts for purchasing in quantity
D)A firm requires customers to enter into long-term purchase contracts
E)None of the above
Q3) What type of cooperation-inducing strategy is defined as one so compelling that that a firm would expect all other firms to adopt it?
A)Backward induction
B)Focal point
C)Always aggress
D)Coordination
E)Folk
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Chapter 8: Industry Analysis
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Sample
Questions
Q1) How did European governments help Airbus aggressively pursue a 50% market share in its early years of operation?
A)Subsidies
B)High-interest loans
C)Helping to ensure scope economies from military aircraft division
D)Paying in excess of cost for military aircraft
E)Guaranteeing a set level of annual aircraft purchases
Q2) Which of the following is true about hospital industry profits from 1980 to 2000 and a five forces analysis?
A)Virtually every factor caused profits to increase
B)Virtually every factor caused profits to decrease
C)Most factors are not applicable to the industry
D)The Value Net cannot be used to evaluate the industry
E)None of the above
Q3) Who are the most powerful suppliers in professional sports?
A)Players unions
B)Referees
C)Owners
D)Politicians
E)Cities
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Chapter 9: Strategic Positioning for Competitive Advantage
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Sample Questions
Q1) What term describes the process of using market prices of unfinished and semi-finished goods to estimate the incremental value-created by distinctive parts of the value chain?
A)Value-added analysis
B)Value creation analysis
C)Market value analysis
D)Value benefit drivers
E)Value cost drivers
Q2) What type of good is one whose quality can be assessed only after the customer has used it for a while?
A)Apparel
B)Search good
C)Experience good
D)Office furniture
E)Airline tickets
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11
Chapter 10: Information and Value Creation
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Sample Questions
Q1) Why is advertising an effective signal of quality in an experience good?
A)Consumers are uninformed and need advertising to provide information
B)Advertising lists the qualities of a product
C)Consumers believe firms that can afford to heavily advertise sell quality products
D)Sellers can ignore low quality issues in their advertisements
E)Consumers believe advertising more than word of mouth information
Q2) Which of the following is measured by a report card that assesses the quality of finished products?
A)Process time
B)Input costs
C)Warranty claims
D)Competitor pricing
E)Total cost of manufacture
Q3) Location can provide which of the following?
A)Vertical differentiation
B)Horizontal differentiation
C)Isolation
D)Customer switching costs
E)Availability of substitutes
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Page 12
Chapter 11: Sustaining Competitive Advantage
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Sample Questions
Q1) What term best describes assets that are more valuable when used together than when separated?
A)Isolating
B)Value-creating
C)Imperfectly mobile
D)Scarce
E)Cospecialized
Q2) Which of the following products and services depend on standards?
A)Cellular communications
B)Internet
C)Video gaming
D)High-definition television
E)All of the above
Q3) What term best describes firm-specific assets such as patents and trademarks,brand-name reputation,installed base,and organizational culture?
A)Competitive advantage
B)Capabilities
C)Resources
D)Threats to sustainability
E)Strategic firm assets
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Chapter 12: Performance Measurement and Incentives
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Sample Questions
Q1) Which of the following is least likely a technique firms can use to mitigate the free-rider problem?
A)Firms can reduce the repeated interactions among team members so that actions depend less on what other members may have done in the past
B)Firms can keep teams small
C)Firms can allow employees to work together for long periods
D)Firms can structure teams so that their members can monitor one another's actions
E)Firms can use future periods of interaction and let natural team dynamics of peer pressure and social isolation take place as punishment for team members who have failed to contribute in the past
Q2) Which of the following factors is an effective tool for companies to use to mitigate hidden action and hidden information problems in agency relationships?
A)Monitoring
B)Offshoring
C)Coordination
D)Objectives
E)Confrontation
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Chapter 13: Strategy and Structure
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Sample Questions
Q1) Which of the following terms involves the location of decision making rights and rule making authority within a hierarchy?
A)Complex hierarchy
B)Coordination
C)Control
D)Hierarchy of authority
E)Departmentalization
Q2) What variant of the multidivisional structure whose units cross national boundaries do Kogut and Zander argue is superior at transferring specific types of knowledge across national boundaries?
A)Subsidiary
B)Holding Company
C)Conglomerate
D)Partnership
E)Multinational corporation
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Chapter 14: Environment, Power, and Culture
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Sample Questions
Q1) What term best describes exchanges of goods,services,or promises on terms that take place outside of traditional economic markets and are not enforceable in court?
A)Handshake agreement
B)Noncontractual exchange relationship
C)Internal context
D)External context
E)Exclusive dealing
Q2) Which of the following is the most visible example of a firm's social context?
A)Employment practices
B)Contracting
C)Regulation
D)Entry-deterring behaviors
E)Formal controls
Q3) Which of the following is true about culture?
A)Culture increases agency costs
B)Culture reduces bargaining costs
C)Culture reduces transactions costs
D)Culture increases economic costs
E)culture has no effect on costs
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Page 16
Chapter 15: Economics Primer
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Sample Questions
Q1) Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Average Variable Costs?
Q2) Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Short-Run (i.e.one year)Average Costs?
Q3) Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand, ?
A)6
E)0.17
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Page 17