Exam for Strategic Management Part V

Ch4 Multiple Choice Questions 92. The makeup of goods and services in the Gross Domestic Products of developed countries has changed over the last decade. More than 50 percent of the value of GDP of developed countries is based on A. clothing and apparel. B. capital accumulation. C. knowledge. D. financial management. Today, more than 50 percent of the gross domestic product (GDP) in developed economies is knowledge-based; it is based on intellectual assets and intangible people skills. 93. As the competitive environment changes, strategic management must focus on different aspects of the organization. Recently, strategic management has moved from focusing on tangible resources to A. fixed capital. B. working capital. C. investment capital. D. intangible resources. For most of the twentieth century, managers focused on tangible resources such as land, equipment, and money and intangibles like brands, image, and customer loyalty. Today, more than 50 percent of the GDP in developed economies is knowledge-based; it is based on intellectual assets and intangible people skills. 94. Changes in our economy have forced firms to be ____________ concerned with protecting their knowledge workers, social capital, and intellectual capital. A. less B. more C. potentially D. not In the knowledge economy, wealth is increasingly created by effective management of knowledge workers instead of by efficient control of physical and financial assets. The growing importance of knowledge, coupled with the move by labor markets to reward knowledge work, tells us that investing in a company is buying a set of talents, capabilities, skills, and ideas (intellectual capital), not physical and financial resources. 95. In the knowledge economy, if a large portion of company value is in intellectual and human assets, the difference between the market value and book value of the company should ___________ a company with mostly physical and financial assets. A. be equal to B. not be correlated with C. be smaller than D. be larger than In firms where knowledge and the management of knowledge workers are relatively important contributors to developing products and services, and physical resources are less critical, the ratio of market-to-book value tends to be much higher. 96. According to the text, intellectual capital is the difference between the market value and the book value of a firm. Intellectual capital can be increased by A. increasing retention of below average workers. B. attracting and retaining knowledgeable workers. C. decreasing labor costs. D. increasing the turnover of employees. Companies create value in the knowledge-intensive economy, and thus intellectual capital, by attracting and leveraging human capital effectively through mechanisms that create products and services of value over time. 97. Which of the following firms would you expect to have the highest ratio of market value to book value? A. Apple B. General Motors C. Intel D. Nucor As shown in Exhibit 4.1, firms such as Apple, Microsoft, and Oracle have very high market value to book value ratios because of their high investment in knowledge resources and technological expertise. In contrast, firms in more traditional industry sectors such as Nucor and General Motors have relatively low market to book ratios. 98. Human capital includes A. the relationships between people. B. an improved product. C. the output from assembly line employees. D. capabilities, knowledge, and skills of an individual. Human capital is the individual capabilities, knowledge, skills, and experience of the company employees and managers. This knowledge is relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through learning. 99. Creativity and problem solving ability are considered to be part of _________ capital. A. physical B. human C. social D. emotional Human capital is the individual capabilities, knowledge, skills, and experience of the company employees and managers. This knowledge is relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through learning. 100. The network of relationships that individuals have throughout the organization is known as A. human capital. B. social capital. C. intellectual capital. D. tacit knowledge. Social capital is the network of relationships that individuals have throughout the organization. Relationships are critical in sharing and leveraging knowledge and in acquiring resources. Social capital can extend beyond the organizational boundaries to include relationships between the firm and its suppliers, customers, and alliance partners. 101. Tacit knowledge A. is the same as explicit knowledge. B. can be accessed only with the consent of the employees. C. is found mostly at the lower levels of the organization. D. can be codified but not reproduced. Tacit knowledge is in the minds of employees and is based on their experiences and backgrounds. It is shared only with the consent and participation of the individual. 102. New knowledge involves the continual interaction between __________ and __________ knowledge. A. intellectual; pragmatic B. tacit; explicit C. theoretical; practical D. detailed; tacit New knowledge is constantly created through the continual interaction of explicit and tacit knowledge. Consider two software engineers working together on a computer code. The computer code is the explicit knowledge. 103. Two software engineers working together on a computer code share their _______ knowledge in order to create new knowledge. A. explicit B. theoretical C. tacit D. easily reproduced New knowledge is constantly created through the continual interaction of explicit and tacit knowledge. Consider two software engineers working together on a computer code. The computer code is the explicit knowledge. By sharing ideas based on the experience of each other, that is, their tacit knowledge, they create new knowledge when they modify the code. 104. Today, the loyalty of a knowledge worker to his or her employing firm has __________ compared to his or her loyalty to his or her profession and colleagues. A. increased B. remained the same C. decreased D. no correlation when The rise to prominence of knowledge workers as a vital source of competitive advantage is changing the balance of power in organizations today. Knowledge workers place professional development and personal enrichment (financial and otherwise) above company loyalty. 105. The text discusses three areas a firm must be concerned with in order to keep their best and brightest employees from leaving. These include all of the following except A. hiring/selecting. B. developing. C. sorting/absorbing. D. retaining. Hiring is the first process in which all successful organizations must engage to build and leverage human capital. Firms must also develop employees to fulfill their full potential to maximize joint contributions, and provide the working environment and intrinsic and extrinsic rewards to retain their best and brightest. 106. Managing a knowledge intensive workforce is very challenging. The best way for a firm to manage its workforce is to A. retain knowledge workers. B. balance efforts in the attraction, selection, and retention of top talent. C. attract the brightest employees. D. ensure that it pays higher salaries than its rivals. Attracting, developing, and retaining human capital are highly interrelated activities, like a three-legged stool. If one leg is weak or broken, the stool collapses. To illustrate such interdependence, poor hiring impedes the effectiveness of development and retention processes. In a similar vein, ineffective retention efforts place additional burdens on hiring and development. 107. Firms must compete for top talent. In attracting and selecting employees, firms must strive to select the best fit for both the employee and the firm. In an effort to reduce wasted time and effort in interviewing too many candidates while assuring a good candidate pool, a firm should A. run employment ads in the newspaper. B. use a pre-interview quiz. C. only let lower level employees interview job candidates. D. refrain from hiring by referrals from present employees. Alan Cooper, president of Cooper Software, Inc., cleverly uses technology to hone in on the problem-solving ability of his applicants and their attitudes before an interview even takes place. He has devised a Bozo Filter, an online test that can be applied to any industry. Before you spend time on whether job candidates will work out satisfactorily, find out how their minds work. 108. Many companies use referrals by current employees as a source for new hiring and even monetarily reward them because A. it is less expensive than the fees paid to headhunters. B. current employees normally are careful in recommending someone due to their personal credibility. C. it is a good test of employee loyalty. D. current employees are careful in their recommendations; it is less expensive than the fees paid to headhunters. GE Medical Systems offers a monetary reward for referrals, but it is peanuts compared to the fees that it typically pays to headhunters for each person hired. When someone refers a former colleague or friend for a job, his or her credibility is on the line. Thus, employees will be careful in recommending people for employment, unless they are reasonably confident that these people are good candidates. 109. QFQ, Incorporated desires to have the most qualified people in every position throughout its organization. This is an example of a concern for A. decreasing labor intensive training. B. developing social networks. C. leveraging organizational structure. D. developing human capital. It is not enough to hire top-level talent and expect that the skills and capabilities of those employees remain current throughout the duration of their employment. Rather, training and development must take place at all levels of the organization, which is considered developing human capital. 110. Developing human capital is essential to maintaining a competitive advantage in the current knowledge economy. Efforts and initiatives to develop human capital should be directed A. at top managers. B. at human resource departments. C. throughout the firm at all levels. D. at the employees themselves. It is not enough to hire top-level talent and expect that the skills and capabilities of those employees remain current throughout the duration of their employment. Rather, training and development must take place at all levels of the organization, which is considered developing human capital. 111. Maintaining a competitive workforce is very challenging in the current economy. The role of evaluating human capital, in recent years, has A. remained the same. B. increased. C. become less important. D. decreased. In the current environment, collaboration and interdependence are vital to organizational success. Individuals must share their knowledge and work constructively to achieve collective, not just individual, goals. Traditional systems evaluate performance from a single perspective (i.e., top down) and generally do not address the softer dimensions of communications and social skills, values, beliefs, and attitudes. 112. In a 360-degree evaluation and feedback system, which of these does not rate the skills and performance of an individual? A. superiors B. family C. direct reports D. colleagues To address the limitations of the traditional approach, many organizations use 360-degree evaluation and feedback systems. Here, superiors, direct reports, colleagues, and even internal and external customers rate the performance of an employee. 113. Attracting and retaining human capital is a challenge for many firms today. Firms experiencing high turnover should A. focus on increased recruiting. B. decrease money spent on human capital. C. adopt effective retention strategies. D. make their work environment less stimulating. Stepped-up recruiting is a poor substitute for weak retention. Leaders can either provide the work environment and incentives to keep productive employees and management from wanting to bail out, or they can use legal means such as employment contracts and noncompete clauses. 114. In order to take advantage of investment in human capital, a firm should A. rotate workers through functions in the company as quickly as possible. B. keep employees in the same position forever. C. refrain from training individual employees. D. establish practices that will enhance employee retention. Since attracting and developing talent represent an investment to a firm, it is necessary to ensure the third step is also done to fully leverage the human capital. A firm must also retain the talent. 115. The least effective way to retain human capital is to A. encourage employee identification with organizational mission and goals. B. provide employees with a challenging and stimulating work environment. C. require employees to sign agreements that prevent them from working for competitors in the future. D. provide employees with financial and nonfinancial rewards and incentives. For retention of talent, greater efforts should be directed at a good work environment and incentives, although employment contracts and non-compete clauses may sometimes have their place. 116. Human capital and social capital are vital for superior firm performance. If a firm has strong human capital, the firm may exploit this by building social capital. This can be accomplished by A. requiring workers to work independently of each other. B. decreasing the interaction of departments within the firm. C. structuring the firm with rigid departmental and employee divisions. D. encouraging the sharing of ideas between employees in the firm. In the knowledge economy, the development of social capital (the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm. The interaction, sharing, and collaboration will create a situation in which a worker will develop firm-specific ties and be less likely to bolt for a higher salary offer. 117. In an effort to capture key employees from competitors, firms may attract the symbolic leader of a group within a competing firm and hope others will follow. This has been termed A. the Columbus effect. B. knowledge integration. C. the Pied Piper effect. D. strategically competitive hiring. In The Wall Street Journal, Bernard Wysocki described the increase in a type of Pied Piper effect, in which teams or networks of people are leaving one company for another. The trend is to recruit job candidates at the crux of social relationships in organizations, particularly if they are seen as having the potential to bring with them valuable colleagues. 118. What is a major reason for Nokia to lose its competitive edge in the cell phone business? A. The team consisted of scientists from around the world. B. The team consisted of only Finnish scientists. C. All of the work required diverse skill sets. D. Each scientist worked alone, separate from colleagues. When given the choice, people will often choose to collaborate with others they know well or who have similar backgrounds, yet static groups breed insularity and may suffocate innovation. Take the former executive team at Nokia as an example. The team was 100 percent Finnish and had worked closely together for more than a decade. Many believe this homogeneity explains why Nokia failed to see the smartphone threat emerging from Silicon Valley. 119. Social capital is a source of strength to many firms. Firms leverage their social capital in an effort to create competitive advantages. The social capital of a firm is based on the A. individual abilities of employees. B. allocation of the financial resources of the firm. C. knowledge of an individual. D. relationships among the employees of the firm. In the knowledge economy, the development of social capital (the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm. 120. Another example of social relationships causing human capital mobility is the _______ of talent from an organization to form __________. A. stability; bail-outs B. emigration; bail-outs C. relocation; new business units D. emigration; start-up ventures Another example of social relationships causing human capital mobility is the emigration of talent from an organization to form start-up ventures. 121. Professionals frequently leave Microsoft en masse to form venture capital and technology start-ups, called Baby Bills, built around teams of software developers. This is an example of ____________ causing human capital mobility. A. formal relationships B. social relationships C. tacit knowledge D. intellectual capital Professionals frequently leave Microsoft en masse to form venture capital and technology start-ups, called Baby Bills, built around teams of software developers. This is an example of social relationships causing human capital mobility. 122. According to the resource-based view of the firm, competitive advantages are ______ for competitors to copy, if they are based on unique bundles of resources. A. easier B. faster C. harder D. more reliable According to the resource-based view of the firm, competitive advantages tend to be harder for competitors to copy if they are based on unique bundles of resources. 123. If employees are working effectively in teams and sharing their knowledge and learning from each other, they will be ________ to add value to the firm and they also will be ________ to leave the organization, because of the loyalties and social ties that they develop over time. A. more likely; more likely B. less likely; more likely C. less likely; less likely D. more likely; less likely If employees are working effectively in teams and sharing their knowledge and learning from each other, not only will they be more likely to add value to the firm, but they also will be less likely to leave the organization, because of the loyalties and social ties that they develop over time. 124. Knowledge-based resources tend to be more ______ in nature and therefore they are ________ difficult to protect against loss (i.e., the individual quitting the organization) than other types of capital, such as equipment, machinery, and land. A. explicit; less B. explicitly; more C. tacit; less D. tacit; more Knowledge-based resources tend to be more tacit in nature and therefore they are much more difficult to protect against loss (i.e., the individual quitting the organization) than other types of capital, such as equipment, machinery, and land. 125. Knowledge workers often exhibit __________ loyalties to their colleagues and their profession relative to their employing organization. A. fewer B. less favorable C. no D. greater Knowledge workers often exhibit greater loyalties to their colleagues and their profession than their employing organization. 126. The __________, __________, and __________ talent is a necessary but not sufficient condition for creating competitive advantages. A. attraction; laissez-faire; retention of B. observance; laissez-faire; regard for C. attraction; development; retention of D. observance; development; hands-off approach to The attraction, development, and retention of talent is a necessary but not sufficient condition for creating competitive advantages. 127. Tying knowledge workers to a firm is part of the objective of the development of A. intellectual capital. B. explicit knowledge. C. social capital. D. human capital. The development of social capital (that is, the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm. 128. Social network analysis is helpful because the configuration of the group member social ties within and outside the group affects the extent to which members connect to individuals who do all of the following except A. convey needed resources. B. have the opportunity to exchange information and support. C. ensure that everyone has the same perspective on strategic and operational issues. D. have the motivation to treat each other in positive ways. The configuration of group member social ties within and outside the group affects the extent to which members connect to individuals who convey needed resources; have the opportunity to exchange information and support; have the motivation to treat each other in positive ways; and have the time to develop trusting relationships that might improve group effectiveness. 129. In social network analysis, the importance of ties connecting heterogeneous people that help to ensure a wide range of diversity in information and perspective is known as A. closure. B. social supports. C. redundancy. D. bridging relationships. Bridging relationships, in contrast to closure, stresses the importance of ties connecting people. Employees who bridge disconnected people tend to receive timely, diverse information because of their access to a wide range of heterogeneous information flows. Such bridging relationships span a number of different types of boundaries. 130. In social network analysis, groups can become too insular and fail to share what they have learned with people outside the group. This is a result of A. closure. B. intellect. C. bridging relationships. D. diverse knowledge. Groups that become too closed can become insular. They cut themselves off from the rest of the organization and fail to share what they are learning from people outside their group. Research shows that while managers need to encourage closure up to a point, if there is too much closure, they need to encourage people to open up their groups and infuse new ideas through bridging relationships. 131. Advantages of effective social networks for career success include all of the following except A. access to private information. B. greater redundancy in knowledge sources. C. access to diverse skill sets. D. greater power. Effective social networks can play a key role in the advancement and success of a personal career. A personal social network potentially can provide three unique advantages: private information, access to diverse skill sets, and power. 132. Social capital has downsides. Which of the following is a downside? A. High social capital may breed groupthink. B. Socialization processes are inexpensive. C. Individuals may be more willing to collaborate on joint projects. D. Management commitment is easy to obtain. There are several downsides to social capital. Some firms have been adversely affected by very high levels of social capital because it may breed groupthink, a tendency not to question shared beliefs. Additionally, the socialization processes (orientation, training, etc.) can be expensive in terms of both financial resources and managerial commitment. 133. Social capital has many potential benefits; however, according to the text, social capital A. is always beneficial to a firm. B. may or may not be beneficial to a firm. C. usually restricts the productivity of employees. D. always hurts firm performance. Social capital is not always beneficial. For example, in firms with deep-rooted mindsets, they may continue to hire, reward, and promote like-minded people who tend to further intensify organizational inertia and erode innovation. Such homogeneity would increase over time and decrease the effectiveness of decision-making processes. 134. Which of the following reasons explains why painter Vincent van Gogh died penniless, while painter Pablo Picasso left a 740 million USD estate upon his death? A. B. C. D. Van Gogh had a wider range of social connections. Picasso had a wider range of social connections and bridging relationships. Picasso was a solitary node with few connections. Van Gogh was a hub who embedded himself in a vast network that stretched across various social lines. These two artists enjoyed sharply contrasting levels of success during their lifetimes. Effective social networks provide many advantages for the firm. They can play a key role in the career advancement and success of an individual. A personal social network potentially can provide three unique advantages: private information, access to diverse skill sets, and power. Bridging relationships in a social network connect otherwise disconnected people. Employees who bridge disconnected people tend to receive timely, diverse information because of their access to a wide range of heterogeneous information flows. Such bridging relationships span a number of different types of boundaries. 135. A recent study of over 300 companies explored how management teams can understand and capitalize on the formal and informal social networks of their employees. Six common types of managers who get stuck in three types of network traps were identified. Which of the following is not one of these network traps? A. the wrong structure B. the wrong relationships C. the wrong behavior D. the wrong business A recent study of over 300 companies explored how management teams can understand and capitalize on the formal and informal social networks of their employees. Six common types of managers who get stuck in three types of network traps were identified: the wrong structure, the wrong relationships, and the wrong behavior. 136. By using the ___________ lever, leaders can build nimble interpersonal networks across the company so that employees are better able to collaborate. A. unification B. people C. network D. social By using the network lever, leaders can build nimble interpersonal networks across the company so that employees are better able to collaborate. 137. With the _________ lever, the emphasis is on getting the right people to collaborate on the right projects. A. network B. unification C. social D. people With the people lever, the emphasis is on getting the right people to collaborate on the right projects. This means cultivating what may be called T-shaped management: people who simultaneously focus on the performance of their unit (the vertical part of the T) and across boundaries (the horizontal part of the T). People become able to collaborate when needed but are disciplined enough to say no when it's not required.