Chapter 15

87) If Verandas International chooses to pursue equity financing, but wants to avoid the time and money required to comply with stock exchange regulations, the company would most likely issue ________. A) American Depository Receipts B) bills of lading C) equity shares D) irrevocable letters of credit

A) American Depository Receipts

74) ________ appeals to companies because it lowers the amount of taxes the companies must pay. A) Debt B) Equity C) Stock value D) Enterprise value

A) Debt

83) Which of the following should most likely be considered in making the decision to outsource some of Echo's manufacturing activities? A) Do purchasing components present the lowest cost option for Echo? B) Would Echo engineers be willing to relocate to a foreign nation? C) Is Echo prepared to cover moving expenses for its managerial talent? D) Can Echo find employees for a customer service center in the U.S.?

A) Do purchasing components present the lowest cost option for Echo?

60) ________ is the term used to refer to a production technique in which inventory is kept to a minimum and inputs to the production process arrive exactly when they are needed. A) Just-in-time manufacturing B) Lean manufacturing C) Continuous production D) Flow production

A) Just-in-time manufacturing

44) Which of the following reasons encourages companies to make a product rather than buy it? A) Making a product gives managers greater control over the production process. B) Making a product lowers the risk associated with the production process. C) Making a product increases the company's flexibility to respond to market conditions. D) Making a product gives companies a great deal of power in their relationships with suppliers.

A) Making a product gives managers greater control over the production process.

48) ________ will enable a company to reduce the degree to which it is vertically integrated and the overall amount of specialized skills and knowledge that it would have to possess. A) Outsourcing B) Skimming C) Lean production D) Centralized production

A) Outsourcing

58) ________ requires each individual to be focused on the quality of his or her own output. A) Total quality management B) Quality-of-life index C) Integrated business planning D) Organizational restructuring

A) Total quality management

34) The decentralization of production facilities is a typical policy for companies that pursue ________. A) a multinational strategy B) a global strategy C) mass customization D) vertical integration

A) a multinational strategy

Scenario: Verandas International Verandas International is expanding its operations in North America. The Dutch company supplies customized furniture to five-star hotels. Verandas International is a leader in this industry, but the company believes it must increase its geographic reach to maintain that position. 85) Economic forecasts reveal that the U.S. dollar is expected to decline relative to the Euro. Which of the following is the most advantageous method of obtaining funding for Verandas under these conditions? A) borrowing from U.S. banks B) issuing equity in Germany C) issuing equity in the U.S. D) borrowing from Dutch banks

A) borrowing from U.S. banks

26) The process of assessing a company's ability to produce enough output to satisfy market demand is called ________. A) capacity planning B) lean production C) process management D) product structure modeling

A) capacity planning

Scenario: Wilson Industries Inc. Wilson Industries Inc. is a multinational firm that designs and produces premium leather bags for major destinations worldwide. The company's board of directors is meeting to discuss changes that might be needed in the company's operations. 75) The board plans to examine Wilson's ability to produce enough bags to satisfy their customers' demands. This evaluation is known as ________. A) capacity planning B) process planning C) lean production D) product structure modeling

A) capacity planning

40) Deciding the spatial arrangement of production processes within production units is called ________. A) facilities layout planning B) capacity planning C) process planning D) location economies

A) facilities layout planning

70) Which of the following types of money adds to the volatility of emerging markets because it can be quickly withdrawn from its investment? A) hot money B) patient money C) key money D) fiat money

A) hot money

36) Companies with centralized production facilities are often pursuing ________ strategies. A) low-cost B) differentiation C) retrenchment D) combination

A) low-cost

47) A firm that buys from another company a good or service that is part of the firm's value-added activities is practicing ________. A) outsourcing B) vertical integration C) horizontal integration D) lean production

A) outsourcing

81) The senior manager argues that Hafstrom could reduce its costs significantly by purchasing parts from companies located overseas rather than producing its own parts. Which of the following is the senior manager advocating? A) outsourcing B) a greenfield investment C) lean production D) vertical integration

A) outsourcing

51) Which of the following is experienced by a company that outsources its product development? A) reduced investments in research and development B) reduced market flexibility C) less market influence with suppliers D) lower product costs due to the elimination of intermediaries

A) reduced investments in research and development

72) Money earned from the sale of goods and services is known as ________. A) revenue B) dividend C) depreciation D) book value

A) revenue

77) The board will also examine new production techniques the company could use to create its product. This examination is a part of ________. A) capacity planning B) process planning C) facilities location planning D) centralized production

B) process planning

30) ________ refers to a situation in which facilities are spread over several locations, with one facility for each national business environment in which the company markets its products. A) Continuous production B) Decentralized production C) Vertical integration D) Lean production

B) Decentralized production

Scenario: Audio Component Outsourcing Echo Corporation manufactures high-quality audio components, such as speakers, amplifiers, and receivers, for home entertainment systems. Echo has been losing market share in recent years due to the competitive pricing of other audio component manufacturers that engage in outsourcing. Echo managers are attempting to convince Nathan Douglas, the firm's founder and CEO, that outsourcing would enable the firm to be more competitive without sacrificing quality. 82) Which of the following most likely supports the argument of Echo managers to outsource some of the firm's manufacturing activities? A) Echo managers could reduce the wages of U.S. based employees and sub-contractors. B) Echo could save money by reducing the costs incurred in manufacturing the component parts. C) Echo managers could implement a marketing campaign for foreign markets that is identical to the outsourced firm's marketing campaign. D) Echo could merge with one of its U.S.-based competitors to gain a larger market share.

B) Echo could save money by reducing the costs incurred in manufacturing the component parts.

71) ________ refers to the foreign direct investment in factories, equipment, and land that cannot be pulled out of the market quickly. A) Hot money B) Patient money C) Fiat money D) Key money

B) Patient money

57) Which of the following statements is true regarding total quality management (TQM)? A) TQM emphasizes on a single effort at the start to improve the quality of its products. B) TQM largely increases the responsibility on each individual to focus on quality. C) TQM philosophy initially took hold in the U.S. D) TQM applies solely to an employee's activities based inside a factory.

B) TQM largely increases the responsibility on each individual to focus on quality.

69) ________ is the financing obtained from investors who believe the borrower will experience rapid growth and who receive equity in return for their investment. A) Internal funding B) Venture capital C) Credit derivative D) Mortgage loan

B) Venture capital

55) Which of the following is a barrier to buying products from international suppliers? A) extremely low tariffs B) additional transportation costs C) lower flexibility to respond to market conditions D) high political risk

B) additional transportation costs

65) A loan in which a parent company deposits money with a host-country bank, which then lends the money to a subsidiary located in the host country is called a ________. A) syndicated loan B) back-to-back loan C) mortgage loan D) title loan

B) back-to-back loan

32) An Asian jewelry company maintains production facilities in South Korea, Vietnam, and Malaysia. Which of the following is the company exemplifying? A) lean production B) decentralized production C) vertical integration D) continuous production

B) decentralized production

33) A company that sells differentiated products may maintain the ability to respond quickly to changing buyer preferences by utilizing ________. A) vertical integration B) decentralized production C) lean production D) continuous production

B) decentralized production

39) Which of the following will a company that is pursuing a low-cost leadership strategy most likely use for creating its product? A) implement handcrafted artisanship B) manufacture in large production batches C) manufacture components in-house D) customize products for each customer

B) manufacture in large production batches

62) A company using just-in-time (JIT) manufacturing involves ________. A) increased availability of components in large inventories B) quicker detection of defective materials and components C) easier training of sales staff regarding product descriptions D) benefits stemming from combining several Japanese technologies

B) quicker detection of defective materials and components

46) Which of the following processes will a computer assembling firm engage in if it decides to manufacture its own monitors and printers? A) outsourcing B) vertical integration C) niche marketing D) lean production

B) vertical integration

29) ________ refers to the concentration of production facilities in one location. A) Lean production B) Continuous production C) Centralized production D) Horizontal integration

C) Centralized production

68) Which of the following is true of American Depository Receipts (ADRs)? A) Investors who buy ADRs have to pay a currency-conversion fee. B) There is a minimum purchase requirement for ADRs. C) Companies offer ADRs in the U.S. to appeal to mutual funds. D) ADRs are listed and traded in London and Luxembourg.

C) Companies offer ADRs in the U.S. to appeal to mutual funds.

28) Which of the following statements is true regarding location economies? A) The demand and supply factors heavily influence the productivity of a location. B) They apply only to service providers. C) Each production activity generates more value in a particular location than elsewhere. D) They are restricted to business activities that involve product manufacturing

C) Each production activity generates more value in a particular location than elsewhere.

49) Which of the following statements is true of outsourcing? A) It reduces economic risk by facilitating the purchase of large insurance policies. B) It reduces production risk by eliminating delays in the timely receipt of needed parts. C) It reduces political risk by enabling the company to avoid investing in plants and equipment abroad. D) It reduces currency risk by allowing the company to invest the home currency on in-house production facilities.

C) It reduces political risk by enabling the company to avoid investing in plants and equipment abroad.

61) The just-in-time (JIT) manufacturing technique was originally developed in ________. A) the United States B) China C) Japan D) Germany

C) Japan

35) The centralization of production facilities is a typical policy for companies that pursue ________. A) horizontal integration B) product differentiation C) a global strategy D) a multinational strategy

C) a global strategy

56) Which of the following is established by a company that builds an entirely new facility? A) a divestiture B) a shadow economy C) a greenfield investment D) a shell corporation

C) a greenfield investment

86) The Verandas U.S. subsidiary was turned down when it tried to borrow from a U.S. bank. The bank manager suggested that the parent firm deposit money with the U.S. bank's Dutch branch, and then the U.S. bank's home office would lend the money to the U.S. subsidiary. This type of arrangement is known as a(n) ________. A) mortgage loan B) title loan C) back-to-back loan D) syndicated loan

C) back-to-back loan

73) The ________ of a company is the mix of equity, debt, and internally generated funds that it uses to finance its activities. A) enterprise value B) stock value C) capital structure D) corporate structure

C) capital structure

31) A British toy company manufactures all of its product lines in a single facility in Europe. Which of the following is the company demonstrating? A) continuous production B) lean production C) centralized production D) horizontal integration

C) centralized production

66) American Depository Receipts (ADRs) are ________. A) certificates that represent shares of stock in American companies B) dollar deposits made by foreign firms conducting business in the U.S. C) certificates that trade in the U.S. and represent shares of stock in a non-U.S. company D) currency deposits made in the United States by firms based in other countries

C) certificates that trade in the U.S. and represent shares of stock in a non-U.S. company

76) If Wilson Industries selects a new area for its production units, the company will be implementing ________. A) capacity planning B) process planning C) facilities location planning D) product structure modeling

C) facilities location planning

53) Storage facilities, retail outlets, and production equipment are examples of ________. A) liquid assets B) current assets C) fixed assets D) intangible assets

C) fixed assets

50) Computer companies buying hardware components from component-makers, assembling them in their own facilities, and selling completed systems to consumers and businesses is an example of ________. A) telecommuting B) franchising C) outsourcing D) licensing

C) outsourcing

64) When a market is experiencing rapid growth, a company will ________. A) emphasize on decruitment B) divest its operations C) reinvest in its operations D) implement retrenchment strategies

C) reinvest in its operations

54) A fixed asset can also be referred to as a ________ asset. A) liquid B) current C) tangible D) trading account

C) tangible

43) The process by which a company extends its control over additional stages of production is called ________. A) a push strategy B) a pull strategy C) vertical integration D) horizontal integration

C) vertical integration

80) The top management of the company contends that Hafstrom would benefit most from manufacturing its own parts, rather than sourcing it from elsewhere, even if they are made at another location overseas. Which of the following is being recommended in this approach? A) just-in-time manufacturing B) location economies C) vertical integration D) outsourcing

C) vertical integration

45) Which of the following reasons encourages companies to buy a product rather than make it? A) Buying a product gives managers greater control over the production process. B) Buying a product decreases the company's total costs significantly compared to making the product in-house. C) Buying a product ensures non-flexibility to local market conditions. D) Buying a product enables a company to gain a great deal of power in their relationships with suppliers.

D) Buying a product enables a company to gain a great deal of power in their relationships with suppliers.

67) ________ are traded in Luxembourg and London and represent a specific number of shares in an outside company. A) Common stock B) Bills of lading C) Revocable letters of credit D) Global Depository Receipts

D) Global Depository Receipts

52) ________ in the computer industry is the outsourcing of the actual assembly of computers plus the job of shipping them to distributors and other intermediaries. A) Agile manufacturing B) Just in time manufacturing C) Lean manufacturing D) Stealth manufacturing

D) Stealth manufacturing

59) Which of the following statements is true regarding the ISO 9000 standards? A) They specify details on how companies should develop its quality processes. B) The standards are applicable to Asia exclusively. C) ISO 9000 is a certification that companies get for their environment-friendly initiatives. D) The standards require each company to define and document its own quality processes.

D) The standards require each company to define and document its own quality processes.

38) Which of the following determines the process that a company will use to create its product? A) a firm's multinational strategy B) a firm's global strategy C) a firm's corporate-level strategy D) a firm's business-level strategy

D) a firm's business-level strategy

41) Which of the following factors has the least effect on facilities layout planning? A) supply of land in a nation B) cost of land in a nation C) a firm's production process D) age of the company

D) age of the company

84) Which of the following is most likely a potential benefit for Echo if it outsources some of its manufacturing activities? A) heightened communications awareness B) increased activity in e-commerce sales C) strong intellectual property protection D) eliminating the exposure of assets to political risk

D) eliminating the exposure of assets to political risk

78) If the board discusses the spatial arrangement of production processes within Wilson's production facilities, they will be engaging in ________. A) capacity planning B) facilities location planning C) process planning D) facilities layout planning

D) facilities layout planning

Scenario: Hafstrom Motors Based in Kentucky, Hafstrom Motors has always used spare parts made in America for its automobiles. However, sales and profits have slumped over the past three years. A senior manager at the company comes up with new strategies for improving the firm's production activities. 79) The senior manager recommends that Hafstrom obtain auto parts from a country where production activities would generate more value than it would generate elsewhere. He wants to take advantage of ________. A) just-in-time manufacturing B) facilities layout planning C) process planning D) location economies

D) location economies

42) Which of the following terms refers to the decision of whether to produce a component internally or to outsource it from another company? A) buyer decision process B) decision problem C) per curiam decision D) make-or-buy decision

D) make-or-buy decision

37) Deciding the sequence of operations a company will use to create its product is called ________. A) product planning B) capacity planning C) location economies D) process planning

D) process planning

63) Which of the following would companies do in markets that require long payback periods? A) divest operations B) implement retrenchment strategies C) emphasize on decruitment D) reinvest profits

D) reinvest profits

27) Transportation costs are one of the driving forces behind the globalization of the ________ industry. A) health care B) publishing C) software D) steel

D) steel