MGT 3660 Exam 2 HW Questions Ch 11-17

What is a disadvantage of establishing a wholly owned subsidiary? Establishing a wholly owned subsidiary is generally the most costly method. Firms will typically lose control over any technological competence. A firm engaging in this strategy will have little control over operations in the foreign country. Firms will face difficulties in building a certain organizational culture in greenfield ventures.

Establishing a wholly owned subsidiary is generally the most costly method.

Firms may need help in financing exports, and importers might need financing to buy imports.

Export assistance

The Ex-Im Bank is the U.S. government agency that helps facilitate exports, imports, and the exchange of commodities by making financing available.

Export assistance

T/F In a wholly owned subsidiary, a firm shares the costs of setting up overseas operations with partner firms.

F - Establishing a wholly owned subsidiary is generally the most costly method of serving a foreign market from a capital investment standpoint. Firms doing this must bear the full capital costs and risks of setting up overseas operations.

T/F Relational capital refers to releasing technological know-how to partners in an acquisition.

F - Managing an alliance successfully requires building interpersonal relationships between the firms' managers, or what is sometimes referred to as relational capital.

T/F Formulating strategy, deciding how to allocate resources within a firm, and evaluating the performance of managers and giving feedback are examples of control systems.

False

By relying on a third party trusted by both buyers, and sellers, an international transaction may be made. Banks often represent those trusted third parties.

Financing international trade

If the buyer is unknown and from a different country, the firm may not trust the buyer to pay for the merchandise. The buyer may not trust the seller.

Financing international trade

A major impediment faced by firms beginning to export is lack of knowledge about markets, countries, regulations, and opportunities.

Information needs

The U.S. government provides a wealth of information and organizes trade events and market studies for exporters.

Information needs

Firms might accept goods or services in payment for exported goods or services. A variety of countertrade options have evolved.

Limited payment options

Some markets might be attractive, but the currency of the country might not be convertible. The exporter may either give up on that market or find alternatives.

Limited payment options

Export management companies can provide start-up assistance or act as the international trading department for firms.

Limited staff expertise

Many firms starting to export have limited expertise among current staff and few resources to dedicate to exporting and international trade.

Limited staff expertise

T/F A relatively low level of fixed costs can make it economical to perform a particular activity in several locations at once.

T - A relatively low level of fixed costs allows the firm to better accommodate demands for local responsiveness.

T/F To survive, a firm must strive to achieve a fit between its environment, its strategy, and its organizational architecture.

True

Which of the following is not a huge barrier to exporting for small and medium-sized firms? a lack of success at achieving domestic scale economies a lack of knowledge of the size and location of export opportunities a lack of knowledge of the complexities and mechanics of exporting to countries with different languages and business practices a lack of understanding of competitive conditions in the foreign market

a lack of success at achieving domestic scale economies

What is an advantage of turnkey contracts? low development costs and risks ability to earn returns from process technology skills in countries where FDI is restricted long-term interest and business potential in the foreign country inadvertent development of competitive forces

ability to earn returns from process technology skills in countries where FDI is restricted

With regard to exporting, studies have shown that unlike big firms, small and medium-sized firms tend to achieve economies of scale by being strong in the domestic markets. seek out the market niches that big companies are overlooking. be reactive and wait for opportunities to come to them.

be reactive and wait for opportunities to come to them.

Forming a strategic alliance is a way to increase control within an organization. reduce conflicts between employees. bring together complementary skills and assets. increase coordination within an organization.

bring together complementary skills and assets.

A function of a capital market is to: provide an opportunity for firms and individuals to exchange currency. bring together those who want to invest money with those who want to borrow money. make speculation an attractive way to diversify a financial portfolio. provide sellers of capital goods a way to find potential buyers.

bring together those who want to invest money with those who want to borrow money.

Budgets and capital spending rules are the most important ________blank controls in subunits within multinational firms. cultural output personal bureaucratic

bureaucratic

Pressures for local responsiveness may make it difficult to ______________________________. compete effectively in more than one international market monitor and adapt to changing tastes in a large number of foreign markets leverage skills and products associated with a firms core competencies from one country to another

compete effectively in more than one international market

The employees at First Rate Fitness are a close group. They work and play together, and they believe that the company's goals are their goals. This demonstrates the organization's structure. processes. culture. control systems.

culture.

The Bretton Woods agreement implemented a system of ________blank exchange rates. currency board fixed floating managed floating

fixed

What allows a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output? standardization Six Sigma ISO 9000 flexible manufacturing

flexible manufacturing

When using horizontal differentiation, a firm divides itself into subunits based on function, type of business, or location of competition. level of difficulty. employee skill level. geographic area.

geographic area.

A(n) ________blank is a facility that positions and allows customization of products for delivery to worldwide wholesalers or retailers or directly to consumers anywhere in the world. export management company offshore center global distribution center logistics center

global distribution center

Felipe has found that if he invests in the global capital market, he has a wider range of investment opportunities than a purely domestic capital market. If Felipe decides to invest in this market, he should be aware that he will be exposed to significantly greater risk. he can easily set up shell operations in tax havens to escape significant tax obligations. he will not have to worry about translation or transaction exposure. he can reduce their risk to below what could be achieved in a strictly domestic market.

he can reduce their risk to below what could be achieved in a strictly domestic market.

One way for first-time exporters to identify the opportunities in exporting and to avoid many of the associated pitfalls is to hire an export management company. rely heavily on the in-house expertise that has proven to be the driver of the firm's previous success. avoid the use of foreign distributors, who may not understand the exporter's business.

hire an export management company.

Stan's company is interested in a hedge fund that positions itself to make "long bets." That means it will invest in funds that are anticipated to maintain their value. offset the value of a "short bet." decline in value. increase in value.

increase in value.

A global capital market benefits borrowers by lowering the cost of capital and increasing the supply of funds available for borrowing. providing a wider range of investment opportunities. diversifying their risk. minimizing or eliminating tax liabilities.

increasing the supply of funds available for borrowing.

Two factors that helped global capital markets take off in the last decades of the 20th century were ________blank and ________blank. privatization; the rise of regulation the growth of the Asian tigers; the attractiveness of the U.S. assets personal computers; cellular phones information technology; deregulation by governments

information technology; deregulation by governments

A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) _______________________. localization strategy international strategy transnational strategy

international strategy

___________________________ is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness. localization strategy international strategy transnational strategy

international strategy

In practice, the global matrix structure often works as well as the theory predicts. is clumsy and bureaucratic. makes it easy to ascertain accountability. results in quick decision making.

is clumsy and bureaucratic.

__________________________is the most appropriate strategy when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense. localization strategy international strategy transnational strategy

localization strategy

The International Monetary Fund was established at the Bretton Woods conference to promote general economic development in the world. establish gold standards across the world. fund the initiatives of the United Nations. maintain order in the international monetary system.

maintain order in the international monetary system.

Tina's Formal Attire is trying to decide if it should purchase new machinery that would allow it to add zippers to some of its products or if it should outsource adding zippers to another firm. Tina's is in the midst of a(n) ________blank decision. buyback nearshoring make-or-buy exporting

make-or-buy

The ________blank program organized by the Department of Commerce provides representatives who accompany groups of U.S. businesses abroad to meet with qualified agents, distributors, and customers. diversification matchmaker benchmark

matchmaker

The refers to the level of output at which most plant-level scale economies are exhausted. value-to-weight ratio purchasing power parity minimum efficient scale volatility rate

minimum efficient scale

The idea that each country should be allowed to choose its own inflation rate is called the ________blank argument. monetary discipline rigid economy trade balance monetary autonomy

monetary autonomy

Markets are dynamic, and any firm will face competition. In time, international and localization strategies tend to become less viable, and managers need to ________________________________. orient their companies toward either a global standardization or transnational strategy develop an appropriate exit strategy to withdraw profitably from markets that become too competitive revitalize their original strategies with more intense focus to avoid spreading energies too thinly

orient their companies toward either a global standardization or transnational strategy

The United Arab Emirates (UAE) bases the valuation of its currency on the U.S. dollar. The value of the UAE's currency is changed based on the changes in the value of the dollar. This is an example of a ________blank exchange rate system. currency board free float pegged managed float

pegged

A firm that has first-mover advantages with its products is able to preempt rivals and capture demand. build product stockpiles. expand quickly within a certain region. follow the experience curve behind rivals and avoid pitfalls.

preempt rivals and capture demand.

For a service firm, a franchising strategy is typically associated with high costs. quickly building a global presence. high risk. slowly building a global presence.

quickly building a global presence.

For U.S. firms, the most comprehensive source of information on export opportunities is the U.S. Department of Commerce. the Internet. the international department of the firm's commercial bank.

the U.S. Department of Commerce.

If a country increases its money supply rapidly under a fixed exchange rate regime, then demand for the country's products will increase in world markets. the trade deficit would get smaller in that country. the country will face high levels of price inflation. imports will become less attractive in that country.

the country will face high levels of price inflation.