Strategic Management Final

Why would a currently-successful firm wish to expand its operations internationally?

1. sourcing of resources and supplies 2. seeking to expand or to develop new markets 3. competitive rivalry 4. leveraging core competencies and learnings

An organization-wide reliance on innovation and entrepreneurship within established firms is called

Corporate entrepreneurship

George, an engineer who specializes in the fireproofing of buildings, has been laid off from his job with a large commercial construction firm because the firm has switched to an entirely new and better fireproofing process that makes George's knowledge and experience outdated. George's fate is the result of the process of

Creative Destruction

The destruction of businesses in New Orleans by Hurricane Katrina is a/an ____ for some firms.

Entrepreneurial opportunity

A firm using multi-domestic strategy is unlikely to customize its products for the local market

False

Exporting and licensing are forms of foreign direct investment?

False

Hector is a research scientist in the field of optics at TransOptic, Inc. His employer is in the middle of a series of acquisitions of other firms noted for innovations in optics. These acquisitions are expensive, and other areas of the firm have experienced budget reductions.

Hector should be concerned, as excessive acquisitions often cause a firm to neglect internal R&D

____ innovations build on the firm's existing knowledge base and existing products.

Incremental

Tyrone, the CEO of a small chemical research firm (TTK), has been approached by a very large company (MegaChem, Inc.) regarding a joint venture. Although there are many benefits to this relationship, such as MegaChem's ability to manufacture, market, and distribute the innovative toxin-testing kit that TTK has developed, Tyrone lies awake at night worrying about the upcoming decision. Most likely, Tyrone is worried that

MegaChem may steal TTK's knowledge

Dell's business model was based on a/an ____ innovation because it changed the means of selling personal computers from store-front retailers to selling directly to customers using the Internet.

Process

____ is the organizational function most critical to successful internal innovation.

Research and development

Like many major rivals, Coca-Cola and Pepsi-Cola compete with each other internationally in order to prevent the other from gaining a significant advantage in any one country or region that it could exploit in the U.S. market.

True

There are two competing pressures organizations must consider when choosing an international strategy: pressures for global efficiencies and pressures for local responsiveness and flexibility.

True

Visionary Optical Research has patented a new type of implantable lens for people with serious eye defects. It does not have access to the financial assets or marketing expertise to begin manufacturing and selling the lenses on a large scale.

VOR should form a strategic alliance with a firm with complementary resources

When an organization forms a strategic alliance with another organization, the alliance should be managed by

a pair of alliance sponsors, one from each organization

For the last 9 years, SISI Designs, has been the outstanding innovator in its field. Its top design team has worked together closely all this time and has resisted lucrative offers from other firms to join them. Megalith, Inc., wishes to gain SISI's elite design team and integrate them with its own designers. Megalith will probably have most success it if

acquires SISI

Which of the following allows the fastest growth for a firm wishing to be on the cutting edge of a market?

acquiring innovative companies

All of the following are advantages for both parties of strategic alliances for innovation except sharing

all core capabilities of each firm

the quickest way to enter a foreign market using foreign direct investment is

an acquisitions

Firms can buy ownership of another firm's innovations and innovation capabilities

and this is considered a legitimate way for organizations to innovate

Entrepreneurs are found

at all levels of the organization

A horizontal strategic alliance is a cooperative partnership between firms

at the same stage of the value chain

What is not a reason for strategic alliances

blocking foreign competitos from domestic markets

____ resources are resources that each partner brings to the partnership that, when combined, allow for new resources or capabilities that neither firm could readily create alone.

complementary

a radical innovation involves

creation of new knowledge

The main incentive for a U.S. company to form a strategic alliance with a South African company is to

develop a competitive advantage

After identifying entrepreneurial opportunities, entrepreneurs turn their attention

developing capabilities to create competitive advantages required to make profit for them

If the U.S. dollar continues to be weak compared with the euro for the long-term, it will?

encourage europeans to make direct investments in the U.S. to manufacture goods here

high uncertainty in competitive markets

encourage firms to form alliances to share risks

Identifying opportunities is a/an ____ process. Developing the capabilities needed to exploit them is a/an ____ process.

entrepreneurial, strategic

If country-specific advantages for production are stronger in the home country, ____ is likely the best choice for entering an international market.

exporting

Tariffs are most likely to be a problem for firms following the ___ international entry mode

exporting

a firm that seeks to encourage innovation must support

failure of innovative products

A cooperative partnership between firms across the value chain is a horizontal strategic alliance.

false

Although a firm can buy ownership of another firm's innovations and innovation capabilities, this is not considered true strategic entrepreneurship.

false

An advantage of an international acquisition is that the acquiring firm takes on only a limited portion of the target firm's liabilities. The remainder are forgiven by the local government.

false

An advantage of the geographic-area divisional structure is that it is easy to achieve economies of scale

false

Claudette is a well-educated human resources professional in the compensation area. She understands the importance of innovation in her area, and would like to be a leader of administrative innovation in her organization. Claudette is very realistic, intolerant of ambiguity, and willing to tackle projects only after they have the financial support of top management. Claudette has the personality profile of an entrepreneur.

false

Corporate-level strategic alliances often serve the same purpose as acquisitions. But alliances are more costly than acquisitions.

false

For an international alliance to succeed, it must be based on detailed formal contracts with extensive monitoring mechanisms.

false

Identifying opportunities is a strategic process while developing the capabilities needed to exploit them is an entrepreneurial process.

false

Incremental innovations are internal innovations because they build on the organization's existing knowledge base, whereas radical innovations are external innovations because they create new knowledge

false

Innovating by cooperating is accomplished primarily through acquisitions.

false

More strategic alliances succeed than fail.

false

Organizations pursue innovation because it eliminates the uncertainty inherent in the competitive marketplace.

false

Strategic alliances are typically delayed until the strength and complementarity of the partner's competencies are completely assessed and a trusting relationship has been established.

false

The main protection against opportunistic behavior by an alliance partner is good contracts.

false

The record of acquisitions with respect to promoting innovation shows that acquirers experience increased levels of innovation.

false

The simplest and most common mode of entering the international marketplace is licensing

false

for global companies, the olympics present a significant opportunity to realize operational efficiencies

false

Which of the following is not a characteristic of an entrepreneur?

focused on cost-benefit analyses

It is common for less-developed countries to require foreign companies to ____ in order to manufacture and sell products in the less-developed country.

form a joint venture with a host country firm

For a fee, McDonald's provides trademarks, the operating system, and its well-known products as well as support services such as advertising, specialized training, and quality assurance programs to partners across the world. This type of market entry is called

franchising

Goodie, Goodie, Gumdrops (GGGs) is a retail business appealing to pre-teen girls. It carries specialty clothing, accessories, and even food items all manufactured specifically for its stores. GGGs has been very successful in the U.S. and it plans to expand into selected international markets. The ____ entry mode would probably be most appropriate for GGGs.

franchising

____ can enable a firm to have a first-mover advantage in a new international market without some of the risks involved in being a first mover.

franchising

the most common reason for outsourcing is to reduce costs. Another major reason for outsourcing is to

gain access to special skills for higher quality output

A company specializing in all natural health products would be likely to form an alliance with a company in Brazil that manufactures creams, lotions, and body oils from tropical plants using little-known indigenous techniques in order to

gain access to the knowledge of the brazilian firm

Bouquet fragrances, Inc. uses a multidomestic strategy. The ___ structure is most appropriate for it

geographic-area divisional

The ____ international strategy requires centralized production and marketing decisions to be make at a central divisional office.

global

The international strategy that requires the least customization of the company's product or service is the

global

The organizational structure that provides the most flexibility in designing products and responding to customer needs is the ____ structure

global matrix

The transitional strategy is usually implemented through the ____ structure

global matrix

The cognitive model that motivates a manager to search for opportunities in foreign markets is known as

global mindset

German firm that manufactures precision scientific instruments has built a new factory in Nebraska on property that it has leased. It has hired German scientists and engineers as well as German technicians to work at the plant. The firm received tax benefits and other economic incentives from Nebraska in order to build this new plant. This is an example of a/an

greenfield venture

Mitigation Masters is a company that specializes in the rescue and repair of paper documents and books damaged by water. They are known all over the United States for salvaging governmental records, academic and private libraries, and museum collections. Mitigation Masters has spent years in painstaking research and practical experimentation to develop methods of drying the documents, preventing mold growth, and minimizing the fragility of damaged documents. Mitigation Masters intends to move into the international market. The best entry mode for it would be

greenfield venture

The C.E.O. of Stability, Inc., a U.S. company, is considering the wisdom of an alliance with a Malaysian company. She is concerned about the fact that the Malaysian company wants to own a large percentage of the venture. The CEO

he CEO should realize that if the Malaysian company owns a large equity stake in the venture it will have more incentive to make the venture a success.

To compete more fully and offer better value to their customers, Dow and Monsanto are working together to develop and produce new corn seed. Each partner will contribute four genetic traits for each new seed that will overcome some problems with pests and ward off weeds. This is an example of a ____ alliance

horizontal

tactic collusion is more likely to be a concern with

horizontal alliances

many companies have discovered that outsourcing lowers costs and

improves quality

In the sense used in the textbook, which of the following would be not classified as an innovation?

increasing the efficiency of a manufacturing plant by running two shifts of workers

A redesign of an automobile tire to make it more resistant to punctures would be a/an ____ innovation.

incremental

If a firm has a strong set of innovation skills and capabilities, it should pursue entrepreneurial opportunities through

internal innovation

Becuase of environmental and technological changes taking place int he twenty-first century

international strategies are becoming more widespread

Organizations pursue innovation because it

is positively linked to improved firm performance

The main problem with relying on contracts to reduce opportunistic behavior by alliance partners is that

it is impossible to specify all opportunistic actions by an alliance partner

Along with differences in cultures, the major impediment to the transfer of knowledge or sharing of other resources between companies in an international strategic alliance is

lack of trust

the cellphone was a radical innovation relative to

landline phones

A manufacturer of kitchen and laundry appliances plans to produce and selldifferent varieties of appliances in various countries due to differences in kitchen and home sizes, electrical power variations, alternative fuels, and cultural preferences. This manufacturer will be following the ____ strategy.

multidomestic

the first step in managing alliances is

selecting a compatible alliance partner

firms often form alliances with partner from previous alliances because

social capital already exists between them

The island of Madagascar has large, undeveloped deposits of a rare mineral. A European mining company is interested in locating in Madagascar to extract this mineral. This is an example of an international strategy being motivated by

sourcing of resources and supplies

the internet has eased internationals transactions in all ways except?

substantially reducing the liability of foreign-ness

the likelihood of a strategic alliance producing synergy and innovation is increased by

the extent to which the knowledge stocks of each organization are integrated

Why would a company choose to use foreign direct investment as a way to enter a foreign market?

the firm is interested in greater control over its business activities

the main attraction for foreign firms in developing countries to join strategic alliances with U.S. firms is

the knowledge resources of the U.S. firm

Alliances for the purpose of diversification are especially valuable if

the new products created by the alliance are related to the firms current products

Franchise relationships are characterized by

tight control of the franchisee's actions by the franchiser

The international strategy that attempts to combine global scale efficiencies with local responsiveness in a geographic region is the ____ strategy.

transnational

A company that has significant internal-coordination advantages should not choose franchising or licensing as a mode of entering the international market?

true

A country that has high political instability and increasing incidents of terrorism will be still be considered a high risk for foreign direct investments, even if the country's labor force is cheap.

true

A new way of handling payroll and benefits would be considered an administrative innovation.

true

A strategic alliance is a relationship between firms in which the partners agree to cooperate in ways that provide benefits to each firm.

true

As the level of equity investment by the foreign alliance partner increases, the probability of the alliance's failure decreases.

true

Everything else being equal, a potential alliance partner that is engaged in alliances with a number of other partners is preferable to an alliance partner who is not involved in other alliances.

true

Firms should innovate internally if they have a strong set of skills and capabilities to do so.

true

Google's innovations come about from all three methods to innovate: internal development, cooperative relationships, and acquisitions.

true

If a firm's success depends on intangible resources and the success of its entry into the international market depends on transferring core competencies, an appropriate mode of entry into the international market would be through an acquisition.

true

If an oganization's goal is in internationalizing is learning, then the best approach is the transitional strategy?

true

One risk of innovating through acquisitions is that it may stifle the firm's ability to innovate internally.

true

Opportunism by alliance partners is a greater threat in horizontal alliances than in vertical alliances.

true

Organizations need to strike a balance between taking risks and understanding the trauma associated with too much failure.

true

Outsourcing is controversial in the U.S. because it is seen as responsible for exporting jobs to other countries

true

Proctor & Gamble's new tooth pastes are considered incremental innovations

true

Radical innovations are more likely to lead to substantial improvements in a firm's performance than are incremental innovations.

true

Tariffs placed by a foreign country on the import of U.S. goods are often the motivation for joint ventures between U.S. firms and firms in that country.

true

The process through which existing products, methods of production, or ways of managing the firm are destroyed and replaced with new ones is called "creative destruction."

true

When partners in a strategic alliance share resources or integrate complementary capabilities to build economies of scope, synergy has been created

true

a joint venture is a type of equity alliance

true

one of the main reasons that comapnies uses contract manufacturing as a mode of entry into the international market is the cost advantage over U.S. manufacturing?

true

one of the major problems with the global matrix structure is that reporting relationships are often very complex and vague

true

the key factor in the success of a vertical strategic alliance is

trust between partners

All of the following are examples of foreign direct investment except

turnkey projects

the main difference between an equity and a non-equity alliance is that

while equity alliances involve ownership, non-equity alliances are contractual relationships without ownership

ZigZag, Inc., operates in four international locations: North America, Latin America, Western Europe, and Eastern Europe. For each of these locations, it has profit centers with separate functions such as accounting, marketing, finance, and information systems. ZigZag uses the ____ structure.

world-wide divisional

In the ___ structure a specific division focuses on a single product or product group

worldwide divisional