Capstone Exam 3

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner

Which of the following is an advantage of equity alliances when compared to non-equity alliances?

They produce stronger ties between partners.

Which of the following statements is true of corporate strategy?

A corporate strategy must be able to create synergies across business units that are quite different.

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

Which of the following statements is true of a multidomestic strategy?

Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

Which of the following scenarios best illustrates horizontal integration?

King Autos Inc. joins with Dimitra Motors Inc., one of its direct competitors

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

Promised synergies never take place.

________ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

Restructuring

Juno LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juno's owners or managers to take?

Seek an alliance with a company or companies that will complete the value chain

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global strategy?

The firm reaps significant economies of scale and location economies.

Which of the following statements is true of joint ventures?

They enable the exchange of both tacit and explicit knowledge

Argus Inc. is a large multinational company, active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.?

a dominant-business firm

A firm that decides to stop purchasing components from suppliers and start producing them in-house is _________

backward vertical integration.

How did Canada, Mexico, and the United States reduce the administrative and political distance between them?

by establishing the North American Free Trade Agreement (NAFTA)

In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources.

factor

Maddox Bauxite Extraction Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will give it strong control over all its business activities. Which of these foreign entry modes will Maddox most likely choose?

greenfield operation

A greater cultural distance between two trading countries

increases the liability of foreignness.

WackyPop Inc. produces an inexpensive microwave popcorn that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has WackyPop performed poorly in?

local responsiveness

Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?

managerial hubris

What causes the winner's curse?

overpaying for an acquisition

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using

related-constrained diversification.

A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance.

related-linked diversification

The process of alliance management begins with

selecting the best possible partner.

Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying?

taper integration

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to gain a new capability

Synergy is achieved when:

the value created by business units working together exceeds the value the units create when working independently.

Which of the following factors is the most important determinant of economic distance?

the wealth and per capita income of consumers

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?

transnational strategy

As a result of globalization, the

world's market economies are becoming more integrated.