gm 170
4. International trade is motivated by the quest to exploit market opportunities in other countries: foreign direct investment, on the other hand, is motivated by the desire to exploit resources and capabilities located in other countries. T/F
F
4. Within a multidivisional company, "portfolio management" refers to decisions over which business the company should own, how resources should be allocated among these businesses, and how to manage the linkages between the businesses in order to exploit the synergies among them. T/F
F
5. For conglomerate companies (companies that comprise unrelated businesses) portfolio management is likely to be more important source of value creation than in a diversified company that comprises closely-related businesses. T/F
F
5. Sheltered industries are shielded from imports by high barriers to entry. T/F
F
6.. The GE/McKinsey portfolio planning matrix is less sophisticated than the BCG growth-share matrix, but is easier to apply. T/F
F
8. Internationalization often involves mergers and acquisitions, hence, it tends to reduce seller concentration within individual national markets. T/F
F
16. For high-tech products such as aircraft and smartphones, the international fragmentation of the value chain tends to be driven less by cost considerations and more by the availability of sophisticated technical capabilities. T/F
T
16. The strategic planning systems of multibusiness corporations have been criticized for the fact that they do not make strategy. T/F
T
18. A key challenge for the strategic planning systems of large corporations is reconciling top-down strategic leadership with bottom-up strategy initiatives. T/F
T
2. Internationalization represents both an opportunity and a threat to business enterprises. T/F
T
20. Starbucks entry into India by means of a joint venture with Tata Group in preference to its usual practice of operating wholly owned subsidiaries outside the US reflects Starbucks' view that Indian market is highly complex and Starbucks needed the knowledge and connections possessed by a local partner. T/F
T
21. Jack Welch's approach to corporate management at General Electric incorporated the principle that sustaining a high level of internal stress within the organization counteracted complacency and increased responsiveness to external change. T/F
T
21. Traditionally, European-based multinational companies such as Unilever, Shell, and Philips have been highly centralized, Japanese multinationals such as Honda, Sony, and Hitachi have been highly decentralized. T/F
T
22. A key difference between Bartlett and Ghoshal's "transnational corporation" and the conventional US multinational corporation (described by Bartlett and Ghoshal as a "coordinated federation") is that communication and coordination occurs between national units rather than exclusively between each national unit and the corporate HQ T/F
T
22. A strategic inflection point is a point where major changes in a firm's competitive environment require a complete change of strategy T/F
T
24. Designating a national subsidiary as a "center of excellence" for a particular product, technology, or activity is a way of reconciling differentiation to meet the needs of national markets with the exploitation of global scale advantages. T/F
T
24. Oliver Williamson argument that the multidivisional corporation resolves the agency problem in large public corporation has not been verified in practice. T/F
T
6. Service industries such as commercial banking and hotels tend to be "multidomestic" in their pattern of internationalization. T/F
T
7. In general, internationalization of an industry results in more competition and lower profitability T/F
T
7. The axes of the BCG and GE/McKinsey business portfolio matrixes represent the two fundamental sources of profitability for a business: the attractiveness of its industry and its competitive advantage. T/F
T
8. The Ashridge portfolio display is distinguished by the fact that it takes account of fit between each business and the corporate owner. T/F
T
9. Increasingly, the corporate headquarters of multibusiness companies are being divided into two parts: that which exerts financial and strategic control over the businesses and that which provided common services to the businesses. T/F
T
9. Internationalization tends to increase competition by increasing investment in new capacity and increasing the diversity of competitors within each national market. T/F
T
32. Portfolio planning techniques, (also called portfolio matrixes), contribute to the following corporate management function: [See pp.363-365] a. Allocating resources among businesses b. Selecting diversification opportunities c. Formulating competitive strategies for individual businesses d. Establishing performance targets for each business
a. Allocating resources among businesses
35. The value chain for a product will tend to be dispersed across different countries when: [See pp.320-321] a. Different stages of the value chain require different types of resources and capabilities. b. The product is subject to import tariffs and quotas. c. The product is knowledge-intensive. d. The different stages of the value chain need to be closely coordinated.
a. Different stages of the value chain require different types of resources and capabilities.
19. In pharmaceuticals (where patent protection tends to be strong), exports or direct foreign investment will tend to be preferred over licensing as a means of exploiting overseas markets. T/F
F
19. The mechanisms through which the corporate headquarters exercises control over individual businesses can be classified into "input control" and "output control." Performance management systems represent a form of "input control." T/F
F
20. If corporate management focuses heavily upon enforcing financial performance targets on its individual businesses, this increases the need for corporate management to guide the strategic plans of the individual businesses. T/F
F
23. In Ghemawat's "Aggregation, Adaptation, Arbitrage" framework, the potential for a multinational enterprise to exploit arbitrage benefits are likely to be greater in a capital-intensive industry than in a labor-intensive industry T/F
F
23. Williamson believed that one of the key advantages of the M-form was that it centralized decision making in corporate headquarters. T/F
F
25. Mintzberg identified a key rigidity of the multidivisional firm its tendency to impose standardized corporate management systems across all its divisions. T/F
F
3. Goold, Campbell, and Alexander's concept of parenting advantage proposes that a key criterion for whether a company should own a particular business corporation whether the value added from owning that business exceeds the costs of administering that business. T/F
F
3. Internationalization occurs through two main mechanisms: trade and offshoring. T/F
F
17. Most multibusiness companies have a dual planning process: strategic planning focuses on the short and medium term, financial planning on the medium to long term T/F
F
17. The benefits from fragmenting a product's value chain across multiple locations almost always outweigh the costs of coordinating globally dispersed activities. T/F
F
18. If the firm's competitive advantage is country-based, the firm can exploit foreign markets either by exports or by direct investment T/F
F
1. The two primary drivers of change in business environment during the past half century are deregulation and internationalization. T/F
F
10. In an international context, comparative advantage and competitive advantage are identical concepts. T/F
F
10. In large multibusiness, multinational companies shared service organizations are almost always located close to their corporate headquarters. T/F
F
11. Typically, a common corporate identity and well-established corporate systems means that there are few barriers to transferring best practices between business units within a company. T/F
F
14. Multibusiness corporations with close linkages between their businesses tend to have smaller corporate headquarters than multibusiness corporations with more independent businesses. T/F
F
14. Porter's "national diamond" framework implies that government policies which foster "national champions" within technology-based industries are likely to be successful in stimulating national competitiveness in these sectors. T/F
F
15. Porter's "national diamond" framework suggests that a significant factor explaining the dominance by German firms of the world market for luxury and high performance automobiles is to be found more in the factors of production available in Germany than in the demand characteristics of German consumers. T/F
F
11. Comparative advantage refers to countries' relative efficiencies in producing different products T/F
T
12. Sharing resources and activities between business units can often impose costs which exceed the value of the synergies gained. T/F
T
12. The revealed comparative advantage of the US, Canada and Australia in cereals is a reflection of these countries' large natural endowments of land. T/F
T
13. Switzerland's comparative advantage in clocks and watches is likely to reflect the Swiss emphasis on punctuality rather than Switzerland's resource endowments. T/F
T
13. The closer the linkages between the business units of a multibusiness corporation, the more involved corporate management must be in coordinating across the businesses. T/F
T
15. "Restructuring" is a corporate strategy that involves acquiring companies then intervening to cut costs, divest assets, revise competitive strategies, and adjust financial structure. T/F
T
33. In Porter's national diamond framework, Porter emphasizes that encouraging mergers in an industry in order to form a "national champion": [See p.318] a. Eliminates the pressure of domestic competition to drive innovation, quality, and efficiency b. Creates the scale that I essential to compete in global markets c. Is an effective means for government to channel support to the domestic industry d. Provides a focal point for building a cluster of related and supporting industries
a. Eliminates the pressure of domestic competition to drive innovation, quality, and efficiency
35. The primary purpose of the "Ashridge portfolio display" is to: [See pp.365-366] a. Evaluate the potential for a corporate parent to add value to its individual businesses. b. Appraise the performance of each individual business under the corporate umbrella. c. Benchmark the strategic position of individual businesses in relation to one another. d. Identify businesses that are candidates for divestment.
a. Evaluate the potential for a corporate parent to add value to its individual businesses.
26. The fundamental issue that implementing corporate strategy addresses is: [See pp.362-363] a. How the multibusiness company can best create value for its different businesses. b. Where the firm should be competing. c. Managing the business portfolio. d. Exploiting linkages among the different businesses.
a. How the multibusiness company can best create value for its different businesses.
28. Besides managing the overall corporate portfolio of businesses, corporate management can add value to individual businesses by: [See p.365] a. Managing the individual businesses, exploiting linkages between them, and managing change. b. Developing and managing corporate-level capabilities. c. Designing strategic orientations, and developing detailed operational plans for each business. d. Communicating the strategic orientations to the main stakeholders, and managing conflicts at lower divisional levels.
a. Managing the individual businesses, exploiting linkages between them, and managing change.
49. A major disadvantage of legislation to improve corporate governance by imposing more stringent reporting requirements on public companies and increasing the penalties that directors face for negligence and misconduct is: [See p.383] a. Preoccupation with compliance means that boards of directors offer less strategy guidance b. More companies are choosing to go private c. Fewer qualified individuals are willing to become board members d. Increased regulation reinforcing the male domination of corporate boards
a. Preoccupation with compliance means that boards of directors offer less strategy guidance
1. According to Jack Welch, the advantages of focus that single business companies possess are outweighed the advantage that multibusiness companies possess in terms of their ability to share the ideas from many different sources. T/F
a. T
2. The key issues with regard to the implementation of corporate strategy concern the relationships between the corporate headquarters and the individual businesses. T/F
a. T
39. A common approach to reconciling the benefits of global scale with the need for national differentiation is to: [See pp.324-325] a. Develop a global brand but rely on local promotional activities. b. Create standard product platforms in terms of design and components, then adapting product features, complementary services, and marketing approaches. c. Allow major national subsidiaries to develop new products, then encouraging other national subsidiaries to adopt them. d. Develop globally standardized products but sell them under local brand names.
b. Create standard product platforms in terms of design and components, then adapting product features, complementary services, and marketing approaches.
46. IBM and Samsung Electronics are examples of large, mature corporations that have: [See pp.379-380] a. Sustained their positions as two of the world's most innovative companies in terms of patents awarded and new products launched. b. Developed corporate systems that promote large-scale strategic change and the development of major new areas of businesses. c. Demonstrate the potential of large established companies rich in complementary resources to outperform technology-based start-ups. d. Demonstrate that strong leadership and centralized decision making is the key to corporate success during turbulent times.
b. Developed corporate systems that promote large-scale strategic change and the development of major new areas of businesses.
38. By separating their corporate headquarters into a corporate management unit and a shared services organization, large corporations anticipate the following benefits: [See p.367] a. Better exploitation of synergy among the business units. b. Economies of scale and greater responsiveness to user needs in supplying services to the business units. c. Ensure standardization in the support services provided to business units. d. Encourage the identification and transfer of best practices.
b. Economies of scale and greater responsiveness to user needs in supplying services to the business units.
27. The company which has done most to pioneer innovations in corporate management during the second half of the 20th century is: [See pp.363, 364, 377, 378]. a. Dupont de Nemours b. General Electric c. IBM d. General Motors
b. General Electric
30. The development of portfolio planning techniques at the end of the 1960s was initiated by: [See p.363] a. The Rand Corporation b. General Electric c. Michael Porter d. Peter Drucker
b. General Electric
44. Strategic Milestones, Balanced Scorecards, and Strategy Maps are all devices which aim to: [See p.373] a. Overcome agency problems in multibusiness corporations. b. Improve the effectiveness of strategy execution. c. Empower divisional and business unit managers. d. Ensure more effective corporate control over divisional financial performance.
b. Improve the effectiveness of strategy execution.
40. The "centralized hub" strategy that Japanese multinationals pursued during the 1970s and 1980s is likely to be most successful in industries with: [See pp.331-332] a. Innovation as the primary source of competitive advantage b. Large economies of scale and limited need for national differentiation c. Substantial opportunities for transfer of learning among countries d. Rapid rates of technological change
b. Large economies of scale and limited need for national differentiation
42. The type of corporate strategy through which most leading private equity groups such as Carlyle Group, Kohlberg Kravis Roberts, and Blackstone create value for their investors is best described as: [See p.371] a. Portfolio management b. Restructuring c. Transferring skills d. Sharing resources
b. Restructuring
36. Saudi Aramco and Statoil are both major oil producers. Saudi Aramco's competitive advantage is based on its access to low-cost domestic oil reserves. Statoil's competitive advantage is its capability in offshore exploration and production. The implications for the internationalization strategies of the two companies are: [See p.319] a. Both companies should focus on exporting from their own countries b. Saudi Aramco should focus on exporting. Statoil should pursue direct foreign investment c. Saudi Aramco should pursue direct foreign investment. Statoil should focus on exporting d. Both companies should use a mixture of exporting and direct investment depending upon the nature of the foreign opportunity
b. Saudi Aramco should focus on exporting. Statoil should pursue direct foreign investment
30. The theory of comparative advantage is concerned with: [See p.315] a. The sources of real income differentials among countries b. The impact of resource availability on national competitiveness in particular industries c. The competitive advantages of low-wage countries d. The determinants of capital flows between countries
b. The impact of resource availability on national competitiveness in particular industries
34. The concept of "parenting advantage" is best summarized by the following statement: [See p.365] a. Corporate managers should emulate the role and skills of good parents in disciplining their children b. The primary criterion for a company's continued ownership of a business is its ability to add more value than alternative corporate parent c. The primary role of corporate management is to coach business management d. The ultimate measure of success for a multibusiness company is to develop successful new businesses
b. The primary criterion for a company's continued ownership of a business is its ability to add more value than alternative corporate parent
41. Internationalization among New York-based law firms is the result of: [See p.325] a. The US possessing a comparative advantage in legal services. b. US law firms following the opportunity to provide global service to their multinational clients. c. US law firms seeking to benefit from knowledge transfer between different legal systems. d. US law firms seeking to exploit economies of scale in human capital and IT systems.
b. US law firms following the opportunity to provide global service to their multinational clients.
29. Which aspect of internationalization by companies does not increase the intensity of competition within national markets? [See p.318] a. Internationalization increases the diversity of firms competing in each national market b. Internationalization increases the number of firms in each national market c Internationalization stimulates mergers and acquisitions within an industry d. Internationalization increases investment in new capacity
c Internationalization stimulates mergers and acquisitions within an industry
42. The Dutch-based electrical and consumer electronics multinational, Philips, has transferred the headquarters for several of its global business away from the Netherlands. In terms of Bartlett and Ghoshal's typology of multinational strategies, this represents a transition from: [See pp.331-333] a. A "centralized hub" to a "decentralized federation" b. A "centralized hub" to a "transnational" c. A "decentralized federation" to a "transnational" ○ d. A "coordinated federation" to a "decentralized federation"
c. A "decentralized federation" to a "transnational" ○
31. Large countries have an advantage over small countries in technology-intensive and capital-intensive industries, because: [See p.316] a. They can influence the rest of the world's technical standards b. Small markets discourage ambition among the firms that serve them c. A large home market allows exploitation of scale economies in facilities and product development d. Large countries tend to have superior educational systems
c. A large home market allows exploitation of scale economies in facilities and product development
28. With internationalization, the threat of new entry into domestic industries is increases because: [See p.314] a. Customer preferences for imported products b. The World Trade Organization (WTO) prevents governments protecting their domestic industries through subsidies and import restrictions c. Barriers to entry that would deter domestic firms may be easily overcome by large firms from other countries d. Foreign-based, state-owned enterprises are not deterred by losses earned in overseas markets
c. Barriers to entry that would deter domestic firms may be easily overcome by large firms from other countries
31. The axes of the BCG and GE/McKinsey portfolio planning matrices act as proxies for two key strategic variables: [See pp.364-365] a. Market share and market growth. b. Competitive advantage and market growth. c. Competitive advantage and market attractiveness. d. Individual business unit performance and potential for synergy.
c. Competitive advantage and market attractiveness.
48. Oliver Williamson said two main corporate governance advantages of the multidivisional structure ("M-form") for large, diversified companies were: [See pp.383-384] a. Allowing decision-making to be decentralized while centralizing high-frequency decision making b. Allowing decision-making to be decentralizing while centralizing strategic decision making c. Creating competitive internal capital market in which capital allocation is not dominated by political consideration and creating a corporate headquarters that can represent shareholder interests d. Ensuring that the divisional managers were dependent on capital allocation at the corporate level
c. Creating competitive internal capital market in which capital allocation is not dominated by political consideration and creating a corporate headquarters that can represent shareholder interests
39. Michael Porter believes that managing linkages among businesses through transferring skills and sharing resources offer greater potential for creating value than portfolio management because: [See p.368] a. Economies of scope have a greater impact on profitability than industry attractiveness b. The size of acquisition premiums means that acquisitions can no longer deliver satisfactory shareholder value c. Increasingly efficient capital markets limit the potential for firms to create value through allocating capital among their businesses d. The propensity for stock markets to apply a conglomerate discount to highly diversified companies
c. Increasingly efficient capital markets limit the potential for firms to create value through allocating capital among their businesses
37. The principal merit of the BCG portfolio planning matrix is: [See pp.364-365] a. Its accuracy in predicting profit and cash flow potential b. Its empirical basis: the relationship between market share and profitability has been widely observed c. Its simplicity d. Its use of metaphor (dogs, cash cows, stars, etc.)
c. Its simplicity
33. A major limitation of the BCG matrix in guiding corporate strategy is: [See p.365] a. The assumption that each business has synergistic links with every other business within the portfolio. b. Business' market shares and growth rates are difficult to measure. c. Neither market growth nor relative market share is reliable indicators of a businesses' future profitability. d. Its long history renders it obsolete.
c. Neither market growth nor relative market share is reliable indicators of a businesses' future profitability.
32. According to Porter's "national diamond" analysis, the competitive advantage of Swiss firms in watches, German firms in luxury cars, and Japanese firms in cameras is a result of: [See p.317] a. The availability of highly skilled workers in each of these countries b. The lack of natural resources in each of these countries c. The characteristics of local demand in each of these countries d. High levels of domestic competition
c. The characteristics of local demand in each of these countries
40. Although sharing resources among the different businesses within the multibusiness corporation can offer substantial cost economies, these savings are often offset by: [See pp.368-369] a. Internal conflicts between divisional managers. b. The need for each business to have resources and facilities that are specialized to its own requirements. c. The costs of coordinating such resource sharing. d. The unwillingness of each business to pay for the maintenance of common resources.
c. The costs of coordinating such resource sharing.
25. Uber's distribution of ice cream in over 38 counties of the world on July 17, 2014, exemplifies the following feature of international business: [See p.311] a. The demand for ice cream is global b. U.S companies have mastered international expansion more effectively than those from any other country c. The pace of transition from being a domestic to a global competitor is much faster in ecommerce than in traditional business sectors d. Once a company has built a network, that network can be used to distribute a wider range of offerings
c. The pace of transition from being a domestic to a global competitor is much faster in ecommerce than in traditional business sectors
36. What are the two dimensions of the Ashridge portfolio display? [See pp.365-366] a. The relative organizational power of the parent, and the business's innate profitability. b. The parent's potential to add value to a business, and its potential to impose effective control on the business. c. The parent's potential to create value and to destroy value in a business. d. The cultural fit between the parent and the business.
c. The parent's potential to create value and to destroy value in a business.
50. Howard Hughes at Hughes Corporation, Ken Lay at Enron, Dennis Kozlowski at Tyco, Jean-Marie Messier at Vivendi, and Fred Goodwin at Royal Bank of Scotland illustrate: [See p.384] a. The hazards of growth through acquisition b. The ineffectiveness of most company boards of directors c. The potential for companies to be vehicles for the personal ambitions of chief executives d. How easily the stock market is fooled by ambitious, visionary CEOs
c. The potential for companies to be vehicles for the personal ambitions of chief executives
44. McDonald's introduction of a greater number of local products on its menus, then transferring these items across national borders points to: [See p.330] a. The tendency for global products to lose their appeal. b. The versatility of the McDonald's business system. c. The potential for localized adaptation within the multinational enterprise to be a source of innovation and strategic renewal. d. Growing competition in the fast food industry as the McDonald's system is increasingly imitated by local rivals.
c. The potential for localized adaptation within the multinational enterprise to be a source of innovation and strategic renewal.
45. The choice between strategic planning and financial control as a corporate management style for a particular company depends upon: [See pp.374-376] a. Whether company is managed in the interest of shareholders or stakeholders b. The degree of maturity of the businesses c. The relatedness of the businesses and the duration of their investment projects d. Whether the goals of the company are growth or profitability,
c. The relatedness of the businesses and the duration of their investment projects
51. Which of the following is not a key difference between a multidivisional company and a holding company? [See p.385] a. Multidivisional companies have a centralized treasury. holding companies do not. b. The parent of a holding company appoints the boards of directors of its subsidiaries. the HQ of a multidivisional company directly appoints divisional managers. c. The subsidiaries of a holding company are responsible for their own financing decisions. the divisions of a multidivisional company need only to consider their credit ratings. d. Multidivisional corporations typically have a single, integrated strategic planning process. holding companies do not.
c. The subsidiaries of a holding company are responsible for their own financing decisions. the divisions of a multidivisional company need only to consider their credit ratings.
47. Corporate governance is: [See p.381] a. The way a firm is organized b. The way a firm makes decisions c. The system by which the top management of a firm is directed and controlled d. The way a firm appoints and replaces its CEO
c. The system by which the top management of a firm is directed and controlled
43. The costs of national differentiation can be low if: [See p.329] a. A firm does not differentiate its products very much b. The firm has a strong brand c. A "global customer" exists d. A common basic design and common components are used
d. A common basic design and common components are used
27. Global industries are those where: [See p.313] a. International trade (imports and exports) are high in relation to industry sales b. Technology transfers are high c. Foreign direct investment is high d. Both trade and direct investment are high
d. Both trade and direct investment are high
43. The principal mechanisms through which the corporate headquarters seeks to improve the strategic and operational management of its businesses are: [See pp.370-376] a. Management development activities b. Providing corporate services c. Creating strong financial incentives for business unit managers d. Direct involvement in business-level management, strategic planning, and performance management and financial control
d. Direct involvement in business-level management, strategic planning, and performance management and financial control
37. A start-up company based in Canada and led by an academic microbiologist has patented genetically-modified, drought-resistant maize particularly suitable to arid regions of Africa. The firm has been unable to attract significant venture capital investment. How should the firm exploit commercial opportunities for its product in Africa? [See pp.322-324] a. It should form a joint venture with a multinational agricultural seed company b. It should establish seed production in Canada and set up sales offices in African countries c. It should establish seed production in Canada and appoint sales agents in different African countries d. It should license its patent to a multinational agricultural seed company and continue research on other projects for the genetic modification of agricultural crops
d. It should license its patent to a multinational agricultural seed company and continue research on other projects for the genetic modification of agricultural crops
29. The main purpose of a portfolio planning matrix is to: [See p.363] a. Locate potential synergies between businesses b. Forecast the future performance of the different businesses c. Evaluate the group's marketing position relative to its rivals d. Represent graphically the different businesses in terms of key strategic variables that determine their potential for profit
d. Represent graphically the different businesses in terms of key strategic variables that determine their potential for profit
41. The corporate headquarters of companies comprising independent business such as Berkshire Hathaway, Danaher, Jardine Matheson, and the Tata Group as compared to those of closely-linked business such as Royal Dutch Shell, IBM, BASF, and Unilever tend to be: [See p.369] a. More committed to financial control b. More actively involved in corporate social responsibility c. More focused upon creating shareholder value d. Smaller
d. Smaller
38. Many retailers that have been outstandingly successful in their how markets have experienced much poorer performance when they have entered overseas markets. These include: Tesco, Marks& Spencer, Laura Ashley, and Body Shop in the UK): Best Buy, Sears, Macy's, and Wal-Mart in the US. This reflects: [See pp.322-324] a. The lack of major efficiency benefits from international scope in retailing. b. The lack of scale economies in retailing. c. Limited opportunities for exploiting learning benefits in retailing (e.g. by transferring best practices). d. The lack of major efficiency benefits from international scope combined with the need for national differentiation.
d. The lack of major efficiency benefits from international scope combined with the need for national differentiation.
34 Toyota operates automobile assembly plants in all five continents of the worlds. This reflects: [See p.319] a. The widespread availability of the resources needed for automobile production. b. The high costs of transporting automobiles between countries. c. The need to adapt products to the requirements of local markets. d. Toyota's ability to transfer its production capabilities worldwide.
d. Toyota's ability to transfer its production capabilities worldwide.
26. Firms internationalize through two mechanisms: [See p.313] a. Exports and imports. b. Trade in goods (visible trade) and trade in services (invisible trade). c. Direct and indirect investment. d. Trade and direct investment.
d. Trade and direct investment.
