Strategy

Macmillan Toys Inc. is looking to expand internationally and wishes to develop a new product line that is highly localized while keeping their cost structure below that of their rivals. Macmillan Toys Inc. has been successful with implementing a blue ocean strategy in their main strategic business units and as such wishes to pursue a ________ strategy for their international operations. A) transnational B) international C) global standardization D) multidomestic

A

Maria wants to pursue an international strategy but is concerned that foreign markets aren't ready for her products and services. You recommend that she engage in ________, which would be contract based and would limit risk and exposure of her investments. A) exporting B) licensing C) equity alliance D) greenfield operations

A

There are some industries that are more competitive in some countries than others. In order to fully understand why this occurs, we need to examine Porter's Diamond framework. Which of the following below is NOT one of the four factors in this framework? A) industry-specific forces B) factor conditions C) competitive intensity in the focal industry D) demand conditions

A

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A) location economies. B) economies of scope. C) learning races. D) network effects.

A

Vinny, the CEO of Rainholm Industries is looking to employ a ________ strategy, which would take advantage of economies of scale and location economies. He wishes to pursue and establish a global division of labor based on wherever best-of-class capabilities reside at the lowest possible cost for Rainholm Industries. A) global standardization B) multidomestic C) international D) transnational

A

When firms sell their products overseas with little or no change to the products, they may increase the expropriation of intellectual property and increase the risk of piracy. This is considered a serious disadvantage when pursuing a(n) ________ strategy. A) international B) differentiation C) cost-leadership D) functional-level

A

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 about managing alliance-related tasks?

Alliance-management capability is based on three alliance-related tasks.

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.

A greater cultural distance between two trading countries A) increases linguistic similarities between the two countries. B) increases the liability of foreignness. C) reduces the uncertainty of doing business. D) reduces the transaction costs associated with business.

B

How will an increase in coordinated economic and political integration between countries affect the world economy? A) The world's market economies will become self-sufficient and independent. B) There will be gains in social welfare and living standards across the globe. C) The cost of labor will further decline in emerging economies. D) There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B

Lucy wishes to have more control with her international strategy and is willing to increase her firms' investments in this foreign market. She considers creating a subsidiary but also wishes to build a manufacturing plant from the ground up. Lucy is most likely interested in pursuing a(n) A) franchising agreement. B) greenfield operations strategy. C) exporting and importing strategy. D) equity alliance.

B

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with A) differences in climates and time zones. B) the absence of a trading bloc. C) physical remoteness. D) the lack of connective ethnic and social networks.

B

Which of the following modes of entering a foreign market allows for the lowest level of control? A) greenfield ventures B) exporting C) joint ventures D) acquisitions

B

Firms that consider international expansion will often examine absolute metrics on which countries to pursue investments in but also consider relative distance. To help firms decide where to compete, the ________ was developed to help firms make this decision. A) MNE decision making model B) polycentric strategic framework C) CAGE distance framework D) Porter's Diamond framework

C

When a firm is facing high pressure for local responsiveness and low pressure for cost-reductions, the firm is likely to adopt a(n) ________ strategy according to the integration-responsiveness framework. A) transnational B) global standardization C) localization D) international

C

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign-entry mode? A) They are easy to initiate and terminate. B) They require low amounts of investments in terms of capital. C) They reduce a firm's exposure to loss of reputation. D) They are based on contracts rather than ownership.

C

Which of the following statements is true with regard to international trade between countries? A) Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. B) Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. C) Wealthy countries engage in relatively more cross-border trade than poorer ones. D) Political integrations decrease the expected trade intensity between two countries.

C

Firms that consider international expansion will often examine absolute metrics on which countries to pursue investments in but also consider relative distance. To help firms decide where to compete, the ________ was developed to help firms make this decision.

CAGE distance framework

Amy is the CEO of a line of accessories and cosmetics, Hooli Inc., which has retail stores and production units in five countries. In this scenario, Hooli Inc. is most likely a A) nonprofit organization. B) nationalized firm. C) sole proprietorship. D) multinational enterprise.

D

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n) A) transnational strategy to a multidomestic strategy. B) transnational strategy to a global-standardization strategy. C) international strategy to a multidomestic strategy. D) international strategy to a global-standardization strategy.

D

When two neighboring democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance. A) political B) geographic C) administrative D) cultural

D

Which of the following is part of Geert Hofstede's cultural dimensions? A) short-term orientation B) groupthink C) embrace of risk taking D) power distance

D

Which of the following will most likely harm a multinational enterprise's (MNE's) reputation? A) Principal-agent problems cause an MNE to merge with another MNE. B) Increased competition causes an MNE to close a factory in a developing country. C) Wages for workers in a factory owned by an MNE increase, causing profits to decline. D) A sweatshop owned by an MNE has an explosion that kills hundreds of workers.

D

________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model.

Horizontal integration; structure-conduct-performance

Which of the following is a drawback of pursuing a transnational strategy?

It requires a global matrix structure, which is difficult to implement.

Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Plexzap pursue?

Redeploy and recombine existing core competencies to compete in markets of the future.

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Hooli Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?

The firm will have more flexibility in purchasing and comparing prices of goods and services.

Which of the following statements is true with regard to international trade between countries?

Wealthy countries engage in relatively more cross-border trade than poorer ones.

Yubaba Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. Axe Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

Yubaba Inc. will sell the same products in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements.

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)

acquisition

Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Golddex should pursue

backward integration

Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy.

backward vertical integration

The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs.

blue ocean

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?

co-opetition

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

coordination costs

concepts that guide corporate strategy

core competencies, economies of scale, economies of scope, transaction costs

John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his

corporate level strategy

comprises the decisions that leaders make and the goal-directed actions they take in the quest for competitive advantage in one or more industries and markets simultaneously.

corporate strategy

When two neighboring democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________ distance.

cultural

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

Which of the following foreign-entry modes primarily involves producing goods in one country to sell in another?

exporting

-the costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring and enforcing the contract

external transaction costs

Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?

forward vertical integration

Which of the following types of organizations comparatively requires the lowest levels of investment and control?

franchising

Where should the company compete geographically in terms of regional, national, or international markets?

geographic scope

Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens?

harvest and/or divest

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing.

industry

________ is best described as a situation in which one party is more informed than another, because of the possession of private information.

information asymmetry

Which of the following is a common drawback of a nonequity alliance?

lack of trust between partners

Sterling Cooper Footware and NERV Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Sterling Cooper Footware entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footware. However, Sterling Cooper Footware was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate?

learning races

Decisions relating to the range of products and services a firm will offer determine the firm's

level of diversification

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

lowering costs

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm's slogan, We Guarantee Success! However, Tom's constituents presented him with data on their latest project which suggests that they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can't lose. This is a classic example of

managerial hubris.

What causes the winner's curse?

overpaying for acquisition

Macmillan Toys Inc. is located in the nation of Ruffino near the nation of East Fenwick. Macmillan Toys is considering expanding into Rusalka. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Ruffino rules this land. Which of the following would most likely prevent Macmillan Toys from expanding into Rusalka?

political distance

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification

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

promised synergies never take place

The process of alliance management begins with

selecting the best possible partner

________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.

strategic alliances

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

the absence of a trading bloc.

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

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

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

the wealth and per capita income of consumers

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

they offer the same products or services in all their stores throughout the world.

are all internal and external costs associated with an economic exchange.

transaction costs:

A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

unrelated diversification strategy

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration

________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

vertical integration

Three Dimensions of Corporate Strategy:

vertical integration diversification geographic scope

Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should

vertically integrate

Mary has been named CEO of an office furniture manufacturing company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Mary most likely to make?

what range of products the firm should offer