Strategy Exam 2

Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.

FALSE

Foreign-entry modes such as acquisitions and greenfield projects are usually disadvantageous because they require a high level of capital and resource investment but allow for a low level of control.

FALSE

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

FALSE

Most businesses around the world are more than 50 percent globalized, meaning that more than half their revenues are from outside the home country.

FALSE

Sending jobs out of the country to lower costs is known as outsourcing.

FALSE

The cultural distance between Australia and the United States is relatively high because of the physical distance between the two nations.

FALSE

The goal of the differentiator is to have a smaller value gap than competitors.

FALSE

The internal and external costs associated with an economic exchange are known as interaction costs.

FALSE

The term demand conditions refers to how high the volume of demand is for a particular product in a particular country.

FALSE

When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale.

FALSE

When pursuing a Blue Ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry.

FALSE

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) business-level strategy B) code of ethics C) mission statement D) functional-level strategy

A

A blue ocean strategy differs from a low-cost strategy in that A) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B) the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C) economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D) a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

A

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A) differentiator is able to create a significant difference between perceived value and current market prices. B) differentiator is able to significantly reduce the value gap. C) source of a competitor's differential appeal is tangible rather than intangible. D) new product features added raise costs but not the perceived value in the minds of consumers.

A

A primary advantage of organizing economic activity within firms is the A) ability to coordinate highly complex tasks to allow for specialized division of labor. B) low administrative costs because of reduced bureaucracy. C) eradication of the principal-agent problem. D) high-powered incentive to work as salaried employees for an existing firm.

A

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario? A) Sturdy Light was a star that developed into a cash cow. B) Sturdy Light was a question mark that developed into a star. C) Sturdy Light was a dog that developed into a question mark. D) Sturdy Light was a cash cow that developed into a star.

A

Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A) gain a market share and make up the loss in margin through increased sales. B) create higher value creation and thus generate greater profit margins. C) gain a market share and make up the loss in margin through increased pricing. D) create higher value creation and thus generate greater sales.

A

Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.

FALSE

Atangadi is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should he consider while choosing his strategy? A) He must be aware of the fact that despite globalization and the emergence of the internet, firm geographic location has actually maintained its importance. B) He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally. C) He should remember that he has only one framework at his disposal to make global strategy decisions. D) He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.

A

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A

Bejukistan Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A) is a world leader in the pharmaceutical industry. B) has nationalized the pharmaceutical industry. C) has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. D) is a potential foreign market for multinational pharmaceutical companies to sell their products.

A

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario? A) The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. B) The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. C) The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. D) The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.

A

Blush Bashful Cosmetics Inc. operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Blush Bashful most likely implement? A) a multidomestic strategy B) a local-as-global strategy C) a transnational strategy D) a sole provider strategy

A

Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is A) low-cost input factors. B) economies of scale. C) superior customer service. D) availability of complements.

A

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate? A) a joint venture B) a franchisee C) a licensing contract D) a corporate acquisition

A

Decisions relating to the range of products and services a firm will offer determine the firm's A) level of diversification. B) geographic scope. C) vertical integration. D) absorptive capacity.

A

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved A) exporting goods. B) making foreign direct investments. C) making foreign institutional investments. D) licensing production and distribution.

A

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing. A) industry B) functional department C) economy D) customer segment

A

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer A) higher quality for lower costs for international routes. B) higher quality for similar costs for U.S. domestic routes. C) similar quality for lower costs for international routes. D) similar quality for lower costs for U.S. domestic routes.

A

Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies. A) backward vertical integration B) forward vertical integration C) backward horizontal integration D) forward horizontal integration

A

Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price? A) It is valued at less than the sum of its individual business units. B) It is valued at greater than the sum of individual business units. C) It is valued at the exact sum of individual business units. D) It is consistently lower than the industry average.

A

Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? A) jumps to a steeper learning curve B) destabilizes a steeper learning curve C) stabilizes the existing learning curve D) moves down the existing learning curve

A

Heaven Freezes Over (HFO) is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should HFO take as it strives to become multinational? A) Pursue a multidomestic strategy, customizing product offerings to suit local preferences. B) Attempt an international strategy, controlling costs and taking advantage of economies of scale by selling the same (or very similar) products around the globe. C) Try a global-standardization strategy, which creates standardized products and competes mainly on price. D) Consider a transnational strategy by creating a blue ocean market.

A

Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A) licensing B) franchising C) crowdsourcing D) bootlegging

A

How is a cost-leader protected from threats from powerful suppliers? A) It is more able to absorb price increases through accepting lower profit margins. B) It is more able to absorb price increases through generating higher profit margins. C) It is able to create a significant difference between perceived value and current market prices. D) It is able to create a significant difference between actual value and future market prices.

A

In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled. A) blue ocean B) focused differentiation C) liquidation D) divestment

A

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? A) greenfield operation B) export C) joint venture D) acquisition

A

Makes Scents Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. PriceSmasher Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A) Makes Scents Inc. will sell the same products in both domestic and foreign markets, whereas PriceSmasher Inc. will customize its product offerings to suit local requirements. B) Makes Scents Inc. will pursue a differentiation strategy at the business level, whereas PriceSmasher Inc. will pursue a cost-leadership strategy at the business level. C) Makes Scents Inc. will be better protected from exchange rate fluctuations when compared to PriceSmasher Inc. D) Makes Scents Inc. will not be able to use its home-based core competencies in foreign markets as much as PriceSmasher Inc. will.

A

Meadows Mowers initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A) learning-curve effect B) network effect C) black-swan event D) time compression diseconomies

A

Myriad Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in New Denistan, considered one of the less-developed nations in the world. How will this strategic move most likely affect Myriad Inc.? A) It will benefit from economic arbitrage. B) Myriad will use its competitive advantage from economies of standardization. C) Myriad will replicate its existing business model easily. D) It will be able to easily sell products for which demand varies by income.

A

Nendry is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Nendry has decided to pursue a differentiation strategy. In this case, she should A) focus on adding unique features to her product that customers will value. B) concentrate on improving process technologies to achieve economies of scale. C) enforce strict budget controls at all levels of the organization. D) devote all resources to reducing the value gap.

A

Nina is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Nina should be hired as a salesperson in the company. However, in her resume, Nina had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate? A) information asymmetry B) principal-agent problem C) experience-curve effect D) learning-curve effect

A

Radial 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, Radial should pursue A) backward integration. B) forward integration. C) product diversification. D) geographic diversification.

A

Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A) by having higher performance in another sector B) by sharing their market power C) by increasing the firm's risk in another sector D) by motivating managers

A

The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator? A) high price, high comfort, high customer service, high concessions variety, low hours of operation B) low price, high comfort, high customer service, high concessions variety, low hours of operation C) high price, low comfort, low customer service, high concessions variety, low hours of operation D) low price, low comfort, low customer service, low concessions variety, low hours of operation

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

Using the Boston Consulting Group growth-share matrix, the managers of Xylicon International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results? A) Increase investment in the personal health monitoring unit to encourage future growth. B) Seek to lower costs in the personal health monitoring unit to increase market share. C) Harvest as much cash flow as possible before shutting the business down. D) Immediately divest from the personal health monitoring industry.

A

Value drivers contribute to a firm's competitive advantage only if A) the increase in value creation exceeds the increase in costs. B) they can shrink the firm's value gap. C) they can restrict the firm from claiming a premium price for its products. D) the decrease in perceived value leads to an increase in costs.

A

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A) stuck in the middle. B) buried at the bottom. C) burned at the top. D) caught in the transition.

A

When a firm combines experience based learning and process innovation, the firm A) jumps to a steeper learning curve. B) experiences an increase in per-unit cost. C) loses its competitive advantage. D) moves down the existing learning curve.

A

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 A) related-constrained diversification. B) related-linked diversification. C) strategic outsourcing. D) offshore outsourcing.

A

Which of the following best illustrates forward vertical integration? A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B) A chain of ice cream parlors launches a brand of toys and accessories for children. C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

A

Which of the following best illustrates site specificity? A) equipment necessary for mining bauxite and aluminum smelting B) bottling machinery to manufacture bottles with trademarked shapes C) investment made in human capital to master procedures of a specific organization D) investment made to train employees to operate computers

A

Which of the following factors is the most important determinant of economic distance? A) the wealth and per capita income of consumers B) the ethnicity and religion of consumers C) the presence of legal institutions in a country D) the topography of a country

A

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? A) benefits from lower labor costs in manufacturing and services B) free use of formerly protected intellectual property C) increasing trade barriers that protect businesses D) exporting newly available raw materials, such as rubber and coal

A

Which of the following is most likely an accurate statement? A) The multinational enterprise Starship benefited from advances in communications technology. B) The multinational enterprise United Allies was hindered by falling investment barriers. C) The multinational enterprise MegaStore benefited from rising trade barriers. D) The multinational enterprise Global Partners was hindered by reduced transportation costs.

A

Which of the following provides an example of a firm in a red ocean? A) Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B) Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C) Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D) Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.

A

While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? A) Fun Frames and Highwire have achieved differentiation parity. B) Fun Frames is a cost-leader when compared to Highwire. C) Fun Frames has created a greater economic value than Highwire. D) Highwire has a higher opportunity cost than Fun Frames.

A

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company. B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

A

Why is following an unrelated diversification strategy especially advantageous in an emerging economy? A) It allows the conglomerate to overcome institutional weaknesses in emerging economies. B) It allows the conglomerate to form a monopoly in emerging economies. C) It allows the conglomerate to use well-defined legal systems in emerging economies. D) It allows the conglomerate to take advantage of strong capital markets in emerging economies.

A

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario? A) diversification discount B) learning-curve effects C) experience-curve effects D) economies of scale

A

Worldwide Minerals Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Worldwide Minerals wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm? A) joint ventures B) acquisitions C) greenfield operations D) exports

A

________ is best described as decreases in cost per unit as output increases. A) Economies of scale B) Economies of scope C) Time compression economies D) Economies of replication

A

________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. A) Minimum efficient scale B) Break-even output C) Maximum output capacity D) Optimum sustainable yield

A

________, 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. A) Coordination costs B) Fixed costs C) Agency costs D) Network costs

A

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under A) question marks. B) stars. C) cash cows. D) dogs.

B

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A) increasing profits B) lowering costs C) reducing risk D) motivating managers

B

A drawback of short-term contracting as an alternative to making a component in-house is that A) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C) it fails to allow a long planning period that individual market transactions provide. D) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

B

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. A) related-constrained strategy B) unrelated diversification strategy C) differentiation strategy D) dominant-business strategy

B

A firm is said to be pursuing a polycentric innovation strategy when A) its research facility is situated in the headquarters and all other business activities are located around the world. B) it draws from multiple, equally important research facilities located throughout the world. C) it restricts its innovation to Western economies and production to developing markets. D) its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B

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

A trend observed during the Globalization 3.0 stage involves A) countries around the globe becoming more self-sufficient and independent. B) multinational companies organizing as global-collaboration networks. C) privately owned firms getting nationalized. D) world's market economies becoming less integrated.

B

A value curve indicates a lack of effectiveness in a firm's strategic profile when it A) stays level. B) zigzags. C) trends downward. D) trends upward.

B

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A) competition switching from non-price attributes to pricing B) innovation that allows competitors to emerge with more economical replacements C) new entrants with small production scale D) suppliers requesting a 2% price increase across the industry

B

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A) It failed to drive up the perceived customer value. B) It failed to refine its strategic position over time. C) It failed to move into a contested market space. D) It failed to offer enough strategic trade-offs.

B

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 A) geographic diversification. B) product diversification. C) vertical integration. D) horizontal integration.

B

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n) A) 80 percent learning curve. B) 90 percent learning curve. C) 60 percent learning curve. D) 54 percent learning curve.

B

Backyard BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A) lowering the quality of ingredients below what customers expect to control costs B) eliminating brick-and-mortar locations and offering delivery from a central kitchen C) raising prices without improving on the quality of food D) marketing itself as a high-end restaurant and competing with more refined restaurants in the area

B

Badlands Corp., a tool and die maker, is considering where to locate its new factories and offices. According to the CAGE distance model, which of these countries is statistically most attractive to Badlands? A) one that is much poorer than the country where Badlands has its headquarters B) one that is in the same trading bloc as Badlands' home country C) a country that does not share the same currency as Badlands' home country D) the country that is the greatest physical distance from existing Badlands facilities

B

Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario? A) cost-leadership B) differentiation C) market penetration D) product diversification

B

Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue? A) dominant business B) related-constrained C) related-linked D) unrelated

B

The process of closer integration and exchange between different countries and peoples worldwide is A) diversification. B) globalization. C) standardization. D) modification.

B

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A) It is leveraging existing core competencies to improve current market position. B) It is building new core competencies to protect and extend its current market position. C) It is redeploying and recombining existing core competencies to compete in markets of the future. D) It is targeting the chasm between the early adopter and early majority market segment.

B

Combining economies of learning with the existing production technology allows a firm to A) move up a given experience curve. B) move down a given learning curve. C) jump to a less steeper learning curve. D) jump to a flatter experience curve.

B

Culinary Solutions Inc. manufactures cooking and baking equipment and has its base in the country of Vandevar. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Culinary Solutions Inc. incurs huge financial losses in Balalaika. In this scenario, Culinary Solutions Inc.'s failure to establish itself successfully in Balalaika occurs most likely because A) it overestimated its need to protect its intellectual property. B) it underestimated its liability of foreignness when entering the Balalaika market. C) it underestimated its dwindling reputation before it enters the Balalaika market. D) it overestimates the geographic and cultural distance between Vandevar and Balalaika.

B

Downshift Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Downshift Autos Inc. is reaping the benefits of A) economies of scope. B) location economies. C) resource immobility. D) resource ambiguity.

B

ESB Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has ESB Group created? A) capital liquidity B) diversification premium C) diversification discount D) demand-pull inflation

B

Fierce domestic competition in New Schuyler makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, New Schuyler's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in A) a peripheral industry. B) a focal industry. C) supportive complementors. D) related complementors.

B

For which of the following companies will geographic distance be the most relevant factor in deciding whether to trade with a target country? A) a firm that manufactures cell phone batteries B) a firm that extracts and exports iron ore C) a firm that produces movies D) a firm that sells wristwatches

B

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? A) concentric integration B) taper integration C) horizontal integration D) conglomerate integration

B

Fun Foods Inc. is a snack manufacturer that wants to expand globally. Few people abroad are familiar with Fun Foods snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fun Foods take? A) Achieve economies of scale by using the global-standardization approach. B) Pursue a multidomestic strategy that includes new "local" brands. C) Keep costs low with undifferentiated product in the international strategy. D) Appease pressures for cost reductions by following the transnational approach.

B

Gold Leaf 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. Gold Leaf 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, Gold Leaf should A) continue to outsource production. B) vertically integrate. C) exit the laptop industry. D) diversify its activities.

B

HealthTech wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, HealthTech invested $100 million in the project. This investment made by HealthTech will result in a A) cartel. B) credible commitment. C) corrective action. D) parent-subsidiary relationship.

B

Heirloom Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is Heirloom applying? A) mass customization B) economies of scope C) learning-curve effect D) network effect

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

How is an equity alliance different from a joint venture? A) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm. C) An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. D) An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.

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

In Michael Porter's diamond framework, ________ conditions describe a country's endowments in terms of natural, human, and other resources. A) market B) factor C) demand D) supply

B

Janessa Inc., a reputed brand for fine art supplies, is implementing an international strategy. Slalom Corp., a maker of mini computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario? A) While Janessa Inc.'s competitive advantage lies in its high local responsiveness, Slalom Corp. will lack such capabilities. B) Slalom Corp. focuses more on cost-reductions when compared to Janessa Inc. C) Slalom's business functions are highly centralized, whereas Janessa. organizes its activities worldwide. D) Slalom is exposed to greater risks of exchange rate fluctuations.

B

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A) diseconomies of scale B) principal-agent problem C) experience-curve effects D) information asymmetries

B

Midas Touch, a venture capital firm, has the opportunity to invest in one of two firms that are in the process of globalizing. Coolco, an air-conditioner manufacturer, faces intense pressure from its home market. Barker, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Midas Touch invest? A) Coolco, because air conditioners cost more to ship than dog toys do B) Coolco, because firms that face stiff competition at home tend to do better abroad C) Barker, because firms that face little or no competition at home tend to do better abroad D) Barker, because dog toys cost less to ship than air conditioners do

B

Red Sapphire is a wristwatch company known for its luxury watches and that follows a differentiation strategy. In this scenario, Red Sapphire should ideally compare its strategic position with a A) watch retailer that sells pre-owned watches. B) watch maker that sells high-end, premium watches. C) watch maker that manufactures low-priced watches. D) watch maker that follows a differentiation strategy.

B

Sky Pioneers Inc. manufactures airplane parts. It wants to globalize and is willing to spend a considerable amount to protect its intellectual property. Which of these business ventures makes the most sense for Sky Pioneers? A) licensing some of its newest designs to overseas competitors B) acquiring an airplane-parts manufacturer in another country C) beginning a brownfield project in its home country D) exporting airplane parts to many other countries

B

Sven is a senior vice president at a textile manufacturer that wants to move from being 20 percent globalized to 70 percent globalized in the next 10 years. What are some possible drawbacks that Sven's company must anticipate? A) None. All political and economic factors point to the rise of globalization. B) Rising wages may cancel out cost savings of access to low-cost input factors. C) Governments may lower barriers to international trade. D) Improved communication technology may lead to longer production cycles.

B

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? A) start-up capital required and stage of industry life cycle B) relative market share and speed of market growth C) economic value created and costs incurred D) amount of debt financing and equity financing

B

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will A) decrease. B) increase. C) become external transaction costs. D) be eliminated.

B

The core competency of GoGo Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, GoGo Motors is A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B) redeploying and recombining existing core competencies to compete in future markets. C) building new core competencies to create and compete in future markets. D) building new core competencies to protect and extend current market position.

B

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? A) cost reduction B) local responsiveness C) global standardization D) transnational strategy

B

WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? A) process diversification B) product diversification C) geographic diversification D) market diversification

B

What must a cost-leadership strategy accomplish to be successful? A) It must increase the firm's cost above that of its competitors while offering adequate value. B) It must reduce the firm's cost below that of its competitors while offering adequate value. C) It must increase the firm's cost above that of its competitors while offering superior value. D) It must reduce the firm's cost below that of its competitors while offering superior value.

B

When Simple Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A) minimum efficient scale B) diseconomies of scale C) experience curve effect D) learning-curve effect

B

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) loses its competitive advantage. B) gains market share from other firms. C) lowers the economic value created. D) results in diseconomies of scale.

B

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A) collective bargaining. B) strategic trade-offs. C) arbitration. D) mediation.

B

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A) 2,000-3,000 units B) 3,000-4,000 units C) below 2,000 units D) above 4,000 units

B

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A) 9,000 units B) 11,000 units C) 13,000 units D) 15,000 units

B

Which of the following best explains why a blue ocean strategy is difficult to implement? A) It combines the benefits of similar strategic positions—differentiation and low cost. B) It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C) It requires the combination of fundamentally similar strategic positions—differentiation and strategic innovation. D) It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic innovation.

B

Which of the following is an accurate statement about learning effects? A) Learning effects are captured at one point in time. B) Learning effects occur over time as output accumulates. C) Learning effects are significant in all production processes. D) Learning effects can produce diseconomies.

B

Which of the following is an example of an external transaction cost? A) the cost of setting up a production unit B) the cost of searching for a contract manufacturer C) the cost of recruiting and retaining employees D) the cost of maintaining plant and machinery

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

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A) inability to implement its trademark focused-differentiation strategy in the German market B) significant differences between its U.S. personnel policies and Germany's culture C) Germany's unfamiliarity with retail discount powerhouses D) Metro's hostile takeover of Walmart in Germany

B

Which of the following types of organizations comparatively requires the lowest levels of investment and control? A) joint ventures B) franchising C) acquisition D) greenfield operations

B

Which quadrant in the core competence-market matrix is the hardest to pursue? A) building new core competencies to protect and extend current market position B) building new core competencies to create and compete in markets of the future C) leveraging core competencies to improve current market position D) redeploying and recombining core competencies to compete in markets of the future

B

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to A) move from unrelated diversification to related-constrained diversification. B) integrate different strategic positions, pursued by different strategic business units. C) pursue a focused differentiation strategy over a focused cost-leadership strategy. D) depend on a single product market to generate most of its revenues.

B

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. A) Fixed costs B) Influence costs C) Coordination costs D) Opportunity costs

B

________ is best described as a situation in which one party is more informed than another, because of the possession of private information. A) Information governance B) Information asymmetry C) Information deregulation D) Information piracy

B

A firm experiences diseconomies of scale when it A) has a constant return to scale. B) moves down the experience curve. C) produces at an output level beyond the minimum efficient scale. D) has a steep learning curve when compared to its competitors.

C

A firm pursuing a transnational strategy would believe that A) key business functions should be located in its home country headquarters. B) local-responsiveness is more important than cost-reductions for competitive advantage. C) best practices, ideas, and innovations should be diffused throughout the world. D) the majority of the value creation should take place in the home country.

C

A firm's business strategy can lead to a competitive advantage if it allows the firm to A) execute the same activities performed by the rivals in a similar manner. B) reduce the value gap. C) perform different activities than its rivals. D) position itself below the productivity frontier.

C

A payroll company in the nation of Antono is seeking to expand beyond its borders while limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion? A) one that considers payroll companies essential to national security B) one that is outside of any trading blocs that Antono participates in C) one that used to have a colonizer or colonized relationship with Antono D) in a country that has extensive tariffs and trade quotas to protect businesses

C

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A) AccuroDisk and TD Storage share differentiation parity. B) TD Storage has a competitive advantage over AccuroDisk in terms of perceived value. C) AccuroDisk creates a greater economic value than TD Storage. D) TD Storage is a cost-leader when compared to AccuroDisk.

C

Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Airbase should ideally compare its strategic position with A) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.

C

Banana 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? A) The firm will be protected against the principal-agent problem. B) The firm's administrative costs will be low because of necessary bureaucracy. C) The firm will have more flexibility in purchasing and comparing prices of goods and services. D) The firm will have high-powered incentives, such as hourly wages and salaries.

C

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A) employing celebrity spokespeople B) implementing automated burger-making machinery C) purchasing competitors D) increasing executive salaries

C

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.

C

Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate? A) Bison Autos has a competitive advantage over Sparrow Inc. B) Both Bison Autos and Sparrow Inc. have achieved competitive parity. C) Sparrow Inc. can charge a premium price on its automobiles. D) Bison Autos has created a higher value gap than Sparrow Inc.

C

Calabash Inc. is located in the nation of West Fenwick near the nation of East Fenwick. Calabash is considering expanding into East Fenwick. 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, West Fenwick rules this land. Which of the following would most likely prevent Calabash from expanding into East Fenwick? A) geographic distance B) economic distance C) political distance D) cultural distance

C

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's A) level of diversification. B) geographic scope. C) vertical integration. D) competitive strategy.

C

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its A) superior customer service. B) time compression economies. C) economies of scale. D) learning-curve effects.

C

ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under A) stars. B) question marks. C) dogs. D) cash cows.

C

Fleet Foot Shoes has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver? A) economies of scale B) low-cost input factors C) product features D) premium prices

C

Gilroy Crackers enjoys a competitive advantage as a cost leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Gilroy Crackers? A) Gilroy's leading competitor develops a new low-sodium product. B) Gilroy's most reliable production worker takes a job in another industry. C) A major winter storm shuts down Gilroy's production for several days. D) A wheat shortage raises input costs across the industry.

C

Groundswell Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Groundswell Industries pursuing? A) zone pricing B) niche marketing C) product-market diversification strategy D) process diversification strategy

C

How did Canada, Mexico, and the United States reduce the administrative and political distance between them? A) by adopting similar national cultures B) by lowering the disparities between their per capita incomes C) by establishing the North American Free Trade Agreement (NAFTA) D) by reducing their linguistic differences

C

How does a conglomerate benefit from following an unrelated diversification strategy? A) The conglomerate can solely depend on its primary business activity for a major portion of its revenues. B) The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. C) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. D) The conglomerate can limit the learning- and experience-curve effects it faces.

C

In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost-sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.

C

In order to achieve a competitive advantage, the Coastal Haven Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so? A) Maintain prices but significantly increase spending on customer service and other amenities. B) Lower prices but eliminate several of the features that have come to define Coastal Haven properties for consumers, such as complimentary meals and in-room massages. C) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Costal Haven brand image. D) Raise prices without increasing spending on customer service or resort features.

C

Which of the following countries has a high geographic distance but a low cultural distance from the United States? A) Canada B) Mexico C) Australia D) France

C

Incline 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 Incline products. In response, Incline 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? A) crowdsourcing B) new product development C) forward vertical integration D) conglomerate diversification

C

Michael Porter's diamond framework explains A) national value creation. B) domestic value creation. C) national competitive advantage. D) domestic competitive advantage.

C

Milk Benefits Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. Andrew Products Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A) While Andrew's competitive advantage will lie in its high local responsiveness, Milk Benefits Inc. will lack such competencies. B) Andrew Products Inc. will face greater pressure for cost reductions than Milk Benefits Inc. due to strategy choice. C) Both Milk Benefits Inc. and Andrew Products Inc. will have to duplicate key business functions in multiple host countries. D) While Milk Benefits Inc. will require a global matrix structure, Andrew Products Inc. will require a traditional headquarters model.

C

Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate? A) crowdsourcing B) credit rationing C) franchising D) bootstrapping

C

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because A) they pursue a cost leadership strategy in their respective industries. B) they are highly responsive to the local needs and preferences of customers in the host countries. C) they offer the same products or services in all their stores throughout the world. D) they attempt to combine benefits of localization and standardization strategies simultaneously.

C

New Zoya is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to New Zoya in terms of cultural distance? A) Danver, which has the same wealth and per capita income as New Zoya B) Sulfura, which has a very profitable economy and where people speak Sulfuran C) Valyria, where people speak English and have a low standard of living D) Novalandia, which is located close to New Zoya and is easily accessible by road

C

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in A) strategic outsourcing. B) lean manufacturing. C) product-market diversification. D) process diversification.

C

Phoenix Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results? A) Invest in vertical integration despite the cost of producing pickups. B) Abandon the idea of vertical integration entirely. C) Pursue taper integration. D) Introduce a budget line of guitars to diversify the firm's offerings.

C

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario? A) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

C

Revolution Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing? A) product diversification strategy B) process diversification strategy C) geographic diversification strategy D) product-market diversification strategy

C

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) a conglomerate B) a subsidiary C) a dominant-business firm D) a single-business firm

C

Save On Everything Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Future Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A) Save On Everything Inc. will focus more on cost-reduction than Solar Future Inc. B) Save On Everything Inc. will have its business functions spread across the world; Solar Future Inc.'s business functions will be highly centralized. C) Unlike Solar Future Inc., Save On Everything Inc. will be able to pursue a differentiation strategy at the business level. D) Unlike Solar Future Inc., Save On Everything Inc. will be able to reap significant economies of scale and location economies.

C

Skylark 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 Skylark 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 Skylark pursue? A) Leverage existing core competencies to improve current market position. B) Build new core competencies to protect and extend current market position. C) Redeploy and recombine existing core competencies to compete in markets of the future. D) Build new core competencies to create and compete in markets of the future.

C

Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position? A) Starfish improves the recipe for its most popular soda without increasing the price. B) Starfish introduces a new biodegradable bottle that raises cost and perceived value. C) Starfish's customers start to consider soda a commodity. D) Starfish's product has not established an acceptable standard of quality.

C

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A) Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business. B) Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy. C) TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. D) TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

C

The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms. A) managerial grid B) growth matrix C) experience curve D) diminishing utility curve

C

The primary goal of a firm pursuing a blue ocean strategy should be to A) create the highest perceived value in its respective industry. B) build a reputation of being the lowest-cost producer in its chosen industry. C) offer a differentiated product or service at a low cost. D) achieve a less steep learning curve.

C

Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.

C

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A) increasing cost and maintaining perceived customer benefits. B) lowering cost and maintaining perceived customer benefits. C) lowering cost and increasing perceived customer benefits. D) increasing cost and increasing perceived customer benefits.

C

True Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, True Tomato worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A) site specificity B) research specificity C) physical-asset specificity D) human-asset specificity

C

Unicorn Toys faces stiff competition from Playtime Inc., a rival firm with which Unicorn Toys has achieved differentiation parity. Both firms have invested in state-of-the art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Unicorn Toys achieve a competitive advantage as a cost leader? A) Reduce the manufacturing staff by half to save on labor costs. B) Increase spending on product features. C) Have a cumulative output that is greater than Playtime Inc.'s. D) Eliminate several features that customers value to cut costs.

C

Vassar Systems Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Vassar Systems? A) exporting B) franchise agreement C) acquisition D) licensing

C

Vermilion Inc., a manufacturer of high-technology medical devices, has its product development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Vermilion most likely pursue? A) international strategy B) multidomestic strategy C) global-standardization strategy D) transnational strategy

C

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in A) reverse engineering. B) benchmarking. C) restructuring. D) crowdsourcing.

C

Which of the following best describes a strategic trade-off? A) the tension between innovation and keeping manufacturing costs down B) the tension between maintaining both high-quality products and service C) the tension between value creation and the pressure to keep costs in check D) the tension between raising prices and keeping a loyal clientele

C

Which of the following describes an airline that is most likely stuck in the middle? A) Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B) Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C) Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D) Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.

C

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A) greenfield operations B) brownfield operations C) exporting D) crowdsourcing

C

Which of the following is a drawback of pursuing a transnational strategy? A) It creates bottlenecks for global learning. B) It exposes a firm to diseconomies of scale and location. C) It requires a global matrix structure, which is difficult to implement. D) It involves locating all key business activities in the home country headquarters.

C

Which of the following is a drawback of vertical integration? A) It increases the difficulty of securing critical supplies. B) It impedes scheduling and planning. C) It increases the potential of legal repercussions. D) It impedes investments in special assets.

C

Which of the following is an observable feature in the Globalization 3.0 stage? A) Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited. B) Only sales and distribution functions of a multinational enterprise are located in a few key countries. C) Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. D) The typical firm has reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries.

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 stakeholders of a company would most likely be responsible for formulating a corporate strategy? A) the first-line employees B) the creditors C) the chief executive officer D) the middle manager

C

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A) because of the political differences between India and the United States B) because NAFTA prohibits Walmart from investing in countries outside North America C) because of the large economic distance between the United States and India D) because Indian consumers have not accepted Walmart's low-cost strategy

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

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A) decreasing the existing value gap by providing luxury goods to customers. B) maintaining a less steeper learning curve as compared to its competitors. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) lowering its costs compared to its competitors,' while offering adequate value for its products and services.

C

________ 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. A) Embargos B) Cartel agreements C) Strategic alliances D) Corporate acquisitions

C

________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. A) Venture capitalism B) Bootlegging C) Vertical integration D) Crowdsourcing

C

A differentiation strategy works best when a A) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

D

A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance. A) unrelated level of diversification B) single-business level of diversification C) dominant-business level of diversification D) related-linked diversification

D

Amber is a strategist for a furniture manufacturer that has a large presence in the United States and Canada. By checking economic and political reports, she knows that trade and investment barriers are falling among wealthy nations. She also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Amber and her company take? A) Amber and her employer should wait out this period of uncertainty and take action when market forces are more stable. B) They should anticipate market corrections because investment barriers and the price of oil inevitably rise. C) Amber and her employer need to prepare for the cost of doing business to increase. D) They should seriously consider globalization because of the falling trade and investment barriers.

D

Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily A) leveraging new core competencies to improve current market position. B) redeploying existing core competencies to compete in future markets. C) unlearning existing core competencies to create and compete in markets of the future. D) building new core competencies to protect and extend current market position.

D

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make? A) whether to pursue a differentiation or cost leadership strategy B) which customer segments to target C) how to achieve the highest levels of customer satisfaction D) what range of products the firm should offer

D

Argus Inc. is a large multinational company owned by two partners, is 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) a flagship brand B) a single-business firm C) a dominant-business firm D) a conglomerate

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

Bulldog Holdings is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A) venture capitalism B) franchising C) joint venture D) parent-subsidiary relationship

D

Carpatia and Novenica are neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A) food processed in Novenica. B) movies and TV shows produced in Carpatia. C) iron ore extracted in Novenica. D) luxury items manufactured in Carpatia.

D

Devonshire Ventures is a large snack-food conglomerate that operates in more than 50 countries and employs more than 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Devonshire most likely use? A) an international strategy B) a focused-differentiation strategy C) a multidomestic strategy D) a transnational strategy

D

Due to its large sales volume and low cost structure, Quick Serve Mini-Marts enjoys a cost leadership position. Which of the following scenarios might threaten Quick Serve's competitive advantage? A) Existing competitors in the mini-mart industry lower their prices to match those of Quick Serve. B) Industry suppliers raise their prices. C) Competitors engage in an all-out price war. D) A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout.

D

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

D

European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it used this strategy? A) to take advantage of the high labor costs in the southern United States B) to take advantage of the high cost of living in the southern United States C) to take advantage of the low impact of globalization in the United States D) to take advantage of lower taxes in the southern United States

D

Screaming Eagle, a luxury motorcycle company, sells the same motorcycles and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Screaming Eagle most likely pursue? A) a multidomestic strategy B) a transnational strategy C) a global-standardization strategy D) an international strategy

D

Frederica, the chief financial officer at a moped manufacturer in Canada, wants to build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors? A) "As the rest of the world globalizes, we will lead the way in strengthening our home nation." B) "Keeping our factories in Canada means facing up to the liability of foreignness." C) "Canada's wages and benefits are so low compared with the rest of the world that it makes the most sense to build factories here." D) "It will be much more difficult to protect our intellectual property if we build factories overseas."

D

How did Marriott use economies of scope to achieve greater economic value than its competitors? A) Marriott sees increases in cost per hotel unit as number of customers increases. B) Marriott sees decreases in cost per hotel unit as number of customers increases. C) Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal. D) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

D

How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.

D

How has China been affected by its one-child-per-family policy and appreciation of its currency? A) The purchasing power of its workforce has declined. B) The government no longer cares about capturing more of the value added. C) The standard of living within the economy has become lower. D) The country's advantage in low-cost manufacturing is now reduced.

D

How is differentiation parity different from cost parity? A) Differentiation parity deals with pricing not innovation. B) Differentiation parity deals with innovation not value. C) Differentiation parity deals with pricing not value. D) Differentiation parity deals with value not cost.

D

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A) leveraging existing core competencies to improve current market position. B) building new core competencies to achieve vertical integration. C) redeploying and recombining existing core competencies to compete in markets of the future. D) building new core competencies to create and compete in markets of the future.

D

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should A) infuse more capital into the strategic business unit. B) provide more human resources to the business. C) hold the business till it turns into a star. D) divest the strategic business unit.

D

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A) liquidation strategy B) product diversification strategy C) market penetration strategy D) blue ocean strategy

D

Managers at Durkmunder, a firm in West Feenistan, want to make their company a global leader in business process outsourcing (BPO). What should the Durkmunder managers look for as they decide where to locate their BPO facilities? A) large, undeveloped plots of land for greenfield projects B) plentiful natural resources C) many uneducated workers who are highly trainable D) an abundance of well-educated English speakers

D

Nocturnal Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Nocturnal pursuing in this scenario? A) taper integration strategy B) niche marketing strategy C) related-constrained strategy D) related-linked strategy

D

Petra's Programming competes on cost with WonderWeb in the web design industry. Both firms operate on a 90 percent learning curve, and neither firm is capable of increasing its cumulative output any further. How might Petra's Programming achieve a cost leadership position while maintaining customer satisfaction? A) by increasing the amount of time the company spends on each website by 25 percent without raising prices B) by eliminating costly service features like 24/7 customer support C) by reducing its client base and lowering output D) by incorporating new programming techniques to take advantage of experience curve effects

D

Planet Resource Inc. is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Planet Resource is most likely doing this to A) reduce its geographical distance from the other countries. B) increase its administrative distance from the other countries. C) increase its economic distance from the other countries. D) reduce its cultural distance from the other countries.

D

Product features, customer service, and complements are all examples of important A) cost curves. B) cost drivers. C) value curves. D) value drivers.

D

Quick Clean Chemicals outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Quick Clean's strategic position? A) network effects B) superior customer service C) availability of complements D) low-cost input factors

D

A differentiator will always benefit when products have become commoditized.

FALSE

A value curve that zig-zags across the strategy canvas indicates a focused strategy that is likely to achieve a sustainable competitive advantage.

FALSE

Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a A) product diversification strategy. B) liquidation strategy. C) broad differentiation strategy. D) focused differentiation strategy.

D

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n) A) multidomestic strategy. B) international strategy. C) global-standardization strategy. D) transnational strategy.

D

The administrative and political distance between two trading countries decreases when A) there are Foreign Direct Investment (FDI) restrictions in the host country. B) the host country lacks an independent central bank. C) tariffs and trade quotas exist in the host country. D) there is a well-functioning capital market in the host country.

D

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A) cost driving. B) cost innovation. C) value driving. D) value innovation.

D

The transnational strategy is similar to a(n) ________ strategy because they both focus on product differentiation and low costs. A) liquidation B) product diversification C) international D) blue ocean

D

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a A) cash cow. B) star. C) dog. D) question mark.

D

To keep track of the latest developments in computing, Lenovo's research centers are located in China, the United States, and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Lenovo's products are the same for its domestic and foreign markets. Which strategy does Lenovo follow? A) a transnational strategy B) a multidomestic strategy C) a localization strategy D) a global-standardization strategy

D

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of A) factor conditions. B) competitive intensity in a focal industry. C) demand conditions. D) related and supporting industries/complementors.

D

What does it mean for a firm to have an 80 percent learning curve? A) Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B) Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C) Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D) Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

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

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) economies of scale. B) learning-curve effects. C) experience-curve effects. D) availability of complements.

D

Which of the following best illustrates physical-asset specificity? A) a unique training program developed in an organization B) a ship container designed to carry more than the average load of iron ore C) a generic machine that can be used to churn different mixtures D) a machine solely designed to give a candy its trademarked shape

D

Which of the following describes a firm in the Globalization 1.0 stage? A) Asha Inc. had a large office in New York, which was one cog in a global network. B) Asha Inc. had a large office in New York, which functioned with other large offices in Europe and Asia. C) Asha Inc. had a base office in New York and a replica office in Amsterdam. D) Asha Inc. had a base office in New York and distributed some of its products overseas.

D

Which of the following drivers simultaneously increases value while lowering cost? A) economies of scale B) superior customer service C) availability of complements D) innovation

D

Which of the following entry modes was used extensively in Globalization 1.0 stage? A) strategic alliances B) acquisitions C) greenfield operations D) exports

D

Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

D

Which of the following is a feature of the Globalization 2.0 stage? A) Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. B) Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. C) Two-way knowledge flowed between the local subsidiaries and their U.S. headquarters. D) Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

D

Businesses located in countries that have relatively weak domestic demand rarely make the leap to multinational enterprises because they must focus their attention on shoring up their economic positions in their home countries

FALSE

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the exit barriers within the industry in which the firm operates B) the number of companies operating in the industry in which the firm operates C) the intensity of rivalry among existing companies in the firm's chosen industry D) the value and the cost position of the firm relative to its competitors

D

Which of the following is an example of an internal transaction cost? A) the cost of searching for a contract manufacturer B) the cost of signing a contract with a supplier C) the cost of buying raw materials D) the cost of maintaining a production unit

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 is primarily a value driver? A) cost of input factors B) economies of scope C) experience-curve effects D) complements

D

Which of the following motivations for business growth involves principal-agent problems? A) increasing profits B) increasing market power C) reducing risk D) motivating managers

D

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A) reputation for innovation B) reputation for quality C) superior customer experience D) observable product features

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

Communities of learning are metropolitan areas that have large numbers of high school graduates who are ready for a university education.

FALSE

Differentiation and cost leadership strategies are only effective in manufacturing industries.

False

A conglomerate receives less than 70 percent of its revenues from any single business and features a number of strategic business units that have little to no relationship with each other.

TRUE

A cost leader is the firm most likely to survive a price war.

TRUE

A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than a firm operating on an 80 percent learning curve will.

TRUE

A firm that decides to stop purchasing components from suppliers and start producing them in-house is pursuing backward vertical integration.

TRUE

Administrative and political distances, such as the presence or absence of colonial ties, are part of the CAGE distance framework.

TRUE

Differentiators tend to score highly on most competitive elements on a strategy canvas, while cost leaders tend to hover near the bottom of the strategy canvas.

TRUE

Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.

TRUE

In recent years as economic forces have changed, many governments and multinational enterprises have been more interested in negotiating bilateral trade agreements between countries rather than multinational agreements through international agencies.

TRUE

MacAdam Enterprises sells the same sparkplugs in more than 30 countries. MacAdam is an example that helps to support the globalization hypothesis.

TRUE

Not all firms are motivated by a need to grow.

TRUE

The major value drivers that managers have at their disposal include product features, customer service, and complements.

TRUE

The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.

TRUE

When multinational enterprises enter host countries such as Saudi Arabia and Japan, the most logical option is usually to pursue a multidomestic strategy even though that strategy rarely leads to significant cost reductions.

TRUE