Question to study - Final Exam

Jack is a board member of firm A but is not an employee of firm A; Jack is a senior executive from firm B. Jack can best be described as a(n)

outside director.

1. According to the CAGE distance framework, cultural distance most affects industries or products that are related to national and/or religious identity.

that are related to national and/or religious identity.

How is an equity alliance different from a joint venture?

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

Which of the following factors best helps capture administrative and political distances?

the absence or presence of weak legal and financial institutions

Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ________ tool.

Boston Consulting Group (BCG) matrix

outside director.

Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.

Which of the following is an advantage of using licensing or franchising as a foreign entry mode?

Either one requires low capital investments

. is how firms are able to source supplies at lower costs, to learn new competencies, and to further differentiate their products and services overseas.

Globalization

________ 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.

Influence costs

________ are the board members who are part of the company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Inside directors

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?

It is building new core competencies to protect and extend its current market position.

. Relaxicab Inc. is a 100-year-old, multinational enterprise (MNE). Which of the following activities would the company most likely have been involved induring the stage of Globalization 2.0?

It would have increased its local responsiveness to country-specific circumstances by duplicating business functions overseas.

Which of the following statements is true of local responsiveness?

Local responsiveness generally entails higher costs.

are described as the benefits from locating value chain activities in prime geographies for a specific activity.

Location economies

Which of the following is a feature of Logitech as a global collaboration network?

The company has been able to organize work continuously because its teams in different locations around the globe can work 24/7.

Which of the following is a common result of a hostile takeover of a company?

The new owner sells the company in pieces.

What helps notions such as fairness, honesty, and reciprocity to be codified into law?

The notions are universal norms.

Hatfan 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?

The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

What are poison pills?

They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

Maritza is trying to understand the relationship between what is legal and what is ethical. Tiffany explains that both of these terms are often synonymous in business. Your response is

Tiffany is incorrect; a manager's actions can be legal but ethically questionable.

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

Vertical integration

About 20 years ago, Xx-zobam, 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, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Xx-zobam was a star that developed into a cash cow.

Paul is a manager at Macmillan Toys Inc. and is friends with the company's CEO. This privilege gives Paul the information that Macmillan Toys is in the midst of talks to take over a leading rival. Paul buys stocks of Macmillan Toys with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of Macmillan Toys depreciate in the following months. Are Paul's actions unethical? Why or why not?

Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome.

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

. Swiss-based Nestlé, the largest food company in the world, is well known for customizing its product offerings to suit local preferences, tastes, andrequirements. Which of the following strategies does the company pursue?

a multidomestic strategy

. Which of the following foreign entry modes requires the highest level of investment in terms of capital and other resources and allows for a high levelof control?

acquisitions

Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies.

backward vertical integration

The name for an agreed-upon code of conduct in business, based on societal norms, is

business ethics.

Tom and James are customer care employees at Omni Consumer Products. In between calls, Tom and James spend time on Facebook and YouTube. The relaxed guidelines at Omni Consumer Products allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior

can be stopped by implementing performance incentives and strict control mechanisms.

The strategic foundations of the globalization hypothesis are based primarily on

cost reduction.

One way to foster ethical behavior in employees is to

create a control system that encourages desired values.

Ontomedia 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 Ontomedia experiencing in this scenario?

diversification discount

XYZ Inc. is a publicly traded company and a highly diversified firm. However, XYZ's most recent stock price is valued less than the sum of all its individual business units. We would conclude that XYZ is currently experiencing a

diversification discount.

Rekall Autos Inc., an automobile company based in the country of Springfield, made a capital investment of $400,000 to set up production units and distribution channels in the country of Uganda from where it plans to access the Uganda market. Such investments are best known as

foreign direct investments.

Tyrell Corporation is an electronics company based in the country of Palmia. The company has manufacturing facilities in four other countries where labor costs are low. It also has its research centers in three other countries because these countries offer best-of-class capabilities. However, Tyrell Corporation does not offer much product differentiation, which means that price is the main competitive weapon. In this scenario, Tyrell Corporation most likely implements a

global-standardization

"A process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs" is the definition of

globalization.

Stephen is a mid-level manager for a high-tech start-up. He's just been asked by his boss to perform an activity that may be unethical. To improve his ethical decision making, Stephen should

imagine whether he would feel comfortable explaining and defending the decision in public.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

informational advantage of the lower-level employees.

The informational advantage that agents possess over principals is often based on the fact that

insiders are the first to learn about important developments before the information is released to the public.

The Bluth Company is a condominium-building company that is based in the country of Veritas. It sells high-priced homes to consumers in Veritas as well as to consumers in other countries. It has extremely high brand loyalty. The industry it operates in is characterized by low pressure for local responsiveness and low pressure for cost reductions. In this scenario, The Bluth Company most likely pursues a(n)strategy.

international

William founded Iron Bank of Braavos in 1993. Ten years later, the company went public. Despite William's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?

legal personality

The additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances, are best described as a(n)

liability of foreignness.

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) ________ in the context of a principal-agent problem.

moral hazard

Which of the following motivations for business growth involves principal-agent problems?

motivating managers

Blackzim 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, Blackzim is a

question mark.

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

related-linked diversification

. Companies from wealthy countries tend to trade with other rich countries rather than poor countries because they can

replicate their existing business model more easily.

Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors for roughly $3 billion. This strategic move allowed InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of

restructuring.

Which of the following characteristics of a public stock company deals with principals and agents?

separation of legal ownership and management control

Mary owns Kind Corporation and wants to maintain a dual focus on creating shareholder value while at the same time increasing value for society as a whole. Mary is following the

shared value creation framework.

Since Coca-Cola focuses on selling only soft drinks, a low degree of product diversification, we would conclude that they compete in a(n) ________ market versus their main competitor PepsiCo, that sells a wide variety of products.

single product

Todd Wilkinson, the founder of 123.com, looked outside his firm for the right talent in order to develop his firm's website. The search led him and his team to a different country where they were able to procure the right talent to get the job done. This example best illustrates the concept of

strategic outsourcing.

. According to the CAGE distance framework, what does cultural distance represent?

the cultural disparity between an internationally expanding firm's home country and its targeted host country

Which of the following strongly affects the cultural distance between two countries?

the languages spoken in each country

In a public stock company, senior executives, such as the CEO, face agency problems when

they delegate authority of strategic business units to general managers.

Johnathan owns shares in a company called Delos Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Johnathan wants to proactively cut his losses and therefore sells his shares. Mary, a trading enthusiast, buys shares in Delos Inc. Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?

transferability of investor ownership

Multinational enterprises will often make foreign direct investments (FDI) which is a firm's investment in abroad.

value chain activities

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

vertical integration.

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

what range of products the firm should offer