Global Strategy Final

Which of the following is not a reason why firms enter alliances? to strengthen competitive position to replace competitive advantage with competitive parity to learn new capabilities to enter new markets, either in terms of geography or products and services

to replace competitive advantage with competitive parity

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

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

Which of the following is true of acquisitions? Acquisitions can occur only when the involved entities are of comparable size. Acquisitions increase the competitive intensity in an industry. Acquisitions can be friendly or hostile. In acquisitions, two independent companies join to form a separate third entity.

Acquisitions can be friendly or hostile.

Which of the following statements is true of an equity alliance? In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. An equity alliance is based on contractual agreements rather than partial ownership. An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Which of the following statements is true of taper integration? It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities. It exposes in-house suppliers and distributors to market competition to make performance comparisons possible. It does not rely on outside-market firms for its supplies. It is the most integrated alternative to performing an activity within one's own corporate family.

It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.

Which of the following scenarios best illustrates horizontal integration? Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors. Regal Autos Inc. sets up its own distribution channel and retail stores.

Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

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

The cost of searching for a contract manufacturer

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy? They cannot leverage their home-based core competencies in foreign markets. They cannot reap the benefits of economies of scale due to their highly customized products. They have to be highly responsive to local needs and preferences. They are highly affected by exchange rate fluctuations.

They are highly affected by exchange rate fluctuations.

Which of the following is an advantage of equity alliances when compared to non-equity alliances? They are more flexible and easy to initiate and terminate. They produce stronger ties between partners. They are based on contracts rather than ownership. They require smaller capital investments.

They produce stronger ties between partners.

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

They reduce a firm's exposure to loss of reputation.

How do firms benefit from vertical integration? Firms that vertically integrate will have increased strategic flexibility when faced with technological changes. Firms that vertically integrate do not have to make transaction-specific investments. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities. Vertical integration allows firms to reduce organizational complexity and administrative costs.

Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

Which of the following firms is most prone to experiencing a diversification discount? a company that pursues unrelated diversification a company that deals in petroleum as well as natural gas a company that derives its revenues from selling aerated drinks and health drinks a company that pursues related-constrained diversification

a company that pursues unrelated diversification

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country? a firm that manufactures cell phone batteries a firm that produces movies a firm that extracts and exports iron ore a firm that sells wristwatche

a firm that extracts and exports iron ore

Evara Cosmetics Inc. is a company that 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 Evara Cosmetics Inc. most likely implement? a one-product strategy a multidomestic strategy a global-standardization strategy an international strategy

a multidomestic strategy

White Leo Motors (WLM) Inc. 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 WLM? related-constrained diversification unrelated diversification a single-business firm related-linked diversification

a single-business firm

Opula Inc., a luxury car company, sells the same cars 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 Opula Inc. most likely pursue? a transnational strategy an international strategy a global-standardization strategy a multidomestic strategy

an international strategy

Companies that pursue related diversification are able to create a diversification premium because they are able to increase value due to economies of scope. can operate beyond the minimum efficient scale. are able to leverage time compression economies. can reduce the value gap created by its products.

are able to increase value due to economies of scope.

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures the willingness to make available necessary resources. the readiness to accept short-term sacrifices to ensure long-term awards. features of the financial health of the different alliance partners. aspects of cultural fit between different firms in an alliance.

aspects of cultural fit between different firms in an alliance.

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it operates on the assumptions made in the globalization hypothesis in order to lower costs. attempts to reap significant economies of scale by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. is pursued in response to low pressure for local responsiveness and low pressure for cost reduction.

attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.

How does horizontal integration within an industry affect the surviving firms? by strengthening the rivalry among existing firms by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers by requiring the surviving firms to shift their focus from non-price to price competition by increasing the threat the surviving firms will face from new entrants

by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

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? capital liquidity diversification premium diversification discount demand-pull inflation

diversification premium

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

franchising

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) ________ strategy. localization global-standardization multidomestic international

global-standardization

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, 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, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because it underestimates its dwindling reputation before it enters the Zevar market. it overestimates the geographic and cultural distance between Pelo and Zevar. it overestimates its need to protect its intellectual property. it underestimates its liability of foreignness when entering the Zevar market.

it underestimates its liability of foreignness when entering the Zevar market.

EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? sole proprietorship joint venture non-equity alliance equity alliance

joint venture

For a multinational enterprise (MNE), applying the globalization hypothesis would mean being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage. customizing each product sold by an enterprise to differentiate it from its competitors.

manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

A(n) ________ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain. equity alliance greenfield venture non-equity alliance joint venture

non-equity alliance

What causes the winner's curse? overpaying for an acquisition underpaying for an acquisition buying a firm with principal-agent problems buying a firm with a competitive disadvantage

overpaying for an acquisition

Evara Inc. 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, if not all, of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Evara pursuing in this scenario? related-linked strategy niche marketing strategy related-constrained strategy taper integration strategy

related-linked strategy

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

relative market share and speed of market growth