MANA 4395 Exam 2

Venus Inc. is a large firm that sells several healthcare products such as bathing soaps, shampoos, body creams, and baby products. Each of these products has its own customer base. Individually, each of these products has upheld unique approaches to establish and maintain competitive advantage over its own rival companies that sell similar products. Which of the following strategies does Venus Inc. use for its products? a) Business unit strategy b) Global marketing strategy c) Corporate strategy d) Economic spending strategy

Business unit strategy

Rest & Sleep Inc. is a mattress manufacturing firm. By manufacturing related products such as bed covers, comforters and quilts, and pillows, it has gained significant competitive advantage as it has managed to create profits in all these markets as well. Rest & Sleep creates a challenge for the other companies in the market by providing unique value through its customer services and warranties. Which of the following terms best describes what Rest & Sleep Inc. is practicing? a) Market penetration b) Business unit strategy c) Corporate strategy d) Unrelated diversification

Corporate strategy

Which of the following statements is true about how an arm's-length relationship is used in strategic alliance? a) Firms cannot buy inputs from multiple sources using the arm's-length relationship. b) Firms typically use the arm's-length relationship between internal departments. c) Firms that use the arm's-length relationship acquire the production facilities of other firms. d) Firms use the arm's-length relationship to purchase inputs at the lowest price.

Firms use the arm's-length relationship to purchase inputs at the lowest price.

_________ occurs when one partner tries to exploit the alliance-specific investments made by another partner. a) Hold-up b) Misrepresentation c) Bondage d) Battery

Hold-up

The research and development department of Chi Inc. studies the buying patterns of its customers. If it starts with the customers in the first step of the consumption chain, which of the following does it most likely study? a) How do its customers find its products? b) How do its customers order its products? c) How do its customers become aware of their needs? d) How do its customers pay for the products?

How do its customers become aware of their needs?

Rita lives in a dorm with other students of her college. She hesitates to buy furniture owing to lack of space. She wants to buy a new study desk, one that can easily fold away and be dismantled so that it doesn't occupy much space when not in use. What is Rita's main concern? a) How to use the product b) How to store the product c) How to assemble the product d) How to locate the product

How to store the product

Which of the following scenarios best illustrates the concept of vertical integration? a) NZB Corp., a company that sells all its assets to another company b) Hues Inc., a company that owns its supply chain for its raw materials and processes c) Scorpio LLC, a company that buys raw materials from a supplier company d) Blue Corp., a company that makes raw materials and supplies them to a different company

Hues Inc., a company that owns its supply chain for its raw materials and processes

Which of the following statements is true of wholly owned subsidiaries as means of entering international markets? a) It requires the least investment for market entry. b) It avoids sharing resources, risks, and rewards. c) It overcomes trade and transportation barriers by producing locally. d) It offers the least amount of control of all the various modes of entry.

It avoids sharing resources, risks, and rewards.

In the context of modes of international market entry, which of the following statements is true of a joint venture? a) It is a favored way to enter markets that are close to the home market. b) It involves cultural barriers that increase the difficulty of operations. c) It avoids sharing resources, risks, and rewards. d) It offers the least amount of control of all the various modes of entry.

It offers the least amount of control of all the various modes of entry.

Which of the following statements best describes global integration? a) It is a strategy that involves tailoring products or services to local markets. b) It involves making products and/or processes consistent across different units within a firm. c) It refers to the standardization of processes within a single business in different locations around the world. d) It refers to a firm's adjustments to products, services, and processes in order to account for local culture and needs.

It refers to the standardization of processes within a single business in different locations around the world.

Time-Threads Inc. sells storage devices, such as memory cards, thumb drives, and external hard disks. Which of the following is most likely true if it achieves product differentiation by designing its products to perform more jobs than its competitors? a) Its thumb drives come with a tracker to help users locate them. b) Its memory cards offer more space than most others in the market. c) Its hard disks are designed for quicker copying of files from various mediums. d) Its instructions manuals are printed in more languages than its competitors.

Its hard disks are designed for quicker copying of files from various mediums.

Leo Inc., a U.S.-based firm, decides to enter a foreign market through offshoring. Which of the following is likely to be the primary reason for Leo to enter the new market? a) The new market is ideal to dump Leo's excess products that cannot be sold in the United States. b) The new market has facilities for research and development that are not available in the United States. c) Leo is likely to have reached saturation in terms of sales growth in the domestic market. d) Labor and raw materials are available at a lower cost in the new market than in the United States.

Labor and raw materials are available at a lower cost in the new market than in the United States.

Gear-up Inc., an apparel brand, differentiates its products by manufacturing jeans that last longer than those of other brands. The fabric is durable and does not wear out even after years of regular use. This attracts customers despite Gear-up's high prices. Which of the following elements of product differentiation is Gear-up primarily providing? a) Aesthetics b) Quality c) Convenience d) Quantity

Quality

Redwood Inc. has an arm's-length relationship with Blue Ink Corp. Which of the following is likely to be true in this case? a) Redwood is likely to conduct all functions within the firm. b) Redwood is likely to choose another firm over Blue Ink for lower costs. c) Blue Ink is unlikely to have made the deal through a bid. d) Blue Ink's manufacturing units are likely to have been acquired by Redwood.

Redwood is likely to choose another firm over Blue Ink for lower costs.

Sasha, the marketing head of a firm, believes that customers hire products to do jobs for them and that these jobs should be the basis for market segmentation. In this case, which of the following is Sasha likely to approve? a) Segmentation based on age and gender of end consumers. b) Segmentation based on features such as durability and quality. c) Segmentation based on the functions provided by a product. d) Segmentation based on socio-economic factors of customers.

Segmentation based on features such as durability and quality.

Tangerine Inc. differentiates its products by building a brand image, whereas Cloud Inc. does not rely on brand image to differentiate its products. Which of the following statements is likely to be true in this case? a) Tangerine is likely to rely on product features to attract customers. b) Tangerine is likely to use advertisements to differentiate its products. c) Cloud is likely to use promotional tools to increase market share. d) Cloud is unlikely to rely on reliability to boost sales

Tangerine is likely to use advertisements to differentiate its products.

Aquarius Corp., a consumer goods company, offers a chain of products that includes food and beverages, beauty care products, apparels, and home décor. By offering these goods, Aquarius creates more value for itself than it would have if it had sold these products individually. This practice by Aquarius Corp. can be referred to as _________. a) imitation b) synergy c) a merger d) an acquisition

synergy

John requires 500 shirts of a particular fabric and quality. He partners with Loumang Inc., a fabric manufacturing company, to develop certain customized inputs. Which of the following is being exemplified in this scenario? a) A licensing agreement b) A supply agreement c) A distribution agreement d) A profit agreement

A supply agreement

Activities closer to the beginning of the industry value chain are referred to as _________. a) middle activities b) forward activities c) upstream activities d) downstream activities

upstream activities

The sequence of all activities that are performed by a firm to turn raw materials into a finished product that is sold to a buyer best describes the term _________. a) product line b) task specialization c) virtuous circle d) value chain

value chain

Among which countries is administrative distance low? a) Countries that use the same currency b) Countries that have different legal systems c) Countries that have never been colonized d) Countries that are from different trading blocs

Countries that use the same currency

Zia, the CEO of Indigo Corp., states that it is essential to diversify the company into new markets and to create new products. She believes that it is important and profitable to tap new customer bases and challenging markets as this experience will help the company grow financially as well as expand its knowledge base on strategic management. Which of the following statements strengthens Zia's belief? a) Moderate diversification pays off but very high levels of diversification will lead to lower levels of performance. b) The company will not be able to provide the same value and customer satisfaction when segmented. c) Diversification will create a loss of revenue if the parent company decides to segment itself to different markets. d) Diversification will reduce the company's overall cost of producing goods and services.

Diversification will reduce the company's overall cost of producing goods and services.

Identify a true statement about an arbitrage strategy. a) It involves tailoring products or services to local markets. b) It involves buying where costs are low and selling where they are high. c) It involves selling standardized products using standardized processes around the world. d) It involves a combination of both local responsiveness and standardization.

It involves buying where costs are low and selling where they are high.

Maria and Sasha, researchers at Gem Corp., discuss the best method for their firm to enter a foreign market with wholly owned subsidiaries. Maria believes that greenfield investments would be more suitable, while Sasha believes that acquiring a local firm is a better option. Which of the following weakens Maria's argument? a) Gem requires high level of control right from production to marketing in the new market. b) Gem has the capabilities and resources required to set up a unit from scratch. c) Gem finds integration to be very difficult because of the cultural differences with the host country. d) Gem needs to enter the new market at the earliest to gain advantage of the product cycle.

Gem finds integration to be very difficult because of the cultural differences with the host country.

In the context of modes of international market entry, which of the following statements is true of licensing and franchising? a) It offers the highest amount of control of all the various modes of entry. b) It is easy to extract knowledge for use in other locations through this mode. c) It can increase the cost of selling in a foreign market. d) It involves the risk of a local firm in alliance to become a competitor.

It involves the risk of a local firm in alliance to become a competitor.

Vactin Motors, an automobile company, is a well-recognized brand. It does not have the capital and capabilities to set up manufacturing units abroad, although it is keen to have its products made in the foreign market. It decides to have the products produced and sold under its brand name. In this case, which of the following modes of international market entry should be adopted by Vactin? a) Exporting b) Franchising c) Joint venture d) Wholly owned subsidiaries

Exporting

Which of the following statements is true about firms in a joint venture? a) The firms contribute knowledge but each performs its roles separately. b) The contributions made by individual firms are easy to measure. c) The parent firms share revenues and expenses in a particular ratio. d) The dependency level between partners is low.

The parent firms share revenues and expenses in a particular ratio.

Two firms recently had a bolt-on acquisition. Martha, the managing director of one of these firms, claims that an integration team is required to decide which tactical elements and operational functions of the two firms should be strategically integrated and implemented. She believes having this team will enable fair decisions to be made, thus inculcating a friendly atmosphere in the new firm. Which of the following statements strengthens Martha's claim? a) Having the team may consume the company's time and effort, but in the long run, it may help the company grow. b) The team members of the two firms may be biased toward their own firms, preventing fair implementation. c) The team always makes sound decisions that are based on the integration templates that managers in the acquiring firm choose. d) The team helps in deciding which culture will be incorporated in the new entity.

The team always makes sound decisions that are based on the integration templates that managers in the acquiring firm choose.

Zeal Inc., a software firm, decides to enter the publishing industry. While it has the financial resources required to enter the new market, it lacks the expertise and technical knowledge required to establish itself in the new industry. So, Zeal Inc. enters into strategic alliance with Chrome Corp., a leading e-publisher. Which of the following is likely to be true in this case? a) Chrome is likely to lose its relational advantage through this alliance. b) Zeal and Chrome are likely to cooperate even at the stage of research and development. c) Zeal's vision is likely to contradict that of Chrome. d) Chrome is likely to provide its expertise only at the marketing stage.

Zeal and Chrome are likely to cooperate even at the stage of research and development.

A U.S.-based insurance firm purchases a company in Germany. The purchase allows the U.S. firm to acquire local resources, knowledge, and expertise while still maintaining control through 100 percent ownership. This process of purchasing a local firm is called __________. a) acquisition b) licensing c) franchising d) authorization

acquisition

Pisces Corp. is an apparel manufacturing company. It purchased a few of its raw material suppliers and set up their factories close to the clothing stores so that the company does not have to invest on transportation charges. This is an example of _________. a) downward diversification b) forward integration c) backward integration d) horizontal diversification

backward integration

Vertical integration can be best defined as _________. a) breaking a large process into smaller tasks that require specialized knowledge b) bringing business processes or activities previously conducted by outside companies in-house c) a graphic representation of the relationship between cost per unit of a product and its scale of production d) the sequence of all activities that are performed by a firm to turn raw materials into a finished product

bringing business processes or activities previously conducted by outside companies in-house

Kitsch Along Inc., a cloth manufacturer, raises funds in a country where interest rates are lower than the United States. In this case, the type of arbitrage strategy adopted by the company is primarily __________. a) linguistic b) cultural c) administrative d) capital

capital

Spring Resources LLC creates unique value by establishing a learning organization that coordinates various production tactics and assimilates different types of technologies. This knowledge is distributed to the entire organization so that its branches can adapt and perform according to their own markets. These tactics and technologies distributed throughout the organization that create value for Spring Resources LLC are termed _________. a) inimitability practices b) prestige development c) core competencies d) dominant logic

core competencies

Even though companies offer varied products and provide unique value to their customers, they have similar barriers to face when entering into a host country due to policies set up by the country's government. The similarities shared by the companies in the way they set up business in the country are an example of a(n) _________. a) plan of action b) passive judgment c) dominant logic d) imitation

dominant logic

Jupiter LLC is a manufacturer of leather items. The board of directors of Jupiter realized that it is better to produce handbags and shoes together rather than in two separate factories. This way, the company can reduce its production costs. This scenario best illustrates a(n) _________. a) related-linked diversification b) unrelated diversification c) economy of scope d) economy of scale

economy of scope

An alliance is likely to rely most on relationships between individuals when it is based on _________. a) legal contracts b) collateral bonds c) goodwill trust d) shared ownership

goodwill trust

Lee, the CEO of Libra Inc., decided that the best way to diversify this food processing company would be to set up its own small-scale beverage producing unit in a new area where its new products would have high demands. This decision by Lee best reflects a(n) _________. a) acquisition b) greenfield entry c) brownfield entry d) merger

greenfield entry

Pluto Corp. has been manufacturing hardware materials for its existing customer base for several years. Recently, the company introduced a new line of electronic products to its customers. Pluto Corp. is engaging in _________. a) vertical integration b) market penetration c) value based initiative d) horizontal diversification

horizontal diversification

Stacy works as a manager at Daffodils Corp., a manufacturing firm that has not been performing well. Despite the availability of research materials and databases, she uses her own experience to make acquisitions because she is usually very confident about the success of her plans. This attitude of Stacy can be termed _________. a) hubris b) selfishness c) solipsism d) megalomania

hubris

Ochre Inc. manufactures accessories such as belts, bags, and shoes. It produces the basic models of all these items on large scale. However, customers can customize these products by choosing embellishments of their choice, such as zippers, straps, and buckles. Ochre's manufacturing process best exemplifies __________. a) mass optimization b) mass customization c) mass consumerism d) mass production

mass customization

A strategy whereby companies attempt to gain competitive advantage by offering value that is not available in other products or services is known as __________. a) product depreciation b) mass customization c) product differentiation d) service dissemination

product differentiation

Brentwood Industries, a furniture company, bought a supplier factory that creates raw materials for the whole range of products Brentwood manufactures. Brentwood has made sure not to look for outside sources for providing the company's raw materials. Brentwood Industries is practicing _________. a) market penetration b) unrelated diversification c) vertical integration d) horizontal diversification

vertical integration

Purple Inc., an interior design company, offers its clients unique design solutions. Clients can choose from Purple's in-house products, customize them to meet their needs, and see how their home would appear using a 3D visualization software in a mini-theatre at Purple's office. This gives Purple a competitive advantage over its rivals since none of them offer this unique combination of services. Purple's advantage is due to its __________. a) service standardization strategy b) mass customization strategy c) product differentiation strategy d) supply-driven strategy

product differentiation strategy

Saturn Inc. is an e-commerce company that sells home appliances. The firm recently started selling its line of packaged food items online. In this scenario, Saturn Inc. chose _________. a) unrelated-linked diversification b) related-constrained diversification c) unrelated-constrained diversification d) related-linked diversification

related-linked diversification

22) Winter Sources Inc., an apparel manufacturer, recently opened a retail store in its unused office space to sell the excess material produced. In this way, the company generated extra profits. The unused space that was available to Winter Sources Inc. is an example of _________. a) kanban b) kaizen c) hubris d) slack

slack

A company called Techno Plus LLC experienced a failed acquisition, but the managers of the company were hesitant to end the venture as they had already invested too much time, finances, and effort into it. They presumed that everything would work out with a little more money and time. This attitude of the managers of Techno Plus LLC can be termed _________. a) hubris b) arrogance c) positive thinking d) sunk cost fallacy

sunk cost fallacy

An organization wants to form a strategic alliance with another firm. The second firm is at the same level along the value chain. It cannot contribute the same level of financial resources, although it can contribute an extensive level of knowledge. In order to accommodate these factors, they decide to start a legally independent firm. Which of the following alliances will be best suited for the organization? a) A contractual alliance b) An equity alliance c) A distribution agreement d) A joint venture

A joint venture

Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry. In return, the company is willing to pay a percentage of revenue to the agro-based industry. In this case, which of the following contractual alliances should be adopted by Sepia? a) A licensing agreement b) A supply agreement c) A distribution agreement d) An input agreement

A licensing agreement

Shondura Inc. focuses on both local responsiveness and standardization in global business. The company typically begins with a strong emphasis in a single strategy and then works to minimize the downsides associated with that strategy as much as possible as they begin to implement the second strategy. Which of the following is best exemplified in this case? a) A multidomestic strategy b) A global strategy c) An arbitrage strategy d) A transnational strategy

A transnational strategy

Which of the following best illustrates a vertically integrated company with control? a) Runners Corp., a shoe manufacturing company, which has a say in how much of its assets are divided among the company's shareholders b) Blueberry Inc., a confectionery company, which has a stronghold over an important resource of the company that helps in differentiating its final product c) Trendsetters LLC, an apparel manufacturing company, which has a stronghold over the number of employees that the company can afford to recruit, train, and retain d) Coders Corp., a software development company, which successfully deflects any possibilities of hostile takeovers

Blueberry Inc., a confectionery company, which has a stronghold over an important resource of the company that helps in differentiating its final product

Suede Inc., a company that manufactures bags, makes extensive use of advertising to compete in the market. The features of its product are similar to existing products in the market. It uses other promotional tools such as discounts, coupons, and rebates to increase its customer base. In this scenario, which of the following elements does Suede rely on to differentiate its products? a) Product reliability b) Convenience c) Brand image d) Quality

Brand image

An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs. Which of the following suppliers is it most likely to choose as a partner? a) Jades Inc., which manufactures the packages required for finished products of Hues b) Black Corp., which prints Hues logo on the air conditioners c) Fin Inc. which produces the compressors used in Hues air conditioners d) Den Corp., which produces the designer vents for Hues that come in different colors

Fin Inc. which produces the compressors used in Hues air conditioners

Which of the following statements is true about strategic alliances? a) Strategic alliances exclude functions that are bought through bidding. b) In strategic alliances, the power to make decisions is always evenly distributed amidst the firms. c) In strategic alliances, companies may choose to cooperate at any stage along the value chain. d) Strategic alliances usually lead to one of the firms losing their relational advantage.

In strategic alliances, companies may choose to cooperate at any stage along the value chain.

Which of the following is a disadvantage of exporting as a mode for entering a foreign market? a) It increases the cost of selling in the foreign market. b) It does not work when the product adaptation required is minimal. c) It cannot work with distribution networks in the foreign market. d) It involves heavy investment in the foreign country.

It increases the cost of selling in the foreign market.

Marcel, the CEO of an automobile company, considers extending his research and development facility by collaborating with a multinational company. He believes that a contractual alliance will be ideal for this collaboration, but other senior members of the management oppose a contractual alliance. Which of the following statements is likely to strengthen Marcel's argument? a) The relationship between the two firms is likely to be supported by equity investments. b) The two firms are likely to seek a joint venture through the collaboration. c) Cooperation between the two firms is not likely to depend on cross-equity holdings. d) Interdependence between the two firms is not likely to be low.

Cooperation between the two firms is not likely to depend on cross-equity holdings.

The research and development department of a pharmaceutical company is in the process of developing a new drug to cure Parkinson's disease. It requires additional resources to complete the process. To convince another pharmaceutical company to provide the necessary resources, it gives false information about how long the drug has been in the developmental pipeline and the guidelines followed in the production process. Which of the following is being exemplified in this case? a) Hold-up b) Misrepresentation c) Bondage d) Profit stealing

Misrepresentation

Peter always buys shoes from Brown Boot's Inc., although other brands offering shoes of same quality are available closer to home and at lower prices. Brown Boots differentiates itself through a strong brand image. Their advertisements associate the brand with class, style, and elegance. Which of the following is a likely reason for Peter's preference toward Brown Boot's? a) Quality b) Reliability c) Convenience d) Prestige

Prestige

Willow Inc., a company that designs and manufactures watches, designs a digital watch allowing users to sync it with their mobile phones. It has a touchscreen, microphone, and Bluetooth device installed in it. The watch is also water-resistant for up to 200 meters. The other general features of the watch remain the same. Which of the following statements is true in this case? a) The touchscreen feature enables the product to do more jobs on existing functions in terms of product differentiation. b) The Bluetooth device feature enables the product to do a better job of the existing functions in terms of product differentiation. c) The feature of water-proof material enables the product do more jobs in terms of product differentiation. d) The microphone feature enables the product to do a unique job in terms of product differentiation.

The Bluetooth device feature enables the product to do a better job of the existing functions in terms of product differentiation.

Juan, the manager of Pvari, a chain of jewelry stores, claims that mass customization is the best way to create value for their products. Nate, the senior designer, believes that every product must be customized from the pre-production stage. Which of the following statements will strengthen Juan's claim? a) Designers feel their creative skills will be underutilized in mass production. b) The production costs will reduce to half if products are made in large scale. c) Customers love the idea of designing their own jewelry from scratch. d) Their clientele includes a niche group that prefers highly customized products.

The production costs will reduce to half if products are made in large scale.

Which of the following is a defining feature of firms that practice related-constrained diversification? a) They earn more than 70 percent of their revenues from their main line of business and the rest from businesses located along the value chain. b) They earn less than 70 percent of their revenues from their main line of business and their other lines of business share product, technological, and distribution linkages with the main business. c) They operate in related markets, but fewer linkages exist between the new and existing markets than the elements create separately. d) They earn more than 95 percent of the revenues from a single line of business.

They earn less than 70 percent of their revenues from their main line of business and their other lines of business share product, technological, and distribution linkages with the main business.

Timber Inc. enters an exclusive partnership to ally with Teal Corp. in order to enter a foreign market. Which of the following statements is likely to be true in this case? a) Timber and Teal are unlikely to receive inputs or activity from each other. b) Timber is likely to buy an activity from Teal using an arm's-length relationship. c) Timber is likely to send a bid to Teal along with other suppliers for the lowest price. d) Timber is likely to acquire an activity or input from Teal to create a new value.

Timber is likely to acquire an activity or input from Teal to create a new value.

Victor Corp., a high-end mobile manufacturer that targets business people, decides to increase its customer base. It forms a strategic alliance with Gray Inc. to produce new instruments designed to attract students. Gray helps design products that change how Victor is perceived by young customers. Which of the following is the primary objective of this strategic alliance? a) To source inputs or activities that create more productivity b) To source inputs or activities that influence the brand c) To source inputs or activities that reduce the total costs d) To source inputs or activities that increase productivity of existing products

To source inputs or activities that influence the brand