MGMT 309 - Chapter 6

________ are companies that start out with a global reach, typically by using their Internet capabilities and also through hiring people with international experience and contacts around the world.

Born globals

________ are usually difficult for competitors to imitate and represent a major focus for strategic development at the corporate level.

Distinctive competencies

________ includes environmental scanning and continuous monitoring to keep abreast of variables around the world that are pertinent to the firm.

Environmental assessment

Core competencies are typically easy for competitors to imitate.

FALSE

Environmental scanning should be conducted on the national level exclusively.

FALSE

Globalization of competitors is one of the proactive reasons that prompt a company to operate overseas.

FALSE

Internal analysis is carried out to assess a firm's capabilities and critical success factors compared to those of its competitors.

FALSE

It is impossible for small businesses, such as those with fewer than 500 workers, to do business overseas.

FALSE

Offshoring is when a company moves one or all of its factories from the host country to the home country.

FALSE

Production, one of the five global corporate objectives, deals with development of new products with global patents.

FALSE

The strategic management process consists of independent and discontinuous steps.

FALSE

The strategic management process invariably follows a linear format.

FALSE

________ reveal an inefficient use of assets that restricts profitability.

Financial ratios

Which of the following statements is true of clustering?

It helps a firm gain an increase in efficiencies.

________ is an ideal strategy for small businesses with few financial and managerial resources for direct investment abroad.

Licensing

After clarifying the corporate mission and objectives, the first major step in weighing international strategic options is the environmental assessment.

TRUE

Antidumping laws enable formal institutions to affect international competition.

TRUE

Companies seek out less restrictive foreign operating environments when the regulations and restrictions enforced by the firm's home government become expensive.

TRUE

In environmental scanning, the first broad scan of all potential world markets results in the firm being able to eliminate from its list those markets that are closed or insignificant or do not have reasonable entry conditions.

TRUE

One pressing reason for many large firms to expand overseas is to seek economies of scale.

TRUE

Operations in foreign countries frequently start as a response to customer demands.

TRUE

Tax exemptions, subsidies, and loans decrease risk and increase profits. Hence, they are attractive to foreign companies.

TRUE

The availability of raw materials and other resources offers both greater control over inputs and lower transportation costs.

TRUE

The mission of an organization provides a basis for strategic decision making.

TRUE

The process by which a firm's managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called strategic planning.

TRUE

The term globalization refers to the establishment of worldwide operations and the development of standardized products and marketing.

TRUE

Which of the following statements is true of the strategic formulation process?

The strategic formulation process is part of the strategic management process in which most firms engage, either formally or informally.

Which of the following is the most likely result of regulations and restrictions enforced by a firm's home government that prove to be expensive for the firm's operations?

the firm searches for less restrictive operating environments overseas

Licensing is especially suitable for ________.

the mature phase of a product's life cycle when production is relatively standardized

A company designs and constructs a facility abroad, trains local personnel, and then transfers the facility to local management for a fee. Which of the following entry strategies is being implemented by the company?

turnkey operation

Which of the following is a global risk with regard to strategic entry scanning?

economic and financial risk

The first broad scan of all potential world markets should result in the firm being able to ________.

eliminate markets with unreasonable entry conditions

Which of the following entry strategies requires little investment and enables quick and easy market withdrawal?

exporting

Which of the following environmental factors would most likely increase the risk for a firm that has established a fully owned subsidiary in a country?

expropriation threats

Dell is an American corporation that deals with computer technology. With its worldwide sourcing and fully merged production and marketing system, Dell is considered to be a ________.

globally integrated company

A ________ gives a foreign company the rights to oversee the daily operations of a business but not to make decisions regarding ownership, financing, or strategic and policy changes.

management contract

Which of the following charts the direction of the company and provides a basis for strategic decision-making?

organizational mission

The use of professional or skilled workers located in countries other than that of the home country is referred to as ________.

outsourcing

Which of the following is the proactive reason that prompts firms to expand overseas?

seeking economies of scale

The process by which a firm's managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called ________.

strategic planning

Which of the following terms best describes a company that has operations in various countries, follows policies to develop local R&D to tailor products to markets, lets plants set their own rules, and aims at being a good corporate citizen in every country?

GLOCAL

________ refers to the establishment of worldwide operations and the development of standardized products and marketing.

Globalization

Panera Bread is a chain of cafes serving sandwiches, soups, and freshly baked breads. The company began in 1981 with stores primarily located along the east coast of the U.S. Since then, the firm has expanded to over 1,300 locations throughout the U.S. and Canada. The firm has strong earnings and has been designated by Business Week as a "Significant Growth Company." Panera Bread executives are considering the idea of expanding globally by opening cafes in Asia through a franchising strategy. Which of the following, if true, supports the argument that Panera Bread should expand into Asia through franchising?

Panera Bread executives want fast access to the Asian market without a significant investment of capital.

Panera Bread is a chain of cafes serving sandwiches, soups, and freshly baked breads. The company began in 1981 with stores primarily located along the east coast of the U.S. Since then, the firm has expanded to over 1,300 locations throughout the U.S. and Canada. The firm has strong earnings and has been designated by Business Week as a "Significant Growth Company." Panera Bread executives are considering the idea of expanding globally by opening cafes in Asia through a franchising strategy. Which of the following, if true, undermines the argument that Panera Bread should expand into Asia through franchising?

Quality control is a high priority for Panera Bread.

A ________ is an assessment of a firm's capabilities relative to those of its competitors as pertinent to the opportunities and threats in the environment for those firms.

SWOT analysis

Which of the following is a venture-specific factor that affects the choice of international entry mode for a company?

ability to protect proprietary technology

Which of the following is a critical success factor for exporting?

choice of distributor

Which of the following terms refers to operating in concentrations of related, interdependent companies within an industry that uses the same suppliers, specialized labor, and distribution channels?

clustering

Futura-Core Technologies, an electronics manufacturing firm, has advantages in financial capability and sustainability, but a disadvantage in speed of innovation. It is also at a disadvantage relative to Core-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions. Which of the following terms best describes Futura-Core's abilities in comparison to Core-Dynamix?

comparative advantage

Due to the high demand for its handmade soaps in Canada, Fragrance Exotica, an Indian Soap manufacturer, has decided to open a new manufacturing unit in Canada, thereby expanding overseas. In this scenario, which of the following reasons prompted Fragrance Exotica to set up a manufacturing unit overseas?

customer demands

Which of the following is a reactive reason that prompts a firm to expand overseas?

customer demands

Which of the following is a way in which formal institutions affect international competition?

enforcing antidumping laws

Which of the following terms refers to the continuous process of gathering and evaluating information about variables and events around the world that may pose threats or opportunities to the firm?

environmental assessment

The process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest is called ________.

environmental scanning

Which of the following is the first step of the planning phase of a strategic management process?

establishment of the company's mission

Which of the following is a regional risk with regard to strategic entry scanning?

financial and currency instability

Which of the following would most likely be categorized as a global financial objective of an international firm?

foreign-exchange management

Which of the following is an advantage of establishing a new, fully-owned foreign manufacturing?

full control over decision making

Meryl Software Inc., an American MNC wishing total control of its operations, wants to acquire an existing firm, Graphiti Animations, in Canada. If acquired, Graphiti Animations would be a ________.

fully-owned subsidiary

Which of the following is an internal factor that affects the choice of international entry mode for a company?

global experience of firm and managers

Which of the following is the most common reactive reason for a firm to extend its operations overseas?

globalization of competitors

The second part of the strategic management process involves the ________.

implementation phase

Which of the following is an external factor that affects the choice of international entry mode for a company?

industry growth rate

Which of the following can be regarded as a pressure to globalize?

information technology expansion

A(n) ________ determines which areas of a firm's operations represent strengths or weaknesses (currently or potentially) compared to competitors.

internal analysis

Which of the following is the most preferred source of environmental information for environmental scanning purposes in a firm?

internal sources

Which of the following strategies would most likely be used by a non-European company wanting to gain quick entry inside the European community?

international joint venture

Which of the following grants the rights to a firm in the host country to either produce or sell a product, or both?

international licensing agreement

Goals for market volume and profitability are usually set higher for international than domestic operations due to the ________.

involvement of greater risks

Which of the following is a national risk with regard to strategic entry scanning?

legal protection

Which of the following entry strategies is most likely to serve as a short-term strategy and to provide limited income?

management contract

Regional strategies are more appropriate than global strategies for firms that operate in ________.

multidomestic industries

At which three levels should firms ideally perform global environmental analysis?

multinational, regional, and local

Which of the following is generally viewed as the most risky entry strategy?

new, fully-owned subsidiaries

Which of the following most likely encourages firms to localize?

providing domestic subsidies

A country seeks new infusions of capital, technology, and know-how. It announces that it shall exempt taxes and grant concessions for foreign investors. Which of the following measures is the country employing?

providing incentives

When Disney decided to build a park in Paris, the French government gave Disney prime farmland just outside the city limits. This is most likely an example of a firm expanding overseas due to ________.

provision of incentives

Which of the following is the most critical aspect of a franchising strategy?

quality control

Which of the following is the primary advantage of using e-business as a local-level entry strategy?

rapid entry and exit from markets

An internal analysis focuses on the company's ________.

resources and operations

According to Ghemawat, which of the following offers room for cross-border strategy to have content distinct from single-country strategy?

semi-globalization

Which of the following is the quickest and cheapest way to develop a global strategy?

strategic alliances

Jamie decides to plan his strategies for starting an electric equipment manufacturing company. His main aim is to ensure that it runs efficiently. He decides to do this in two phases: the planning phase and the implementation phase. Which of the following processes is Jamie employing?

strategic management

A company's choice to operate in a business or businesses and the ways in which it differentiates itself from its competitors is called its ________.

strategy

Which of the following terms refers to the basic means by which a company competes?

strategy

Restrictive trade barriers most likely influence the globalization of businesses by encouraging firms to ________.

switch from exporting to overseas manufacturing

According to Gupta and Govindarajan, an alliance-based entry strategy is most suitable when ________.

the risk of asymmetric learning by the partner is low

Offshoring provides the company with access to foreign markets while avoiding ________.

trade barriers

Roch, a Swiss chocolate company, recently opened a manufacturing unit in Spain. The purpose of this move was that Roch wanted to avoid Spain's high import tariffs. Which of the following reasons prompted Roch to open the manufacturing unit in Spain?

trade barriers

The primary motive in the contract manufacturing strategy is ________.

utilizing inexpensive overseas labor