MGT 449 Exam 3

2) ________ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. A) Stakeholder impact analysis B) Corporate social responsibility C) Corporate governance D) Shareholder capitalism

2) C) Corporate governance

15) The process of alliance management begins with ________. A) selecting the best possible partner B) designing the alliance C) creating resource combinations that obey the VRIO criteria D) choosing an appropriate governance mechanism

A) selecting the best possible partner

52) 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 targeting the chasm between the early adopter and early majority market segment. B) It is building new core competencies to protect and extend its current market position. C) It is leveraging existing core competencies to improve current market position. D) It is redeploying and recombining existing core competencies to compete in markets of the future.

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

18) Hitoro Inc. developed a superior touchscreen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A) Franchising B) Licensing C) Crowdsourcing D) Bootlegging

B) Licensing

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

B) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

66) When large, incumbent firms buy startup companies, the transaction is generally described as a(n) ________. A) alliance B) acquisition C) partnership D) joint venture

B) acquisition

51) Ethics is: A) always universal and cannot differ between cultures. B) not synonymous with law. C) impossible to codify into law. D) the minimum acceptable standard in business practice.

B) always universal and cannot differ between cultures.

38) The global-standardization strategy arises out of the combination of: A) low pressure for both local responsiveness and cost reductions. B) high pressure for cost reductions and low pressure for local responsiveness. C) high pressure for both local responsiveness and cost reductions. D) high pressure for local responsiveness and low pressure for cost reductions.

B) high pressure for cost reductions and low pressure for local responsiveness.

69) 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) dogs. B) stars. C) cash cows. D) question marks.

B) stars

35) According to the agency theory, ________. A) companies should focus on generating profits for stockholders B) principals and agents have interchangeable roles C) conflicts that arise in corporations should be addressed in the legal realm D) corporations are more than a set of contracts between parties

C) conflicts that arise in corporations should be addressed in the legal realm.

20) BioGrow Pharma Inc. 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, BioGrow Pharma invested $100 million in the project. This investment made by BioGrow Pharma will result in a ________. A) parent-subsidiary relationship B) cartel C) credible commitment D) corrective action

C) credible commitment

38) Postrupe Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to Postrupe's board to achieve board independence? A) 5 B) 1 C) 3 D) 7

D) 7

29) Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 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 Shine Enterprises Inc. most likely use? A) A focused-differentiation strategy B) An international strategy C) A multidomestic strategy D) A transnational strategy

D) A transnational strategy

11) In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as ________. A) shareholders B) principals C) clients D) agents

D) agents

11) Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the: A) upper echelons theory. B) real options perspective. C) global scaling theory. D) globalization hypothesis.

D) globalization hypothesis

34) A firm that engages in strategic outsourcing typically: A) reduces its level of external transaction costs. B) increases its level of horizontal integration. C) increases its internal transaction costs. D) reduces its level of vertical integration.

D) reduces its level of vertical integration

9) Which of the following best illustrates an equity alliance? A) A partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc. B) A contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market C) An alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company D) A collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices

A) A partnership in which REdGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

12) A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A) The VRIO framework B) The transaction-cost economics model C) The Boston Consulting Group (BCG) matrix D) The core competence matrix

A) The VRIO framework

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

A) The cost of signing a contract with a supplier.

29) In a non-equity alliance, which of the following types of information would firms most likely share? A) The documented information about the material composition of a product B) A top-level manager's experience related to making strategic decisions C) A manager's knowledge related to solving non-routine problems D) The employees' entrepreneurial skills

A) The documented information about the material composition of a product

1) The success of the Pixar-Disney strategic alliance demonstrated that: A) the two entities' complementary assets matched. B) the companies were effectively managing an unrelated diversification strategy. C) Disney was in desperate need of Pixar's graphic display systems. D) it was easier for the alliance partners to reduce the value gap created.

A) The two entities' complementary assets matched.

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

A) They produce stronger ties between partners

35) Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are: A) engaging in strategic outsourcing. B) offshoring their core activities. C) increasing their level of vertical integration. D) engaging in unrelated diversification.

A) engaging in strategic outsourcing.

27) Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) sole proprietorship

A) joint venture

67) The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high. If the company invests further resources into this division, it can increase its relative market share in the future. However, if due to technological changes the car cannot create sufficient consumer demand, then the division can prove to be unprofitable. In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under: A) question marks. B) stars. C) underdogs. D) dogs.

A) question marks

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

A) related-linked diversification

14) A drawback of short-term contracting as an alternative to making a component in-house is that: A) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. B) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. 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.

A) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

11) Which of the following is an ineffective practice in alliance management? A) Coordinating a firm's portfolio of alliances B) Focusing on developing an alliance-management capability in isolation C) Establishing knowledge-sharing routines between alliance partners D) Developing relational capabilities to manage mergers and acquisitions

B) Focusing on developing an alliance-management capability in isolation

11) In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones? A) Principal-agent problem B) Information asymmetry C) Time compression diseconomies D) Experience-curve effects

B) Information asymmetry

3) Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.? A) GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. B) GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase. C) GD Inc. and VS Inc. join together to form a single new company called GDVS Inc. D) GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately

C) GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

39) Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing? A) Product diversification strategy B) Product-market diversification strategy C) Geographic diversification strategy D) Process diversification strategy

C) Geographic diversification strategy

13) When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as? A) Experience-curve effect B) Learning-curve effect C) Information asymmetry D) Principal-agent problem

C) Information asymmetry

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

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

12) Bill is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Bill should be hired as a sales person in the company. However, in his resume, Bill had not mentioned his previous work experience as he was fired from that job on the account of using illegal drugs. Which of the following does this scenario best illustrate? A) Principal-agent problem B) Learning-curve effect C) Experience-curve effect D) Information asymmetry

D) Information asymmetry

5) Which of the following statements is true of internal transaction costs? A) Internal transaction costs arise when companies transact in the open market. B) It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low. C) When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate. D) Internal transaction costs tend to increase with organizational size and complexity

D) Internal transaction costs tend to increase with organizational size and complexity.

48) When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) Accessing critical complementary assets B) Reducing differentiation of product and service offerings C) Procuring additional capital investments D) Increasing competitive intensity

A) Accessing critical complementary assets

49) Red Empire Inc., 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 dominant-business firm B) A conglomerate C) A flagship brand D) A single-business firm

B) A conglomerate

15) Which of the following firms is least integrated? A) A firm that makes equity investments in its supplier's company B) A firm that buys all the required raw materials from multiple external vendors C) A firm that enters a joint venture with another company to develop a new technology D) A firm that owns production subsidiaries across the globe

B) A firm that buys all the required raw materials from multiple external vendors.

47) Which of the following is an important internal corporate-governance mechanism? A) Market for corporate control B) Board of directors C) Shareholder capitalism D) Activist investors

B) Board of directors

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

B) By strengthening the bargaining power of the surviving firms vis-a-vis suppliers and buyers.

32) Why did the American MTV network cable channel fail when pursuing a global-standardization strategy? A) Because the globalization hypothesis holds true for the music industry B) Because an international strategy was more suitable for the music industry C) Because cultural distance most affects products with high linguistic content D) Because MTV failed to understand that music videos were a commodity product

C) Because cultural distance most affects products with high linguistic content

33) Which of the following best illustrates a non-equity alliance? A) An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc. B) A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices C) A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. D) An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company

C) A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc.

41) 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? A) A single-business firm B) A conglomerate C) A dominant-business firm D) A subsidiary

C) A dominant-business firm

57) 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) A firm that produces movies B) A firm that manufactures cell phone batteries C) A firm that extracts and exports iron ore D) A firm that sells wrist watches

C) A firm that extracts and exports iron ore.

12) Onico 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 Onico Inc. most likely pursue? A) A transnational strategy B) A global-standardization strategy C) An international strategy D) A multidomestic strategy

C) An international strategy

9) Which of the following is not included within the types of strategic alliances? A) Licensing B) Joint ventures C) Franchising D) Acquisitions

D) Acquistions

28) ________ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team. A) Moral hazard B) Shareholder capitalism C) Information asymmetry D) Adverse selection

D) Adverse selection

39) Which of the following proves that GE's board of directors is significantly independent? A) 16 of the 17 board directors are from outside the organization. B) 26 percent of the board members at GE are female. C) The CEO of GE is also the chairman of the board. D) GE's board has five committees, each with its own chair.

A) 16 of the 17 board directors are from outside the organization.

33) Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A) Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement. B) Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. C) Goldman Sachs was party to the Abacus deal despite knowing its shortcomings. D) GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy.

A) Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.

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

A) By establishing the North American Free Trade Agreement (NAFTA)

38) ________ is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes. A) Diversification B) Differentiation C) Open innovation D) Taper integration

A) Diversification

21) When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust? A) It made a credible commitment by taking an equity stake in Orocobre. B) It acquired Orocobre as part of its backward vertical integration plans. C) It offered Orocobre franchising opportunities to sell hybrid vehicles. D) It offered Orocobre exposure to Toyota's proprietary information.

A) It made a credible commitment by taking an equity stake in Orocobre.

41) ________ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A) Learning races B) Learning networks C) Learning matrices D) Learning effects

A) Learning races

17) ________ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. A) Licensing B) Lean manufacturing C) Crowdsourcing D) Bootlegging

A) Licensing

36) ________ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A) Licensing agreements B) Acquisitions C) Cartels D) Equity alliances

A) Licensing agreements

46) Which of the following is an important external corporate-governance mechanism? A) Market for corporate control B) Executive compensation C) Shareholder capitalism D) Board of directors

A) Market for corporate control

18) McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast food chain pursuing? A) Multidomestic strategy B) International strategy C) Global-standardization strategy D) Focused differentiation strategy

A) Multidomestic strategy

45) John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies ________. A) the strong relationship between executive compensation and company performance B) the inversely proportional relationship between CEO compensation and the pay of the average employee C) the avoidance of control mechanisms to guide performance D) the public's perception of a company's stock value based on executive compensation figures

A) The strong relationship between executive compensation and company performance

23) ________ 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) Vertical integration B) Venture capitalism C) Bootlegging D) Crowdsourcing

A) Vertical integration

24) The ________ is the centerpiece of corporate governance and is composed of inside and outside members. A) board of directors B) group of shareholders C) institutional investors group D) scientific advisory board

A) board of directors

53) 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 softwares. This is an example of: A) building new core competencies to create and compete in markets of the future. B) redeploying and recombining existing core competencies to compete in markets of the future. C) building new core competencies to achieve vertical integration. D) leveraging existing core competencies to improve current market position.

A) building new core competencies to create and compete in markets of the future.

25) Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a ________ in the automobile industry. A) national competitive advantage B) liability of foreignness C) capital gain D) trade surplus

A) national competitive advantage

10) The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by ________. A) information asymmetry B) groupthink C) stakeholder strategy D) corporate governance

A) information asymmetry

12) The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the: A) informational advantage of the lower-level employees. B) knowledge of employees regarding day-to-day tasks. C) higher number of lower-level employees than senior executives. D) operational expertise of lower-level employees in concentrated areas of a particular field.

A) informational advantage of the lower-level employees.

69) Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the ________ that firms can experience when expanding overseas. A) intellectual property exposure B) threat of new entrants C) loss of reputation D) liability of foreignness

A) intellectual property exposure.

27) Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and Rajat Gupta himself is an example of ________. A) moral hazard B) shareholder capitalism C) shared value creation D) adverse selection

A) moral hazard

7) India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because: A) of an abundance of well-educated, English-speaking young people. B) it has emerged as a manufacturing powerhouse. C) it has an abundance of uneducated workers who are highly trainable. D) of an efficient infrastructure and high labor costs.

A) of an abundance of well-educated, English-speaking young people.

70) Strategic business units that have a relatively low market share but have the potential to grow are best categorized under ________ in the Boston Consulting Group (BCG) growth-share matrix. A) question marks B) dogs C) stars D) cash cows

A) question marks

53) A ________ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A) strategic alliance B) proprietorship C) cooperative D) leveraged buyout

A) strategic alliance

31) Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A) Non-equity alliance B) Equity alliance C) Greenfield venture D) Joint venture

B) Equity alliance

54) Which of the following modes of entering a foreign market allows for the lowest level of control? A) Joint ventures B) Exporting C) Acquisitions D) Greenfield ventures

B) Exporting

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

B) It will be able to benefit from economic arbitrage.

42) Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company? A) Cost-leadership strategy B) Related diversification strategy C) Differentiation strategy D) Taper integration strategy

B) Related diversification strategy

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

B) Strategic alliances

5) 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 reduced. B) The country's advantage in low-cost manufacturing has reduced. C) The standard of living within the economy has lowered. D) The value added to production has reduced.

B) The country's advantage in low-cost manufacturing has reduced.

14) Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN 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: A) typically exemplifies the agency problem of adverse selection. B) can be stopped by implementing performance incentives and strict control mechanisms. C) is neither unlawful nor unethical; hence, Neville and Andre cannot be reprimanded. D) goes against the principles of shareholder capitalism.

B) can be stopped by implementing performance incentives and strict control mechanisms

61) DiskOne Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, DiskOne has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, DiskOne will be categorized under: A) stars. B) cash cows. C) question marks. D) dogs.

B) cash cows

10) When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to: A) enter into a licensing agreement. B) consider an outright acquisition. C) borrow via a contractual agreement. D) pursue internal development.

B) consider an outright acquisition

24) 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) ________. A) international strategy B) global-standardization strategy C) multidomestic strategy D) localization strategy

B) global-standaraization strategy

64) A greater cultural distance between two trading countries: A) reduces the transaction costs associated with business. B) increases the liability of foreignness. C) increases linguistic similarities between the two countries. D) reduces the uncertainty of doing business.

B) increases the liability of foreignness.

60) ________ are strategic business units that compete in a low-growth market but hold considerable market share. A) Stars B) Dogs C) Cash cows D) Question marks

C) Cash cows

22) Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc., 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 Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate? A) A corporate acquisition B) A joint venture C) A licensing contract D) A franchisee

B) joint venture

16) Which of the following types of strategic alliances is the least common in terms of frequency? A) Mergers B) Joint ventures C) Equity alliances D) Acquisitions

B) joint ventures

4) 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. A) greenfield venture B) non-equity alliance C) equity alliance D) joint venture

B) non-equity alliance

36) An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) ________. A) agent B) principal C) manager D) employee

B) principal

8) Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) ________. A) inside director-outside director conflict B) principal-agent problem C) shareholder capitalism scenario D) fiduciary responsibility oversight

B) principal-agent problem

65) Welcome 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. Welcome Inc. is most likely doing this to: A) increase its economic distance from the other countries. B) reduce its cultural distance from the other countries. C) reduce its geographical distance from the other countries. D) increase its administrative distance from the other countries.

B) reduce its geographical distance from the other countries.

45) The ________ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A) real-options perspective B) relational view of competitive advantage C) non-differentiation strategy D) stakeholder strategy

B) relational view of competitve advantage

43) A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) ________. A) bonus B) stock option C) stock exchange D) commission

B) stock option

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

B) they offer the same products or services in all their stores throughout the world.

2) As a result of globalization, the: A) cost of doing business around the world is increasing. B) world's market economies are becoming more integrated. C) cultural distance between countries is increasing. D) economies around the world are becoming more independent.

B) world's market economies are becoming more integrated.

34) Which of the following is NOT true of corporate governance in public stock companies? A) Corporate governance attempts to address the principal-agent problem. B) Corporate governance seeks to benefit multiple stakeholders, not just shareholders. C) Corporate governance seeks to create a separation between ownership and control. D) Corporate governance provides rules for making decisions on corporate affairs.

C) Corporate governance seeks to create a separation between ownership and control.

38) Which of the following statements is true of explicit knowledge? A) Explicit knowledge is knowledge that cannot be codified. B) Equity knowledge is acquired only through actively participating in a process. C) Explicit knowledge is shared in non-equity alliance firms. D) Explicit knowledge is about knowing how to do a certain task.

C) Explicit knowledge is shared in non-equity alliance firms.

27) ________ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain. A) Corporate divestiture B) Closed innovation C) Forward vertical integration D) Reverse engineering

C) Forward vertical integration

67) Which of the following is part of Geert Hofstede's cultural dimensions? A) Self-efficacy B) Span of control C) Power distance D) Locus of control

C) Power distance

40) Marva 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 Marva Industries pursuing? A) Process diversification strategy B) Niche marketing C) Product-market diversification strategy D) Zone pricing

C) Product-market diversification strategy

44) 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? A) Related-constrained strategy B) Niche marketing strategy C) Related-linked strategy D) Taper integration strategy

C) Related-linked strategy

26) Who appoints the board of directors in a public stock company? A) CEOs B) Employees C) Shareholders D) Auditors

C) Shareholders

41) GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A) The CEO might be able to influence the board through setting the meeting agendas. B) The CEO is likely to be more responsible because he is setting his own performance targets. C) The CEO possesses invaluable inside information that can help chair the board effectively. D) The CEO will suggest board appointees who are friendly toward him or her

C) The CEO possesses invaluable inside information that can help chair the board effectively.

52) A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A) The bank is not aware of the investments made by the customer. B) The bank is depending on the customer to pay back the loan before term completion. C) The bank knows that the customer will be unable to pay the loan if the interest rate rises. D) The bank has the financial statements of the customer, but it is not aware of each source of income.

C) The bank knows that the customer will be unable to pay the loan if the interest rate rises.

64) A corporation's star SBUs will: A) hold a small market share in a low-growth market. B) experience low and unstable earnings in a fast-growing market. C) hold a high market share in a fast-growing market. D) compete in a low-growth market but hold considerable market share

C) hold a high market share in a fast-growing market

34) Which of the following is an advantage of non-equity alliances? A) They facilitate the sharing of tacit knowledge between the alliance partners. B) They are based on ownership rather than contracts. C) They are flexible and easy to initiate and terminate. D) They produce strong ties between alliance partners as they are permanent in nature.

C) They are flexible and easy to initiate and terminate

52) Which of the following statements is true of strategic alliances? A) They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. B) They are always focused on joining the same value chain activities. C) They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles. D) They enable firms to achieve goals faster, but at higher costs

C) They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

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

C) ability to coordinate highly complex tasks to allow for specialized division of labor.

32) Johan is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan's team lead realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies ________. A) shared value creation B) corporate governance C) adverse selection D) moral hazard

C) adverse selection

51) The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate? A) A joint venture B) A merger C) An acquisition D) An equity alliance

C) an acquisiton

42) When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because: A) the strategic alliance will reduce the differentiation of its product and service offerings. B) the local partner can better protect its proprietary know-how. C) building downstream complementary assets can be expensive and time-consuming. D) the value gap created by the firm can be easily lowered in an alliance.

C) building downstream complementary assets can be expensive and time-consuming

60) When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________. A) political distance B) administrative distance C) cultural distance D) geographic distance

C) cultural distance

21) The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) acquisition

C) equity alliance

57) In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs: A) compete in a low-growth market but hold considerable market share. B) hold a high market share in a fast-growing market. C) hold a small market share in a low-growth market. D) compete in a high-growth market but have low and unstable earnings.

C) hold a small market share in a low-growth market.

14) When a firm pursues a(n) ________, it sells the same products or services in both domestic and foreign markets. A) localization strategy B) differentiation strategy C) international strategy D) domestic strategy

C) international strategy

44) New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first ________ in the U.S. automobile industry. A) hostile takeover B) equity alliance C) joint venture D) non-equity alliance

C) joint venture

3) Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a ________. A) non-profit organization B) sole proprietorship C) multinational enterprise D) nationalized firm

C) multinational enterprise

37) Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of ________. A) cartel arrangements B) equity alliances C) non-equity alliances D) joint ventures

C) non-equity alliances

37) Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of ________. A) shared value creation B) adverse selection C) on-the-job consumption D) corporate governance

C) on-the-job consumption

58) Adidas acquired Reebok primarily to ________. A) pursue an unrelated diversification strategy B) get access to the superior technology of Reebok C) overcome its competitive disadvantage against Nike D) overcome its principal-agent problems

C) overcome its competitive disadvantage against Nike

9) The most efficient way to overcome the principal-agent problem in a firm is to: A) increase the level of vertical integration within the firm. B) organize economic activities within the firm. C) provide stock options to managers. D) downsize the existing workforce.

C) provide stock options to managers

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

C) related-constrained diversification

2) Disney became the world's leading media company to a large extent by pursuing a corporate strategy of ________. A) hostile takeovers B) cost-leadership C) related-linked diversification D) unrelated diversification

C) related-linked diversification

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

C) relative market share and speed of market growth

61) PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A) PureSource Pharma will increase its cost of distribution. B) PureSource Pharma will reduce the size of its sales force. C) PureSource Pharma will diminish its economic value creation. D) PureSource Pharma will lower its costs through economies of scale.

D) PureSource Pharma will lower its costs through economies of scale.

33) ________ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain. A) Horizontal integration B) Forward integration C) Reverse engineering D) Strategic outsourcing

D) Strategic outsourcing

8) When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement? A) When the resource in question is highly tradable B) After it has been established that the firm's internal resources are sufficient to build C) Before the strategist has considered borrowing the necessary resources through integrated strategic alliances D) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

D) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge.

6) Saul is a manager at Holden Apparels Inc. and is friends with the company's CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months. Are Saul's actions unethical? Why? A) Yes, because it is illegal and unethical for Saul to possess any kind of insider information. B) No, because Saul did not make any profits from trading stocks using this information. C) No, because Saul did not ask the CEO to disclose such information to him. D) Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.

D) Yes, because it's unethical to trade stocks based on insider information irrespective of the final outcome.

31) At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of ________. A) moral hazard B) shared value creation C) corporate governance D) adverse selection

D) adverse selection

47) A ________ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy. A) single-business firm B) parent company C) subsidiary D) conglomerate

D) conglomerate

28) A(n) ________ is best described as a partnership in which at least one partner takes partial ownership in the other partner. A) non-equity alliance B) acquisition C) joint venture D) equity alliance

D) equity alliance

57) The main reason behind Google's decision to acquire the Israeli startup company Waze for $1 billion was to: A) share its capabilities with Waze. B) gain access to technology that is alien to it. C) support startup companies with venture capital. D) preempt its competitors from buying Waze.

D) preempt its competitors from buying Waze

56) The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of: A) experience-curve effects. B) resource ambiguity. C) time compression diseconomies. D) principal-agent problems.

D) principal-agent problems

37) 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) lean manufacturing B) process diversification C) strategic outsourcing D) product-market diversification

D) product-market diversification

36) When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will: A) introduce different products and services in an existing single market. B) operate from multiple headquarters across the globe. C) depend solely on its in-house facilities for all its production purposes. D) sell its products in several different regional, national, and international markets.

D) sell its products in several different regional, national, and international markets.

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

D) unrelated diversification strategy

10) Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A) Exporting B) Brownfield operations C) Greenfield operations D) Crowdsourcing

A) Exporiting

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

A) A firm that manufactured and sold car engines to major automobile companies launches its own line of cars.

37) To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A) A global-standardization strategy B) A localization strategy C) A transnational strategy D) A multidomestic strategy

A) A global-standardization strategy.

17) 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) A multidomestic strategy B) An international strategy C) A one-product strategy D) A global-standardization strategy

A) A multidomestic strategy

40) Which of the following best defines duality in a board of directors? A) A person holds both the role of CEO and chairperson of the board. B) A person holds both the role of inside director and outside director of the board. C) A person holds the role of CEO on the boards of two companies. D) A person holds both the role of director and shareholder of the company.

A) A person holds both the role of CEO and chairperson of the board.

26) Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost? A) A transnational strategy B) A multidomestic strategy C) A global-standardization strategy D) An international strategy

A) A transnational strategy

53) Octa Autos 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 it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.? A) Acquisition B) Licensing C) Exporting D) Franchise agreement

A) Acquisition

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

A) Acquisitions can be friendly or hostile.

20) Food Works Inc. is a multinational fast food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company? A) Each country unit owned by the company will tend to be highly autonomous. B) The company's competitive advantage lies in leveraging its home-based core competencies in foreign markets. C) The company will not face any operational inefficiency as the key business functions do not have to be duplicated. D) Majority of the value creation for the company will take place in its home country.

A) Each country unit owned by the company will tend to be highly autonomous.

55) Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. B) Leading by ethical example often has a less strong effect on employee behavior than words. C) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful. D) Very few and specific corporate governance mechanisms can be effective in addressing the principal-agent problem.

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

1) Today, Hollywood movies are banking more on foreign sales for their overall revenues. Hollywood studios have been adapting scripts to appeal to global audiences, and casting foreign actors in leading roles. Which of the following statements most accurately explains the reason for this change? A) Hollywood is now a truly global enterprise with the vast majority of revenues coming from outside the United States. B) The movie industries of other countries are not doing so well. C) The purchasing power of the U.S. audience has reduced drastically. D) Hollywood actors and actresses are no longer willing to participate in domestic productions since there is no money in this industry.

A) Hollywood is now a truly global enterprise with the vast majority of revenues coming from outside the United States.

22) ________ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A) Inside directors B) Auditors C) Investors D) Outside directors

A) Inside directors

5) Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases the potential for legal repercussions. B) It increases the costs associated with increasing value. C) It increases the threat of new entrants in an industry. D) It increases competitive intensity within an industry.

A) It increases the potential for legal repercussions.

8) 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) Principal-agent problem B) Information asymmetries C) Diseconomies of scale D) Experience-curve effects

A) Principal-agent problem

30) HK Goods Inc. 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) Product diversification B) Market diversification C) Geographic diversification D) Process diversification

A) Product diversification

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

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

31) ________ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use. A) Specialized assets B) Cost drivers C) Liquid assets D) Value drivers

A) Specialized assets

39) Which of the following is NOT a reason why firms enter alliances? A) To replace competitive advantage with competitive parity B) To enter new markets, either in terms of geography or products and services C) To learn new capabilities D) To strengthen competitive position

A) To replace competitive advantage with competitive parity

68) The 3D television division of a large consumer electronics company has been recognized as a question mark. The company's LCD television division has been categorized under dogs. Which of the following statements will hold well in this scenario? A) The 3D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market. B) The strategic recommendation for the 3D television division is to harvest it, and the strategic recommendation for the LCD television division is to invest further in it. C) The 3D television division will have a high market share in its industry, whereas the LCD television division will have a low-market share in its industry. D) The LCD television division will benefit by pursuing a differentiation strategy, and the 3D television division will benefit by following a cost-leadership strategy.

A) The 3D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market.

44) Which of the following is a major issue at the forefront of CEO compensation in recent years? A) The absolute size of the CEO pay package compared with the pay of the average employee B) The performance of the CEO as an employee versus the performance as a board member C) A comparison of the compensation of senior management hired during and before the CEO's tenure D) A comparison of the performance of the organization before and after the CEO's tenure

A) The absolute size of the CEO pay package compared with the pay of the average employee

16) Which of the following statements best describes local responsiveness? A) The need to tailor product and service offerings to fit native consumer preferences and host-country requirements B) The additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances C) The process of producing goods in one country and selling them in another D) The belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogeneous

A) The need to tailor product and service offerings to fit native consumer preferences and host-country requirements.

59) 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 topography of a country D) The presence of legal institutions in a country

A) The wealth and per capita income of consumers.

64) Which of the following is a result of horizontal integration in terms of Porter's five forces model? A) There is a reduction of excess capacity in the market. B) The industry structure becomes potentially less profitable. C) The industry structure becomes less consolidated. D) There is an increase in rivalry among existing firms

A) There is a reduction of excess capacity in the market.

4) How will an increase in coordinated economic and political integration between countries affect the world economy? A) There will be gains in social welfare and living standards across the globe. B) There will be a movement away from global-collaboration networks among multinational enterprises (MNEs). C) The cost of labor will further decline in emerging economies. D) The world's market economies will become self-sufficient and independent.

A) There will be gains in social welfare and living standards across the globe.

1) Which of the following statements is true of shareholders in a public stock company? A) They are granted a charter of incorporation by the state and legally own company stock. B) They directly supervise and coordinate the manufacture of products and delivery of services. C) They are the centerpiece of corporate governance. D) They are appointed by a board of directors to oversee the company's management.

A) They are granted a charter of incorporation by the state and legally own company stock.

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

A) Torque Inc. focuses more on cost reductions when compared to Marc Works Inc.

27) Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally? A) Transnational strategy B) Focused-differentiation strategy C) Global-standardization strategy D) International strategy

A) Transnational strategy

65) 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 market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. B) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy. C) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. D) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU.

A) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

70) 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: A) it underestimates its liability of foreignness when entering the Zevar market. B) it underestimates its dwindling reputation before it enters the Zevar market. C) it overestimates its need to protect its intellectual property. D) it overestimates the geographic and cultural distance between Pelo and Zevar.

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

66) United Nerumbia and Fernsland are two 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) luxury items manufactured in United Nerumbia. B) iron ore extracted in Fernsland. C) food processed in Fernsland. D) movies and TV shows produced in United Nerumbia.

A) luxury items manufactured in United Nerumbia.

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

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

29) In principal-agent relationships, ________ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts. A) moral hazard B) adverse selection C) on-the-job consumption D) the agency problem

A) moral hazard

55) 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) restructuring. B) reverse engineering. C) benchmarking. D) crowdsourcing.

A) restructuring.

18) The downside of equity alliances is: A) the amount of investment that can be involved. B) that they are not useful stepping stones toward full integration of the partner firms. C) the weaker ties and reduced trust between partners. D) that the alliances cannot be abandoned if not promising

A) the amount of investment that can be involved.

16) Outside directors are more likely to watch out for the interests of shareholders of their firm because: A) they have more independence than inside directors. B) they are part-time employees of the firm. C) they do not have the safety of serving on the boards of other firms. D) they are more likely to benefit from using inside information to trade stocks.

A) they have more independence than inside directors

31) A(n) ________ arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A) transnational strategy B) international strategy C) global-standardization strategy D) multidomestic strategy

A) transnational strategy

6) When does a merger between companies typically occur? A) When a target firm does not want to be acquired B) When two firms of comparable size join to form a combined entity C) When two or more firms enter a temporary vertical strategic alliance D) When large, incumbent firms buy startup companies

B) When two firms of comparable size join to form a combined entity

55) To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) ________. A) exit strategy B) acquisitions-led growth strategy C) unrelated diversification strategy D) harvest strategy

B) acquisitions-led growth strategy

7) When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) ________. A) proprietorship B) non-equity alliance C) equity alliance D) joint venture

D) joint venture

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

B) aspects of cultural fit between different firms in an alliance

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

B) Both Gamma Foods Inc. and RiverGem Inc. will have to duplicate key business functions in multiple host countries.

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

B) DS & Co. will share fewer common competencies and resources between its various businesses when compared to GreenWing Inc.

43) Which of the following statements is true of a multidomestic strategy? A) The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation. B) Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. C) Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level. D) The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage.

B) Firms frequently use a multi domestic strategy when entering host countries with large and/or idiosyncratic local markets.

50) Which of the following types of organizations comparatively requires the lowest levels of investment and control? A) Greenfield operations B) Franchising C) Joint ventures D) Acquisition

B) Franchising

30) Garnet Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. 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 Garnet Mobiles Inc. most likely pursue? A) Localization strategy B) Global-standardization strategy C) International strategy D) Multidomestic strategy

B) Global-standardization strategy

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

B) Glova Inc. will sell the same products and services in both domestic and foreign markets, whereas RightMart Inc. will customize its product offerings to suit local requirements.

67) Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A) Forward integration B) Horizontal integration C) Vertical integration D) Backward integration

B) Horizontal integration

59) FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate? A) Managerial capitalism B) Managerial hubris C) Managerial feasibility D) Managerial empathy

B) Managerial Hubris

13) Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry? A) Galleon Group's decision to trust Rajat Gupta's information as accurate B) Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs C) Warren Buffet's decision to inject a huge amount of money into Goldman Sachs based on its financial reports D) Rajaratnam receiving information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

B) Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

54) ________ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. A) Rebooting B) Restructuring C) Reverse brainstorming D) Reverse engineering

B) Restructuring

49) All public companies listed on the U.S. stock exchanges must file a number of financial statements with the ________. A) Wall Street Journal B) Securities and Exchange Commission (SEC) C) GovernanceMetrics International (GMI) D) EDGAR database

B) Securities and Exchange Commission (SEC)

63) Zeda 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 Zeda in terms of cultural distance? A) Terra, which is located close to Zeda and is easily accessible by road B) Segar, where people speak English and have a low standard of living C) Jordax, which has a very profitable economy and where people speak Jordaxian D) Olax, which has the same wealth and per capita income as Zeda

B) Segar, where people speak English and have a low standard of living.

52) Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A) Germany's unfamiliarity with retail discount powerhouses B) Significant differences between its U.S. personnel policies and Germany's culture C) Metro's hostile takeover of Walmart in Germany D) 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

60) Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A) The need to reduce its level of horizontal integration B) The desire to gain a new capability C) The desire to pursue an unrelated diversification strategy D) The need to enter a new geographical market

B) The desire to gain a new capability

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

B) They are highly affected by exchange rate fluctuations

30) Which of the following is a disadvantage of equity alliances? A) They do not permit the exchange of explicit knowledge. B) They can entail significant investments. C) They can bring about a lack of commitment. D) They are reflective of weaker ties between firms.

B) They can entail significant investments

14) Which of the following is a drawback of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They necessitate the sharing of rewards between the partners. C) They produce weak ties, trust, and commitment between the partners. D) They do not enable the transfer and sharing of tacit knowledge.

B) They necessitate the sharing of rewards between the partners.

47) Why did Yahoo enter into a strategic alliance with Microsoft? A) To share its continuously updated search technology with Microsoft B) To overcome its competitive disadvantage in comparison to Google C) To pursue an unrelated diversification strategy D) To invest its excess cash flow in Microsoft's superior technology

B) To overcome its competitive disadvantage in comparison to google.

42) A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it: A) is pursued in response to low pressure for local responsiveness and low pressure for cost reduction. B) attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. C) 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. D) operates on the assumptions made in the globalization hypothesis in order to lower costs.

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

51) MotorCult Inc. 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. In this scenario, MotorCult is primarily: A) unlearning existing core competencies to create and compete in markets of the future. B) building new core competencies to protect and extend current market position. C) leveraging new core competencies to improve current market position. D) redeploying existing core competencies to compete in future markets.

B) building new core competencies to protect and extend current market position.

20) Hashim is a board member at Kluster Motors Inc. He is also a senior executive of the firm. On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics. According to this scenario, Hashim ________. A) cannot serve on the board of any other organization B) is an inside director of Kluster Motors C) can use information from board meetings to trade stocks of Kluster Motors D) is more likely than Compton to take care of stockholder interests

B) is an inside directo of Kluster Motors

19) Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena: A) is also the CEO of other companies. B) is likely to provide the board with valuable inside information. C) is a board member of a major client. D) is more likely than other board members to take care of the stockholders

B) is likely to provide the board with valuable inside information

15) The day-to-day operations of a publicly traded company are conducted by: A) people who finance the company, such as investors. B) its managers and lower-level employees. C) the CEO and the board of directors. D) people who own the company, such as shareholders.

B) its managers and lower-level employees

17) Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc. headquartered in United Cadvia. The parent companies, together, have established a standalone firm called Genuine Autos Inc. This arrangement best exemplifies a ________. A) partnership B) joint venture C) proprietorship D) non-equity alliance

B) joint venture

48) Which of the following do NOT serve as additional external-governance mechanisms? A) Industry analysts B) Government regulators C) Board of directors D) Auditors

C) Board of directors

66) How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies? A) By adding more unrelated businesses into its corporate portfolio B) By investing in businesses under the question mark quadrant of the BCG matrix C) By using internal capital markets as a source of value creation D) By increasing its coordination and influence costs

C) By using internal capital markets as a source of value creation.

19) Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise 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 stock the collection approved from 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) Credit Rationing B) Crowdsourcing C) Franchising D) Bootstrapping

C) Franchising

3) Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) Adopting the principles of shareholder capitalism B) Adopting a narrow shareholder perspective C) Separating economic interests and social needs D) Practicing effective corporate governance

D) Practicing effective corporate governance

15) Which of the following is one of the features of an international strategy? A) It is characterized by cost-leadership as a preferred business strategy. B) It is often used successfully by firms with relatively small domestic markets. C) It is characterized by limited local responsiveness. D) It is one of the newest types of global strategies.

C) It is characterized by limited local responsivenes.

22) Which of the following statements is NOT true of tacit knowledge? A) It is knowledge that cannot be easily codified. B) It is concerned with knowing how to do a certain task. C) It is regularly shared between partners in a non-equity alliance. D) It is acquired only through actively participating in the process.

C) It is regularly shared between partners in a non-equity alliance.

20) NorthStar Inc. and The Royal Group have together established The Royal Star Group of hotels. NorthStar owns 49 percent and The Royal Group has a 51 percent share in The Royal Star Group of hotels. However, the management of The Royal Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? A) Sole Proprietorship B) Non-equity alliance C) Joint venture D) Equity alliance

C) Joint venture

43) Aro Shoes Inc. and Mova Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Aro Shoes entered the strategic alliance to acquire the production system pioneered by Mova Shoes. Similarly, Mova Shoes agreed to the strategic alliance to study the designing process of Aro Shoes. However, Aro Shoes was more successful and faster than Mova Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) Time compression diseconomies B) Network effects C) Learning races D) Economies of scope

C) Learning races

19) After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A) The company will be able to reap greater benefits from economies of scale. B) The company's operations will become more cost efficient. C) The company's exposure to exchange rate fluctuations will reduce. D) The company will be exposed to a lower risk of intellectual property appropriation.

C) The company's exposure to exchange rate fluctuations will reduce.

4) In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A) The expectation that the agent will go above and beyond the call of duty B) The expectation that the agent will reconnect economic and social needs C) The expectation that the agent will act in the principal's best interest D) The expectation that the agent will follow the country's laws and regulations

C) The expectation that the agent will act in the principal's best interest.

6) Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm? A) The firm's administrative costs will be low because of necessary bureaucracy. B) The firm will have high-powered incentives, such as hourly wages and salaries. C) The firm will have more flexibility in purchasing and comparing prices of goods and services. D) The firm will be protected against the principal-agent problem

C) The firm will have more flexibility in purchasing and comparing prices of goods and services.

71) TrueAutos 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 is more important than the hybrid electric cars SBU in terms of future growth for the company. 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 petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. D) 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.

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

18) Which of the following is NOT true about the members of the board of directors in a public stock company? A) They may hire and fire top management. B) They oversee the firm's operations. C) They are not responsible to shareholders. D) They represent the shareholders' interests.

C) They are not responsible to shareholders

51) 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 are based on contracts rather than ownership. C) They reduce a firm's exposure to loss of reputation. D) They require low amounts of investments in terms of capital.

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

40) In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A) To access GM's distribution system and marketing expertise B) To access GM's completely new production system C) To learn how to implement its lean manufacturing program with an American work force D) To learn and implement the just-in-time inventory system pioneered by GM

C) To learn how to implement its lean manufacturing program with an American work force

35) With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A) To transfer its knowledge of a completely new production system B) To better understand the American work force C) To learn the lean manufacturing system pioneered by Toyota D) To get access to Toyota's distribution system and marketing expertise

C) To learn the lean manufacturing system pioneered by Toyota.

34) One Stop Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Com 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) One Stop Inc. will have its business functions spread across the world; Solar Com Inc.'s business functions will be highly centralized. B) One Stop Inc. will focus more on cost-reduction than Solar Com Inc. C) Unlike Solar Com Inc., One Stop Inc. will be able to pursue a differentiation strategy at the business level. D) Unlike Solar Com Inc., One Stop Inc. will be able to reap significant economies of scale and location economies.

C) Unlike Solar Com Inc., One Stop Inc. will be able to pursue a differentiation strategy at the business level.

25) Which of the following is true of the board of directors in a public stock company? A) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. B) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs. C) Votes at shareholder meetings determine whose representatives are appointed to the board of directors. D) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision.

C) Votes at shareholder meetings determine whose representatives are appointed to the board of directors.

58) Which of the following statements is true with regard to international trade between countries? A) Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. B) Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. 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) Wealthy countries engage in relatively more cross-border trade than poorer ones.

46) In which of the following situations is pursuing an international strategy advisable? A) When a firm manufactures products related to national and religious identity B) When a firm operates in an industry where the pressure to keep the costs low is extremely high C) When a firm enjoys a large domestic market, strong reputation, and brand name D) When a firm wants to be perceived as a domestic company by the host country consumers

C) When a firm enjoys a large domestic market, strong reputation, and brand name.

50) A drawback involved in using cross-border strategic alliances to enter new foreign markets is that: A) the foreign firm will need to make larger investments when compared to entering the new market on its own. B) all potential business risks in the new market will have to be faced alone by the foreign firm. C) some of the firm's proprietary know-how may be appropriated by the foreign partner. D) the shareholder value of the foreign partner will decline drastically.

C) some of the firm's proprietary know-how may be appropriated by the foreign partner.

26) Investments in specialized assets tend to incur high opportunity costs because the: A) assets can be profitably used for multiple purposes. B) firms can avoid backward integration by investing in these assets. C) threat of one of the partners pursuing his or her self-interest is high. D) social costs associated with these assets are high.

C) threat of one of the partners pursuing his or her self-interest is high.

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

C) vertical integration

54) Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario? A) A proprietorship B) A leveraged buyout C) An acquisition D) A strategic alliance

D) A strategic alliance

28) Neon Electronics Inc. sourced touchscreens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touchscreens. What does this scenario best illustrate? A) New product development B) Crowdsourcing C) Conglomerate diversification D) Backward vertical integration

D) Backward vertical integration

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

D) Because of the large economic distance between U.S. and India.

65) How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A) By preventing mergers from taking place B) By facilitating excess capacity in the industry C) By increasing the threat of entry in the industry D) By lowering competitive intensity in the industry overall

D) By lowering competitive intensity in the industry overall

50) Which of the following is true of business ethics? A) Business ethics is an agreed-upon code of conduct in business, based on laws. B) The perception of what is ethical and what is not is similar across different cultures. C) Business ethics needs to be codified into law in order to be followed. D) Certain notions such as fairness, honesty, and reciprocity are universal norms.

D) Certain notions such as fairness, honesty, and reciprocity are universal norms.

6) GM entered China in 1997 through a joint venture with Shanghai Automotive Industrial Corp. (SAIC). Which of the following factors best contributes to the fact that the Chinese market already accounts for 25 percent of GM's total revenues? A) GM's China operation has never been cost-competitive. B) The company operates a larger number of assembly plants in China than the U.S. C) The China operation sells more vehicles while employing twice the number of employees. D) Chinese workers cost only a fraction of what U.S. workers do.

D) Chinese workers cost only a fraction of what U.S. workers do.

22) For which of the following products is an international strategy most suitable? A) For products with high linguistic content B) For products with low value-to-weight ratios such as steel C) For food products that are specific to certain cultures D) For luxury goods that can be shipped across the globe

D) For luxury goods that can be shipped across the globe

17) Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? A) Frank is a stockholder of Lofloy Greens. B) Frank cannot serve as a director on Spinson Locomotives' board. C) Frank is a part-time employee at Lofloy Greens. D) Frank is an outside director on Lofloy's board of directors.

D) Frank is an outside director on Lofloy's board of directors.

21) Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.? A) Acquisition B) Export C) Joint venture D) Greenfield operation

D) Greenfield operation

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

D) Information asymmetry

13) Which of the following statements is true of an international strategy? A) It effectively protects a firm from exchange rate fluctuations. B) It is advantageous when firms face high pressures for both local responsiveness and cost reductions. C) It relies on joint ventures to reap economies of scale by accessing a larger market. D) It enables firms to leverage their home-based core competencies in foreign markets.

D) It enables firms to leverage their home-based core competencies in foreign markets.

49) What did Microsoft do to gain a foothold in the online search and advertising market dominated by Google? A) It sold part of its equity to Yahoo. B) It acquired Yahoo. C) It outsourced its non-core business activities to Yahoo. D) It entered into a strategic alliance with Yahoo.

D) It entered into a strategic alliance with Yahoo.

36) Which of the following is a feature of a multinational company pursuing a global-standardization strategy? A) Its key business functions are located at the home country headquarters. B) Its core competency lies in its strong product differentiation. C) Its competitive advantage lies in its high local responsiveness. D) Its business-level strategy tends to be cost leadership.

D) Its business-level strategy tends to be cost leadership.

21) ________ are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals. A) Auditors B) CEOs C) Inside directors D) Outside directors

D) Outside directors

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

D) The cost of searching for a contract manufacturer.

35) Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A) The firm customizes products and services to better suit local requirements. B) The firm follows a differentiation strategy at the business level. C) The firm has all its key business functions located in the home country. D) The firm reaps significant economies of scale and location economies

D) The firm reaps significant economies of scale and location economies.

5) Which of the following is the source of the principal-agent problem in publicly traded companies? A) Transferability of investor ownership B) The law of legal personality C) Limited liability for investors D) The separation of ownership and control

D) The separation of ownership and control

39) Which of the following is a drawback of pursuing a multidomestic strategy? A) The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy. B) The strategy allows for the lowest possible local responsiveness. C) The strategy lowers the differentiation of a firm's product and service offerings. D) The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

D) The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

19) Which of the following is an advantage of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They can be easily initiated and terminated. C) They require the lowest amount of investment relative to the other alliance types. D) They create strong ties, trust, and commitment between the partners.

D) They create strong ties, trust, and commitment between the partners.

53) Which of the following is true of the codes of conduct of an organization? A) They help the board of directors and the CEO implement shareholder capitalism. B) They are a guide to determine what is lawful and what is unlawful. C) They are a reiteration of the laws pertaining to business dealings in a corporate environment. D) They detail how the organization expects an employee to behave and to represent the company in business dealings.

D) They detail how the organization expects an employee to behave and to represent the company in business dealings.

32) Which of the following statements is true of joint ventures? A) They are characterized by single reporting lines. B) They cannot entail long negotiations. C) They reduce the possibilities of trust and commitment. D) They enable the exchange of both tacit and explicit knowledge

D) They enable the exchange of both tacit and explicit knowlegde

42) Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A) To bring about a separation of CEO/chair duality B) To change the liability of shareholders from limited to unlimited C) To reduce the transferability of stocks between stockholders D) To align incentives between shareholders and management

D) To align incentives between shareholders and management.

2) Which of the following statements of is true transactions costs? A) When the costs of pursuing an activity in-house are more than the costs of transacting for that activity in the market, then the concerned firm should vertically integrate. B) Transactions costs exclusively consist of external costs associated with economic exchanges. C) When companies transact in the open market, they incur internal transaction costs. D) Transaction costs are necessary to explain and predict the boundaries of a firm.

D) Transaction costs are necessary to explain and predict the boundaries of a firm.

7) The informational advantage that agents possess over principals is often based on the fact that: A) the information is extremely secure and protected from exposure to anyone outside the company. B) public stock companies are characterized by information symmetry. C) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals. D) insiders are the first to learn about important developments before the information is released to the public

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

54) One of the ways to foster ethical behavior in employees is to: A) view clients as counter parties to transactions. B) align the vision statement of the organization with its informal culture. C) avoid codifying organizational culture. D) create a control system that encourages desired values.

D) create a control system that encourages desired values.

23) The ________ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally. A) dynamic capabilities framework B) local responsiveness hypothesis C) real option framework D) death-of-distance hypothesis

D) death-of-distance hypothesis

59) 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) provide more human resource to the business. B) infuse more capital into the strategic business unit. C) hold the business till it turns into a star. D) divest the strategic business unit.

D) divest the strategic business unit.

58) 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) question marks. B) cash cows. C) stars. D) dogs.

D) dogs.

40) A firm following a multidomestic strategy: A) is highly efficient. B) lacks local responsiveness. C) requires exposing explicit knowledge because products are manufactured locally. D) faces a greater risk of intellectual property (IP) appropriation.

D) faces a greater risk of intellectual property (IP) appropriation.

46) In a strategic alliance, the firm that learns faster: A) has the incentive to invest further in the alliance. B) has the tendency to lose its competitive advantage. C) has the tendency to move up a learning curve. D) has the incentive to reduce its knowledge sharing

D) has the incentive to reduce its knowledge sharing

23) The board of directors of a public stock company consists of: A) employees of a company who belong to the senior management and directly report to the CEO of the firm. B) managers appointed by the owners of a company to run its day-to-day operations. C) the legal owners of a publicly traded company that was purchased in a leveraged buyout. D) individuals who formally represent the firm's shareholders and oversee the work of executives.

D) individuals who formally represent the firm's shareholders and oversee the work of executives

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

D) industry

25) A(n) ________ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages. A) encrypt B) chain of command C) scatter chart D) industry value chain

D) industry value chain

30) Adverse selection in a public stock company occurs when: A) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. B) an agent manipulates information to benefit stockholders. C) a principal is not aware of the context from which information from an agent is derived. D) information asymmetry increases the likelihood of selecting inferior alternatives

D) information asymmetry increases the likelihood of selecting inferior alternatives

62) If a strategic business unit is recognized as a cash cow, it is advisable to: A) harvest the business. B) maintain it till turns into a dog. C) divest the business due to its low market share. D) invest into the business to hold its current position.

D) invest into the business to hold its current position.

49) GearOne 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, GearOne Autos Inc. is reaping the benefits of ________. A) resource immobility B) resource ambiguity C) economies of scope D) location economies

D) location economies

8) Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations onsite while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of ________. A) network effects B) learning races C) economies of scope D) location economies

D) location economies

44) A(n) ________ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. A) global standardization strategy B) transnational strategy C) international strategy D) multidomestic strategy

D) multidomestic strategy

26) Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) ________. A) joint venture B) greenfield venture C) acquisition D) non-equity alliance

D) non-equity alliance

24) Equity alliances are less common than non-equity alliances because they: A) produce weaker ties between partners. B) depend on contractual agreements. C) fail to facilitate the transfer of tacit knowledge. D) often require larger investments.

D) often require larger investments.

50) The core competency of MotorCraft Inc. is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that there is a new market opportunity to diversify. Thus, it produces the car engines on a large scale and sells them to other automobile companies. In this scenario, MotorCraft is: A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B) building new core competencies to create and compete in future markets. C) building new core competencies to protect and extend current market position. D) redeploying and recombining existing core competencies to compete in future markets.

D) redeploying and recombining existing core competencies to complete in future.

68) Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with: A) physical remoteness. B) the lack of connective ethnic and social networks. C) differences in climates and time zones. D) the absence of a trading bloc.

D) the absence of a trading bloc.

23) Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to: A) the product information documented in Tesla's database. B) the lean manufacturing process pioneered by Tesla. C) the safety measures followed in Tesla, recorded in its user manuals. D) the entrepreneurial spirit in Tesla.

D) the entrepreneurial spirit in Tesla

9) The conflict in a principal-agent relationship arises when: A) stockholders and agents are involved in the day-to-day operations of the company. B) the company has more outside directors than inside directors. C) the strategy adopted by the company's agents tries to emulate the mission statement created by the principals. D) the goals of the principals and agents are not aligned with each other

D) the goals of the principals and agents are not aligned with each other

61) The administrative and political distance between two trading countries reduces when: A) there are tariffs and trade quotas in the host country. B) there are FDI restrictions in the host country. C) there is no independent central bank in the host country. D) there is a well-functioning capital market in the host country.

D) there is a well-functioning capital market in the host country.