Part 2
A company's strategy needs to be ethical because
a strategy that is unethical not only damages the company's reputation, but it can also have costly consequences.
The results of strategies that cannot pass the test of moral scrutiny often are not manifested in
increased customer loyalty.
The costs incurred when ethical wrongdoing occurs fall into three specific categories and include all except
intangible costs such as legal and investigative costs incurred by the company.
Moves to improve a diversified company's overall performance do not include
selling businesses too late and at too low a price.
One of the suggested advantages of an unrelated diversification strategy is that it
spreads the stockholders' risks across a group of truly diverse businesses.
Founding a wholly owned subsidiary in a foreign market to take advantage of all essential value chain activities requires a strategy that
supports direct control over all aspects of operating in a foreign market.
Diversifying into new businesses can be considered a success only if it
builds shareholder value.
Which of the following is not something a company should usually consider in crafting a strategy of social responsibility?
Actions to benefit shareholders (such as raising the dividend to boost the stock price)
Which of the following statements regarding a company's CSR and sustainability strategies is false?
A company is not demonstrating an adequate degree of social responsibility or endeavoring to be a model corporate citizen unless it spends 5 percent (or more) of pretax profits on social responsibility initiatives.
Which of the following is not one of the strategy options for expanding into markets of foreign countries?
A profit sanctuary strategy
Which of the following is not one of the suggested appeals of an unrelated diversification strategy?
Ability to capture cross-business strategic fit with which to capture added competitive advantage and few managerial demands
Which of the following does not accurately describe entering a new business via acquisition, internal development, or a joint venture?
Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up.
Which of the following should not be on a company's menu of actions to consider in crafting a strategy of social responsibility?
Actions that place profits and returns to shareholders without respect to commitments to employees, communities, and the environment.
Which one of the following is not a part of the business case for why companies should act in a socially responsible manner?
Aggressive pursuit of market share, revenues, and profits
Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?
Craft new initiatives to build or enhance the company's reputation.
Competing in the markets of foreign countries generally does not involve which of the following?
Crafting a multicountry strategy that can transform the world market into one big profit sanctuary
Which one of the following is not one of the elements of crafting corporate strategy for a diversified company?
Choosing the appropriate value chain for each business the company has entered
Which of the following is considered to be a visible cost that companies may incur when ethical wrongdoing is discovered and punished?
Civil penalties
Which of the following statements is false?
Companies like Samsung that export goods to foreign countries always gain in competitiveness when the currency of South Korea, in which the goods are manufactured, is strong.
Which of the following is not a typical option that companies have to consider in order to tailor their strategy to fit the circumstances of emerging country markets?
Develop a strategy for the short-term and forget about a long-term strategy because conditions in emerging country markets change so rapidly.
Which of the following is not a strategic option companies should consider in tailoring their strategy to fit circumstances of emerging country markets?
Enter only those emerging markets that provide profit sanctuaries by offering opportunities for offensive strategies, such as preemptive strikes.
Which of the following is an example of a modification in a particular company's business model to accommodate the unique local circumstances of
In China, Dell moved from its traditional Internet-based orders to orders over phone and fax.
Which of the following is an example of a modification in a particular company's business model to accommodate the unique local circumstances of developing countries?
In China, Dell moved from its traditional Internet-based orders to orders over phone and fax.
The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?
Increasing dividend payments to shareholders and/or repurchasing shares of the company's stock
Which one of the following is not one of the major drivers of unethical managerial behavior?
Intense competitive pressures
Which of the following is an important appeal of a related diversification strategy?
It offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another.
Which of the following is considered to be an intangible or less visible cost that companies may incur when ethical wrongdoing is discovered and punished?
Loss of reputation
Which of the following is not one of the problems and risks of cross-border strategic alliances, that is, between domestic and foreign firms?
Making it harder to pursue a multidomestic strategy as compared to a global strategy
Although exposing children to hazardous work and long work hours is unquestionably deplorable, which of the following, if true, leads to a moral dilemma?
Many child laborers come from poverty-stricken families.
In an attempt to fulfill its corporate social responsibility, which of the following is an activity that a company might consider to enhance the quality of life for its employees?
Providing work-at-home opportunities
Which of the following is an example of a cross-border alliance?
Renault-Nissan sells more than one in ten cars worldwide.
Which of the following is not a factor surrounding the decision to enter into the markets of foreign countries?
Repatriation of foreign company assets by governments in countries outside of home market(s)
Which of the following rationales for pursuing unrelated diversification is likely to increase shareholder value?
Restructuring an underperforming business
Which of the following is an example of an export strategy?
The United States is home to the world's three largest producers and suppliers of artificial heart valves.
Which one of the following is not a rationale for retaining a cash hog business in a diversified company's portfolio?
The business is in an industry with low attractiveness and has a weak competitive position in that industry.
Which of the following statements about corporate diversification is incorrect?
The more attractive an industry's prospects are for growth and good long-term profitability, the less expensive it can be to enter.
Which one of the following is false as concerns the merits of why acting in a socially responsible manner is good business?
There is a high correlation between socially responsible behavior that addresses social issues and a firm's competitive advantage and financial performance.
Exxon Mobil has entered into a pact with Gazprom, the world's largest natural gas extractor, to set up a processing unit in Baku, Azerbaijan. Which of the following is most likely the reason for Exxon Mobil to opt for this strategic alliance?
To gain access to low-cost inputs of production
Which of the following is not a reason why a company decides to enter foreign markets?
To impart technical knowledge to high-cost human resources in developing nations
Televisa, a Mexican media company, became the world's most prolific producer of Spanish-language soap operas owing to its expertise in Spanish culture and linguistics. Which of the following strategies did Televisa employ to defend against global giants?
Transfer company expertise to cross-border markets and initiate actions to contend on an international level.
A manufacturer and marketer of prescription pharmaceuticals decided to raise the price of its anti-malaria drug from $15.00 per dose to $750.00 per dose, a price increase of 5,000 percent. Following a public outcry, the CEO was forced to resign, the company was forced to retract the price hike, and the company's stock price sharply declined. Which of the following has the company incurred?
Visible and intangible costs
A multinational automobile manufacturer issues a public statement that the company's vehicle emissions tests had been falsified to meet environmental compliance standards over recent years using software specifically designed for that purpose. Following the news, the company's CEO is replaced, vehicle sales plummet, and the company's stock price sharply declines. Which of the following has the company incurred?
Visible and intangible costs
Which of the following is not an example of a cross-border alliance?
Western Union purchases the global payments division of British-owned Travelex Ltd.
In which of the following circumstances is it not advantageous for a multinational competitor to concentrate its activities in a limited number of locations in order to build competitive advantage?
When a company has a competitively superior patented technology that it can license to foreign partners
In which of the following instances is retrenching to a narrower diversification base not likely to be an attractive or advisable strategy for a diversified company?
When a diversified company has too many cash cows
Which one of the following elements does not typically comprise a company's social responsibility strategy?
actions to keep prices low enough that the company's profits will not be viewed by the general public as obscenely high or exorbitant
Cross-business strategic fits are unlikely to be derived from
activities along the value chain that cannot be shared by different businesses
The strategic and financial options for allocating a diversified company's financial resources do not include
allocating resources to businesses with dim or marginal prospects.
As they apply to business conduct and business decisions, ethical principles
are not materially different from ethical principles in general.
Ethical principles in business
are not materially different from ethical principles in general.
The essence of socially responsible business behavior is
balancing strategic actions to benefit shareholders against the duty to be a good corporate citizen.
A competitive strength score above five indicates that a diversified company's relative position in the market is characterized by
business units that are all fairly strong market contenders in their respective industries.
Using domestic plants as a production base for exporting goods to selected foreign country markets
can be an excellent initial strategy to pursue international sales.
Diversification ought to be considered when a
company begins to encounter diminishing growth prospects in its mainstay business.
The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether
conditions in the target industry allow for profits and return on investment that is equal to or better than that of the company's present business(es).
A think global, act global approach to strategy making is preferable to a think local, act local approach when
country-by-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy.
The strategic options for expansion into foreign markets include all of the following except
creating products and services that are not subject to tariffs and local regulations.
The ability of a multinational or global competitor to shift production from country to country to take advantage of exchange rate fluctuations, energy costs, wage rates, or changes in tariffs is an example of
cross-border coordination.
The contention that because different societies and cultures have divergent values and standards of right and wrong, it is appropriate to judge behavior as ethical or unethical in the light of local customs and social mores rather than according to a single set of ethical standards
defines what is meant by ethical relativism.
Environmental sustainability involves
deliberate actions to protect the environment, provide for the longevity of resources, maintain ecological support systems for future generations, and guard against the ultimate endangerment of the planet.
One strategic fit-based approach to related diversification would be to
diversify into new industries that present opportunities to combine value chain activities of two or more businesses to lower costs.
The task of crafting a company's overall corporate strategy for a diversified company encompasses all of the following except
divesting well-performing businesses.
When calculating industry attractiveness scores, to produce a valid response it is necessary to
ensure the appropriate weights are assigned to each measure and that the preparer has sufficient knowledge to rate the industry on each attractiveness measure.
Integrative social contracts theory maintains that
first-order universal ethical norms always take precedence over second-order local ethical norms.
What factor is not likely to be responsible for Apple's decision to set up mobile phone manufacturing facilities in India?
franchising opportunities in India
Acquisition of an existing firm rather than via internal development may be the least risky and cost-efficient means of overcoming entry barriers such as
gaining access to local distribution networks, building supplier networks, and establishing working relationships with key government officials.
Companies racing for global market leadership
generally have to consider establishing competitive positions in the markets of emerging countries.
The value of determining the relative competitive strength of each business a company has diversified into is to
have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.
Good corporate citizens do not
identify up-and-coming managers who have a future in local- or state-level politics.
An acquisition of an unrelated business is deemed to have potential
if it can pass the industry attractiveness and cost-of-entry test, and if it has good prospects for profit growth.
Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous in all of the following situations except
if resources retain their foreign contexts so there is competitive advantage over a broader domain.
The contention that ethical standards should be governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not are the basic principles of
integrative social contracts theory.
One important dimension of resource fit concerns the potential to generate internal cash flows sufficient to fund capital requirements of its business lineup, termed the firm's
internal capital market.
Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it
is an effective way to hurdle entry barriers, is usually quicker than trying to launch a new start-up operation, and allows the acquirer to move directly to the task of building a strong position in the target industry.
Retrenching to a narrower diversification base
is directed at improving long-term performance by building stronger positions in a smaller number of core businesses.
The competitive strategy of a firm pursuing a think global, act local approach to strategy making
is essentially the same in all country markets where it competes, but it may nonetheless give local managers room to make minor variations where necessary to better satisfy local buyers and to better match local market conditions.
A think local, act local multidomestic type of strategy
is more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and marketing methods.
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is useful for helping decide which businesses should have high, average, and low priorities in allocating corporate resources.
The strength of a think local, act local multidomestic strategy is that
it matches a company's competitive approach to prevailing market and competitive conditions in each country market.
The businesses in a diversified company's lineup exhibit good resource fit when
its individual businesses add to a company's resource strengths and when it has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin.
A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following considerations except
its top management wants to increase its compensation.
The advantages of using an export strategy to build a customer base in foreign markets include
minimizing capital requirements and involvement in foreign markets.
Sourcing a supply from a small, women-owned business is an example of a corporate social responsibility action to
promote workforce diversity.
The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to
provide a quantitative measure of the overall market strength and competitive standing for each business unit.
Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as
relative market share, ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and ability to benefit from strategic fits with sister businesses.
Which of the following should a company not consider in crafting a strategy consistent with corporate social responsibility?
taking steps to provide suppliers, distributors, and other value chain partners with handsome profit margins
In competing in foreign markets, companies find it advantageous to concentrate their activities in a limited number of locations in all of these situations, except when
the addition of new production capacity will not adversely impact the supply-demand balance in the local market.
Business ethics concerns
the application of ethical principles and standards to business activities, behavior, and decisions.
A company's unethical behavior may result in the following except
the company will have to deal with the Sarbanes-Oxley Act of 2002, which requires the company remove the tarnished employees.
The option of sticking with the current business lineup makes sense when
the company's present businesses offer attractive growth opportunities and can be counted on to generate good earnings and cash flows for shareholders.
Unethical business behavior is unlikely to be to be driven by such factors as
the need to meet objectives associated with the triple bottom line.
Competing in the markets of foreign countries entails dealing with such factors except
the prevalence of global brands.
The contentions that (1) many of the same standards of what is ethical and what is unethical resonate with peoples of most cultures, societies, and religions, and (2) to the extent there is common moral agreement about right and wrong actions, there exists a set of common ethical standards to which organizations and individuals can be held accountable are defining beliefs of
the school of ethical universalism.
Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when
there is ample time to launch the new business from the ground up.
Different businesses are said to be unrelated when
there is an absence of competitively valuable strategic fits between their respective value chains.
Companies committed to environmental sustainability
undertake initiatives directed at improving the company's triple bottom line, which places importance on economic, environmental, and social metrics.
When expanding outside its domestic market, a company can gain competitive advantage by
using location to lower costs or help achieve greater product differentiation or using cross-border coordination in ways a domestic-only competitor cannot.
Apple Inc.'s decision to acquire Beats Electronics and Beats Music in 2014 for $3 billion rather than enter into a joint venture with that company was an attractive strategy option for entering a promising new industry in headphones and streaming music services because it
was an effective way to hurdle entry barriers, was quicker than trying to launch a brand-new start-up or joint venture operation, and allowed Apple Inc. to move directly to the task of building a strong position in the target industry.
The tests of whether a diversified company's businesses exhibit resource fit do not include
whether the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money.
A belief in ethical relativism leads to the conclusion that
whether the payment of bribes and kickbacks should be deemed ethical or unethical depends on the moral standards, values, beliefs, convictions, and business norms that prevail in particular cultures, societies, countries, or circumstances.
When industry attractiveness ratings are calculated for each of the industries a multibusiness company has diversified into, the results help indicate
which industries appear to be the most and least attractive from the standpoint of the company's long-term performance.