491 Exam 2 Quiz Q's

A horizontal acquisition involves two firms in the same industry. True False

True

A transnational strategy is an international strategy in which the firm seeks to achieve both global efficiency and local responsiveness. True False

True

Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures. True False

True

If intellectual property rights in an emerging economy are not well-protected, the number of firms in the industry is rapidly growing, and the need for global integration is high, ____ is the preferred entry mode. a. a joint venture or wholly owned subsidiary b. exporting c. licensing d. strategic alliance

a. a joint venture or wholly owned subsidiary

In a(n) ____, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. a. joint venture b. non-equity strategic alliance c. equity strategic alliance d. equality-based strategic alliance

a. joint venture

The problems associated with exporting include: a. a partner's incompatibility. b. high transportation costs and the expense of tariffs. c. merging corporate cultures. d. difficulty in negotiating relationships.

b. high transportation costs and the expense of tariffs.

A global strategy: a. is easy to manage because of common operating decisions across borders. b. lacks responsiveness to local markets. c. increases risk because decision making is centralized at the home office. d. achieves efficient operations without sharing resources across country boundaries.

b. lacks responsiveness to local markets.

The two important environmental trends that influence a firm's choice and use of international corporate-level strategies are _________ and __________. a. culture; geographic scope b. liability of foreignness; regionalization c. cost; quality d. regionalization; globalization

b. liability of foreignness; regionalization

When diversification results in two companies, such as UPS and FedEx, simultaneously competing in the same product areas or geographic markets, this is called ____ competition. a. multiple b. multipoint c. multiplicit d. multiportal

b. multipoint

Usually a company is classified as a single business firm when revenues generated by the dominant business are greater than ____ percent. a. 99 b. 70 c. 95 d. 90

c. 95

In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify? a. Desire for increased compensation b. Reduced managerial risk c. Economies of scope d. Low performance

c. Economies of scope

Which of the following is an advantage associated with greenfield ventures? a. The lower cost of this type of venture b. Governmental support and subsidies in the host country c. The level of control over the firm's operations d. The lower level of risks involved

c. The level of control over the firm's operations

A leveraged buyout refers to: a. a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background. b. an action where the management of the firm and/or an external party buys all of the assets of a business financed largely with equity. c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. d. a firm restructuring itself by selling off unrelated units of the company's portfolio.

c. a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private.

Multipoint competition occurs when: a. firms have multiple products in their primary industry. b. firms have multiple retail outlets. c. diversified firms compete against each other in several markets. d. firms have diversified portfolios of companies.

c. diversified firms compete against each other in several markets.

An international diversification strategy is one in which a firm: a. acquires a firm in a foreign country. b. expands into one or a few markets. c. expands into a potentially large number of geographic locations and markets. d. expands into nearby markets

c. expands into a potentially large number of geographic locations and markets.

There are few true mergers because: a. integration problems are more severe than in outright acquisitions. b. few firms have complementary resources. c. one firm usually dominates in terms of market share, size, or value of assets. d. of managerial resistance. True mergers result in significant managerial-level layoffs.

c. one firm usually dominates in terms of market share, size, or value of assets.

Backward integration occurs when a company: a. is divesting unrelated businesses. b. owns its own source of distribution of outputs. c. produces its own inputs. d. is concentrated in a single industry.

c. produces its own inputs.

International strategy refers to a(n): a. strategy American firms use to dominate international markets. b. action plan pursued by American companies to compete against foreign companies operating in the United States. c. strategy through which the firm sells products in markets outside the firm's domestic market. d. political and economic action plan developed by businesses and governments to cope with global competition.

c. strategy through which the firm sells products in markets outside the firm's domestic market.

Synergy exists when: a. two units create value by utilizing market power in their respective industries. b. firms utilize constrained related diversification to build an attractive portfolio of businesses. c. the value created by business units working together exceeds the value the units create when working independently. d. cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm.

c. the value created by business units working together exceeds the value the units create when working independently.

In a merger: a. one firm buys controlling interest in another firm. b. two firms combine to create a third separate entity. c. two firms agree to integrate their operations on a relatively coequal basis. d. one firm breaks into two firms.

c. two firms agree to integrate their operations on a relatively coequal basis.

A nonequity strategic alliance exists when: a. the partners agree to sell bonds instead of stock in order to finance a new venture. b. two firms join together to create a new company. c. two or more firms have a contractual relationship to share resources and capabilities. d. two partners in an alliance own unequal shares in the combined entity.

c. two or more firms have a contractual relationship to share resources and capabilities.

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification. a. dominant business b. related linked c. unrelated d. related constrained

c. unrelated

The term "conglomerates" refers to firms using the ____ diversification strategy. a. related constrained b. related linked c. unrelated d. global

c. unrelated

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) ____ strategy. a. uncertainty reduction b. horizontal complementary c. vertical complementary d. network

c. vertical complementary

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach. a. trust but verify b. pragmatic realism c. opportunity maximization d. cost minimization

d. cost minimization

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are: a. following uncertainty reducing strategies. b. following a competitive response strategy. c. monitoring business competitors for opportunistic behaviors. d. engaging in tacit collusion.

d. engaging in tacit collusion.

Successful unrelated diversification through restructuring is typically accomplished by: a. seeking out high technology firms in high-growth industries. b. a top management team that is not constrained by pre-established ideas of how the firm's portfolio should be developed. c. a "random walk" of good luck in picking firms to buy. d. focusing on mature, low-technology businesses.

d. focusing on mature, low-technology businesses.

A firm that earns less than 70 percent of revenue from its dominant business and has direct connections between its businesses is engaging in ____ diversification. a. unrelated b. dominant business c. related linked d. related constrained

d. related constrained

A firm may narrow its focus to a specific region of the world: a. because that market is most different from its domestic market and so represents an unexploited "greenfield opportunity" for its products. b. in order to obtain greater economies of scale. c. to take advantage of limited protections of intellectual property so that it can manufacture innovative products without restrictions. d. so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets.

d. so that it can better understand the cultures, legal and social norms, and other factors that are important for effective competition in those markets.

Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the suppliers' products are sold. This purchase is a(n): a. horizontal acquisition. b. unrelated acquisition. c. merger. d. vertical acquisition.

d. vertical acquisition.