International Business 10-12

A liability of foreignness refers to the inherent disadvantage that foreign firms experience in host countries because of their nonnative status. a. True b. False

True

22. _____ is the location-specific advantage that arises from the clustering of economic activities in certain locations. a. Agglomeration b. First-mover advantage c. Late-mover advantage d. Innovation

a. Agglomeration

36. Which of the following modes of entry call for the establishment of independent organizations overseas? a. An equity mode b. An export mode c. A franchising mode d. A licensing mode

a. An equity mode

19. Which of the following is an informal barrier to trade when foreign firms enter new markets? a. Differences in norms b. Political differences c. Economic differences d. Existence of multiple currencies

a. Differences in norms

20. Which of the following is a way that a foreign firm may be effected by the liability of foreignness? a. Experiencing both formal and informal discrimination b. Heightened competitive advantage c. Adoption of VIRO d. Having first-mover advantage

a. Experiencing both formal and informal discrimination

39. In the context of organizational cultures, which of the following is true of a wolf culture? a. It centers on relentless pursuit with highly motivated employees working overtime. b. It focuses on appointing a host-country national as the head of a foreign subsidiary. c. It is the proactive and deliberate pursuit of new opportunities by a subsidiary to expand its scope of responsibility. d. It centers on an organizational structure that assigns global responsibilities.

a. It centers on relentless pursuit with highly motivated employees working overtime.

23. Which of the following is an advantage of adopting a home replication strategy? a. It is relatively easy to implement. b. It focuses on host country. c. It is effective when the pressures for cost reductions are low. d. It encourages the fragmentation of a company into fiefdoms.

a. It is relatively easy to implement.

25. Which of the following is a disadvantage of adopting a home replication strategy? a. It often lacks local responsiveness. b. It is organizationally complex and difficult to implement. c. It focuses on the demands made by the foreign countries. d. It involves high costs due to duplication efforts in multiple countries than localization strategy.

a. It often lacks local responsiveness.

42. In the context of knowledge management, which of the following is true of multinational enterprises (MNEs) adopting a home replication strategy? a. Knowledge is developed at the center and transferred to subsidiaries. b. Knowledge is developed and retained within each subsidiary. c. Knowledge is mostly developed and retained at the center and key locations. d. Knowledge is developed jointly and shared worldwide.

a. Knowledge is developed at the center and transferred to subsidiaries.

23. When two firms combine to establish a new legal entity, it is known as a(n) ______. a. Merger b. Strategic investment c. Contractual alliance d. Acquisition

a. Merger

47. In the post-acquisition phase, which of the following problems is specific to cross-border mergers and acquisitions? a. Nationalistic firm-level concerns over foreign takeovers b. Nationalistic media-level concerns against foreign takeovers c. Lack of familiarity with foreign business systems d. Lack of familiarity with foreign culture

a. Nationalistic firm-level concerns over foreign takeovers

16. _____ are associations between firms that are based on contracts and do not involve the sharing of ownership. a. Non-equity-based alliances b. Acquisitions c. Equity-based alliances d. Competitive alliances

a. Non-equity-based alliances

24. If a firm decides to engage in crude oil and petroleum business abroad, which of the following countries will provide location-specific advantage to the firm? a. Russia b. Liberia c. Switzerland d. Greenland

a. Russia

34. In the three-stage model of alliance formation, which of the following is the first stage? a. Taking a decision on the mode of growth b. Making a choice between a contractual and an equity approach c. Selecting an appropriate format to specify the relationship d. Taking decisions on strategic and organizational fits

a. Taking a decision on the mode of growth

40. According to an institution-based view, which of the following is true of synergistic motives that drive acquisitions? a. They are a response to formal institutional constraints and transitions. b. They cannot coexist with managerial and hubristic motives. c. They portray self-interested actions guided by informal norms and values. d. They portray overconfidence in one's capability.

a. They are a response to formal institutional constraints and transitions.

18. Which of the following is true of the business leader of a specific country (or a geographic region)? a. They carry a great deal of weight in their geographic area. b. They are less influential than domestic managers. c. No geographic area is stand-alone. d. They tend to decrease local responsiveness overall.

a. They carry a great deal of weight in their geographic area.

47. Which of the following statements is true of greenfield operations? a. They suffer from a slow entry speed of at least one to several years. b. They face difficulty in achieving effective equity and management control. c. They are cost effective and free from risk. d. They do not add any new capacity to an industry.

a. They suffer from a slow entry speed of at least one to several years.

1. Strategic alliances are voluntary agreements of cooperation between firms. a. True b. False

a. True

11. An MNE is defined by entering foreign markets via equity modes through FDI. A firm that merely exports/imports with no FDI is usually not regarded as an MNE. a. True b. False

a. True

11. Tacit knowledge is non-codifiable, and its acquisition and transfer require hands-on practice. a. True b. False

a. True

12. A hallmark of transnational multinational enterprises is a high degree of interdependence and extensive and bi-directional flows of knowledge. a. True b. False

a. True

12. If a manager is fueled by hubristic motives for acquisition, she may knowingly overpay for targets. a. True b. False

a. True

12. One advantage to engaging in a Joint Venture is sharing costs and risks with a local partner that limits risk exposure. a. True b. False

a. True

13. An acquisition is likely to be the largest capital expenditure of a firm, as well as one of its most poorly planned and executed activities. a. True b. False

a. True

14. Inadequate screening is a problem which occurs during the pre-acquisition phase of the merger and acquisitions (M&A) process. a. True b. False

a. True

14. To be successful in internationalization, managers need to understand the rules of the game, both formal and informal, governing competition in foreign markets. a. True b. False

a. True

15. From a resource-based view, managers need to match entries with strategic goals to be successful in foreign markets. a. True b. False

a. True

15. Managers need to actively develop learning and innovation capabilities to leverage multinational presence. a. True b. False

a. True

2. Transnational strategy aims to capture the best of both worlds by endeavoring to be both cost efficient and locally responsive. a. True b. False

a. True

4. In the context of organizing acquisitions, strategic fit refers to the effective matching of complementary strategic capabilities. a. True b. False

a. True

5. If a firm wants to have some direct control over joint activities on a continuing basis, it should choose an equity relationship over a contractual relationship. a. True b. False

a. True

5. The positioning of the four strategic choices of multinational enterprises is not random. They develop from the relatively simple international division through either geographic area or global product division structures. a. True b. False

a. True

6. In a three-stage model of alliance formation, firms need to specify a specific format that is either equity based or contractual (non-equity based) in stage three. a. True b. False

a. True

7. Formally, organizational charts specify the scope of responsibilities for various parties. a. True b. False

a. True

7. The worst scenario for the dissolution of an alliance can be described as "death by 1000 cuts". a. True b. False

a. True

7. To overcome cultural and institutional differences, it is more important to consider strategic goals such as market and efficiency rather than culture and institutions. a. True b. False

a. True

8. Formal structures are easier to observe and imitate than informal structures. a. True b. False

a. True

8. The second phase in the dissolution of alliances is going public. a. True b. False

a. True

When foreign firms enter new markets, they are often discriminated against the local firms. a. True b. False

a. True

16. What did Theodore Levitt argue in his 1983 article "The Globalization of Markets"? a. Worldwide consumer tastes are converging b. Local responsiveness is increasingly necessary c. Firms should stay domestic d. Globalization is reducing the need for MNEs

a. Worldwide consumer tastes are converging

45. Companies following a localization strategy differ from companies following a home replication strategy in that the companies following a localization strategy: a. develop and retain knowledge within each subsidiary. b. develop and retain knowledge at the center and key locations. c. develop knowledge at the center and transfer it to subsidiaries. d. develop knowledge and share it worldwide.

a. develop and retain knowledge within each subsidiary.

36. Widget Corp., a manufacturing firm in Lithuania, exports its manufactured tools to Wales. To protect its domestic firms, the Government of Wales imposes a 20 percent tax on the tools imported from Widget Corp. Therefore, Widget Corp. is subject to: a. formal institutional frameworks erected by the host-country government. b. formal institutional frameworks erected by the home-country government. c. informal rules of the game erected by the host-country government. d. informal rules of the game erected by the home-country government.

a. formal institutional frameworks erected by the host-country government.

24. Burger Mart, a fast food franchise in the U.S. is famous for its unique recipes that are a combination of a variety of spices. Their products are very popular in the U.S. They open a new outlet in Germany. They do not change their menu or their recipes as their menu and products are already popular in the U.S. Based on the integration-responsiveness framework, the strategy used by Burger Mart is a(n) _____. a. home replication strategy b. localization strategy c. transnational strategy d. acquisition strategy

a. home replication strategy

35. The global matrix structure supports the goal of the transnational strategy, but in practice it is often difficult to deliver because: a. managers have to deal with two bosses who are often in conflict. b. managers have to deal with the pressures of both global integration and local responsiveness. c. the structure encourages fragmentation of multinational enterprises into fiefdoms. d. the structure increases inefficient duplication in multiple countries.

a. managers have to deal with two bosses who are often in conflict.

26. Formal institutions influence alliances and acquisitions by: a. requiring firms to conform to the entry mode requirements. b. centering on collective norms, supported by a normative pillar. c. emphasizing internalized values and beliefs, supported by a cognitive pillar. d. emphasizing the creation of value.

a. requiring firms to conform to the entry mode requirements.

29. In most of the cases, alliances have emerged as great instruments of real options because they help companies to: a. sequentially scale up or scale down their investments. b. choose the right partners for future investments. c. eradicate potential partner opportunism. d. become immune to competition.

a. sequentially scale up or scale down their investments.

25. Rues and West Bros., a technological giant, is a company motivated with the drive to find new and affordable technologies. It is selecting a location so that it can operate with its motive, as well as enjoy the benefits of the location. In this scenario, Rues and West Bros. should select locations: a. that possess abundance of innovative individuals, firms, and universities. b. that feature a combination of scale economies and low-cost factors. c. that has an abundance of strong market demand. d. that possess natural resources and related infrastructure.

a. that possess abundance of innovative individuals, firms, and universities.

32. In the context of acquisition, the only identifiable group of winners is: a. the shareholders of target firms. b. the shareholders of acquiring firms. c. the employees of acquiring firms. d. the first line managers of target firms.

a. the shareholders of target firms.

30. Multinational enterprises that engage in a _____ strategy promote global learning and diffusion of innovations in multiple ways. a. transnational b. home replication c. localization d. global standardization

a. transnational

37. Which of the following is true of a multinational enterprise (MNE)? a. A firm that enters into a contractual agreement with a foreign firm b. A firm that enters foreign market via foreign direct investment (FDI) c. A firm that merely exports/imports products to host countries d. A firm that enters foreign market by non-equity mode

b. A firm that enters foreign market via foreign direct investment (FDI)

45. _____ is a type of wholly owned subsidiary. a. A research and development (R&D) contract b. A greenfield project c. Co-marketing d. Franchising

b. A greenfield project

48. A software company in China has decided to become a multinational enterprise (MNE). The company desires to completely own its subsidiary and requires a fast entry mode. In addition, the company wants to enter into business immediately without requiring to add a new capacity. In this scenario, which of the following modes of entry will be most appropriate for the company? a. Greenfield operation b. Acquisition c. Licensing d. Build-operate-transfer agreement

b. Acquisition

28. Which of the following is a strategy to overcome cultural distance while engaging in international business? a. Entering culturally distant countries with confidence b. Choosing countries with colony-colonizer links c. Entering in countries without much physical distance d. Entering a culturally different country as a late mover

b. Choosing countries with colony-colonizer links

49. From a resource-based standpoint, a fundamental basis for competitive advantage is innovation-based firm heterogeneity. _____ virtually guarantees that there will be persistent heterogeneity in the solutions generated. a. Adding more researchers in centralized R&D units b. Decentralized R&D work performed by different teams around the world c. Nationalizing R&D functions d. Increased interdependence between the headquarters and foreign subsidiaries of a company

b. Decentralized R&D work performed by different teams around the world

21. A chip company operating in Pakistan, a majority Muslim country, recently got into a public relations nightmare when the public discovered that the firm was using a pork based product in their chips. Many Muslim people do not eat pork. Which of the following aspects of the liability of foreignness is this an example of? a. Regulatory risks b. Difference of informal institutions c. Economic differences d. Existence of multiple currencies

b. Difference of informal institutions

17. _____ are based on ownership or financial interest between firms. a. Contractual alliances b. Equity-based alliances c. Acquisitions d. Mergers

b. Equity-based alliances

1. The global standardization strategy maximizes local responsiveness. a. True b. False

b. False

10. A joint venture is defined as a subsidiary located in a foreign country that is entirely owned by the parent multinational. a. True b. False

b. False

10. A manager whose approach to knowledge management is to install a sophisticated information technology (IT) infrastructure is one of the most valuable assets to knowledge management. a. True b. False

b. False

10. Equity, learning and experience, nationality, and relational capabilities have each been found to have a direct impact on alliance performance. a. True b. False

b. False

11. Relational capabilities are insignificant in making or breaking alliances. a. True b. False

b. False

13. A greenfield operation limits the equity and management control of and MNE, which gives joint ventures a comparative advantage. a. True b. False

b. False

13. From a resource-based standpoint, a fundamental basis for competitive advantage is innovation-based firm homogeneity. a. True b. False

b. False

14. Centralized research and development guarantees persistent heterogeneity in the solutions generated by a company. a. True b. False

b. False

15. While managing alliances, managers should keep in mind that soft-relationship aspects are secondary to strategic and organizational fit. a. True b. False

b. False

2. An acquisition is the combination of operations and management of two firms to establish a new legal entity. a. True b. False

b. False

3. Antitrust authorities are more likely to approve acquisitions as opposed to alliances. a. True b. False

b. False

3. Domestic and international competition share the pressure to reduce costs, but only domestic competition feels the pressure for local responsiveness. a. True b. False

b. False

3. In the context of entering into foreign business, firms with a strategic goal to seek market should select economies of scale and abundance of low-cost factors. a. True b. False

b. False

4. In the context of entering into foreign business, location advantages are the most important consideration. a. True b. False

b. False

4. When Henry Ford experimented with marketing "world car" designs, he was widely successful. a. True b. False

b. False

5. A Spanish firm specializing in textiles will be more successful if they first enter foreign markets with vastly different cultural norms than Spain. a. True b. False

b. False

6. According to the stage model, firms will enter culturally different countries during their first stage of internationalization and will then gain more confidence to enter culturally similar countries in later stages. a. True b. False

b. False

6. Global product division structure, which is the opposite of the geographic area structure, supports the transnational strategy. a. True b. False

b. False

8. Last movers will build precious relationships with key stakeholders such as customers and governments. a. True b. False

b. False

9. Equity, learning and experience, relational capabilities, and organization are the four factors that may influence alliance performance. a. True b. False

b. False

9. The pioneering status of first movers gives them the guarantee of success. a. True b. False

b. False

9. The stakeholders of an MNE (employees and world governments) gain confidence in the global aspirations of the MNE when the upper echelon of management consists largely of one nationality. a. True b. False

b. False

30. In the context of real options, which of the following is a disadvantage of entering into alliances? a. Investments are unlikely to be modified. b. Firms are most likely to choose the wrong partners. c. Alliances with other firms are most likely to fail. d. Entering into alliances is very costly.

b. Firms are most likely to choose the wrong partners.

32. Which of the following is a difference between first movers and late movers? a. First movers take advantage of the inflexibility of late movers, whereas late movers may be locked into a given set of fixed assets. b. First movers face greater technological and market uncertainties, whereas late movers take advantage of the solutions of the first movers. c. First movers may be able to free ride on the huge pioneering investments of late movers, whereas late movers have to make preemptive investments. d. First movers attract more late entrants, whereas late movers erect entry barriers for further entrants.

b. First movers face greater technological and market uncertainties, whereas late movers take advantage of the solutions of the first movers.

33. Citigroup was one of the first firms to enter Afghanistan, earning a good deal of goodwill from the Afghan government. This is an example of: a. Late-mover advantage through free riding on first-mover investments b. First-mover advantage through relationship building c. First-mover advantage through preemptive investments? d. Late-mover advantage through prior market adaptation

b. First-mover advantage through relationship building

50. Fly Wagons Inc. and Esca Motors Inc. are competing to acquire Charge Tool Inc., a spark plug manufacturing company, which is worth $5 million. Esca Motors quotes a bid of $10 million to acquire the company, and Fly Wagons quotes a bid of $20 million. In this scenario, which of the following approaches should be adopted by Fly Wagons for the acquisition? a. Fly Wagons should submit a bid of $30 million. b. Fly Wagons should drop the deal. c. Fly Wagons should continue bidding till Esca Motors gives up on Charge Tool. d. Fly Wagons should double the bid amount.

b. Fly Wagons should drop the deal.

17. Flarring Corp. is a well-known company that manufactures spare parts for automobiles. The company, based in Boston, expanded by entering the market of Nerodo. Even after 12 years of marketing in Nerodo, the company is on the verge of failure. In this case, which of the following factors could lead to the failure of Flarring Corp. in Nerodo? a. Decreased liability of foreignness b. Formal rules that are favorable to local firms c. Decreased competition from the local firms d. Products that are hard to imitate

b. Formal rules that are favorable to local firms

45. In the pre-acquisition phase, which of the following must be avoided by an acquirer to reduce the possibility of acquisition failure? a. Adopting a synergistic view b. Giving importance to executive hubris c. Taking actions to eliminate poor organizational fit d. Addressing stakeholders' concerns

b. Giving importance to executive hubris

43. Frolik Foods Inc., a fast food franchise in the United States, opens a new outlet in Germany. The franchise develops recipes in the U.S. and then transfers them to its outlets in Germany. Which of the following strategies is being used by Frolik Foods? a. Localization strategy b. Home replication strategy c. Global standardization strategy d. Transnational strategy

b. Home replication strategy

31. Which of the following is a leading problem with the international division organizational structure? a. It encourages the fragmentation of the multinational enterprises into fiefdoms. b. It does not give sufficient voice to foreign subsidiary managers relative to the heads of domestic divisions. c. It treats each product division as a stand-alone entity with full worldwide responsibilities. d. It does not allow a firm to focus on its domestic activities because it serves as a silo whose activities are not coordinated with the rest of the firm.

b. It does not give sufficient voice to foreign subsidiary managers relative to the heads of domestic divisions.

44. In the context of knowledge management, which of the following is true of multinational enterprises (MNEs) adopting a localization strategy? a. Knowledge is developed at the center and transferred to subsidiaries. b. Knowledge is developed and retained within each subsidiary. c. Knowledge is mostly developed and retained at the center and key locations. d. Knowledge is developed jointly and shared worldwide.

b. Knowledge is developed and retained within each subsidiary.

40. _____ can be defined as the structures, processes, and systems that actively develop, leverage, and transfer knowledge. a. Knowledge engineering b. Knowledge management c. Global standardization d. Global product division

b. Knowledge management

35. Which of the following statements is true of scale of entry? a. Small-scale entries experience higher liability of foreignness. b. Large-scale entries demonstrate a strategic commitment to certain markets. c. Small-scale entries face the difficulty of limited strategic flexibility elsewhere. d. Large-scale entries will face difficulty capturing first-mover advantages.

b. Large-scale entries demonstrate a strategic commitment to certain markets.

23. Dubai attracts numerous foreign entrants to engage in international business. It is an ideal stopping point for air traffic between Europe and Asia, and between Africa and Asia. Which of the following advantages has Dubai honed to attract foreign business? a. Late-mover advantage b. Location-specific advantage c. Export advantage d. Cultural advantage

b. Location-specific advantage

25. Firm A has a very laissez-faire culture of dress and work hours, while Firm B is very regulated and strict in those areas. This difference may prove to be a challenge in which aspect of forming an alliance? a. Strategic fit b. Organizational fit c. Relational capability d. Collaborative capability

b. Organizational fit

18. Ziff Tech Inc., a technological firm, funds Tictoe Corp., a computer processor designing company, with five percent of its annual revenue. Which of the following best describes the alliance between Ziff Tech and Tictoe Corp.? a. Acquisition b. Strategic investment c. Cross-shareholding d. Merger

b. Strategic investment

49. Arc Corp., a consumer goods manufacturer in Lumeria, proposed to merge with Borton Inc., a consumer goods manufacturer in Arkadas. Arc Corp. cleared the antitrust scrutiny in Lumeria but failed to anticipate a rigorous antitrust scrutiny in Arkadas. As a result, the merger never took place. In this scenario, which of the following is most likely the reason for the failure of the merger? a. The firms neglected the influence of informal institutions on the merger. b. The firms neglected the influence of formal institutions on the merger. c. The firms gave excessive importance to soft relational capabilities. d. The firms overpaid for their targets.

b. The firms neglected the influence of formal institutions on the merger.

41. Which of the following statements is true of research and development (R&D) contracts? a. They make innovations at relatively high cost. b. They are difficult to negotiate and enforce. c. Quality of a research is easy to assess. d. Firms build their core R&D capabilities in the long run.

b. They are difficult to negotiate and enforce.

42. In the context of an institution-based view, which of the following is true of hubristic motives driving acquisitions? a. They are a response to formal institutional constraints and transitions. b. They involve the display of herd behavior by chasing fads of acquisitions. c. They cause a firm to knowingly overpay for targets. d. They focus on leveraging superior resources.

b. They involve the display of herd behavior by chasing fads of acquisitions.

38. _____ is a non-equity mode of entry into a foreign market. a. Acquisition b. Turnkey project c. Joint venture d. Wholly owned subsidiary

b. Turnkey project

49. If generating returns from foreign markets is the goal, and returns are not being generated, which of the following strategies may be necessary? a. Changing strategic goals b. Withdrawing from those foreign markets c. Engaging in a price war d. Ignoring the liability of foreignness

b. Withdrawing from those foreign markets

44. Laelle Corp., a popular cosmetic brand in France, has decided to expand its business to Australia. The company enters into an agreement with a local firm in Australia by which the two companies share 50 percent equity. This mode of entry is an example of _____. a. a turnkey project b. a joint venture c. licensing d. co-marketing

b. a joint venture

46. A greenfield operation refers to: a. efforts among a number of firms to jointly market their products. b. building new factories and offices from scratch. c. a new entity jointly created and owned by two or more parent companies. d. exports and contractual agreements of smaller commitments to overseas markets.

b. building new factories and offices from scratch.

27. Informal institutions affect the formation of alliances and acquisitions by: a. imposing entry mode requirements. b. centering on collective norms, supported by a normative pillar. c. involving antitrust authorities to monitor the market. d. discouraging acquisitions.

b. centering on collective norms, supported by a normative pillar.

20. The two sets of pressures that multinational enterprises (MNEs) confront are _____. a. formal institutions and informal institutions b. cost reduction and local responsiveness c. liability of foreignness and investment risk d. explicit knowledge and tacit knowledge

b. cost reduction and local responsiveness

50. In the context of strategizing, structuring, and learning around the world, an implication for savvy managers will be to: a. understand and be prepared to change the external rules of the game governing multinational enterprise (MNE) management. b. develop learning and innovative capabilities to leverage multinational presence as an asset. c. focus on structuring the internal rules of the game for different strategies. d. develop the rules of the game and their transitions at both global and regional levels.

b. develop learning and innovative capabilities to leverage multinational presence as an asset.

35. Rues and West Bros. manufactures firearms. Since it lacks the skills and high-end technology needed to manufacture silencers for its firearms, it enters into an alliance with Porben Inc., a company that specializes in manufacturing silencers. In order to ensure the optimal utilization of Porben's technological capabilities, Rues and West Bros. is most likely to follow the _____ approach. a. contractual b. equity c. turnkey project d. licensing

b. equity

29. In the context of entry timing, _____ is defined as the benefit that accrues to firms that are late entrants in the market and that early entrants do not enjoy. a. late-mover advantage b. first-mover advantage c. location-specific advantage d. cultural advantage

b. first-mover advantage

30. Being a first mover in a market is advantageous for a firm because: a. it may have an opportunity to free ride on late-mover investments. b. it may gain advantage through proprietary technology. c. it would attract more firms to join their business network. d. it would face minimal technological and market uncertainties.

b. it may gain advantage through proprietary technology.

27. Asset Sports, a sports equipment manufacturing company based in India, specializes in cricket equipment. It establishes a new manufacturing plant in Brazil that specializes in soccer equipment. Based on the integration-responsiveness framework, the strategy adopted by Asset Sports is called a(n) _____. a. home replication strategy b. localization strategy c. transnational strategy d. acquisition strategy

b. localization strategy

33. In the context of organizing acquisitions, _____ is the similarity in culture, systems, and structures between two or more firms. a. strategic fit b. organizational fit c. relational capability d. collaborative capability

b. organizational fit

28. A _____ is an investment in real operations as opposed to financial capital. a. real unit b. real option c. real acquisition d. real expense

b. real option

46. What is the percentage of acquisitions that reportedly fail? a. 20% b. 40% c. 70% d. 90%

c. 70%

19. _____ refers to a business strategy in which each partner in an alliance holds stock in the other firm. a. Acquisition b. Strategic investment c. Cross-shareholding d. Merger

c. Cross-shareholding

20. Ocan Foods Inc., a food and beverage retailer, invests ten percent of its annual revenue in Bright Diaries Inc., a diary manufacturer. Bright Diaries, on the other hand, invests 15 percent of its annual revenue in Ocan Foods. Which of the following equity-based alliances is shown in the given scenario? a. Acquisition b. Contractual alliance c. Cross-shareholding d. Merger

c. Cross-shareholding

27. Palova Skin care, a famous cosmetic brand, is successfully engaging in international business with several countries. Contrary to the successes in foreign market, the recent attempts to expand its business in its neighboring country, Arkadas, has been unsuccessful, owing to its strict rules for women and perception of beauty. In this scenario, which of the following is most likely the reason for Palova's failure in Arkadas? a. Lack of natural resources b. Physical distance c. Cultural distance d. Lack of purchasing power

c. Cultural distance

18. Which of the following is a formal barrier to trade when foreign firms enter new markets? a. Differences in values b. Differences in norms c. Currency risk d. Cultural differences

c. Currency risk

34. KG Steel Co. is exporting steel bars at prices that are below what it costs to manufacture them, with the intent to raise prices after eliminating local rivals. This practice is known as: a. Extortion b. Market seeking c. Dumping d. Plunking

c. Dumping

19. _______ is an organizational structure often used to alleviate the disadvantages associated with both geographic area and global product division structures, particularly when adopting a transnational strategy. a. Geographic structure area b. Subsidiary initiative c. Global matrix d. Global product division

c. Global matrix

32. Which of the following statements is true of a geographic area structure? a. It is typically used when firms initially expand abroad. b. It reduces inefficient duplication in multiple countries. c. It encourages the fragmentation of the multinational enterprises into fiefdoms. d. It assigns global responsibilities to each product division across different countries.

c. It encourages the fragmentation of the multinational enterprises into fiefdoms.

34. Which of the following is a disadvantage of a global product division structure? a. It encourages the fragmentation of the multinational enterprises into fiefdoms. b. It increases inefficient duplication in multiple countries. c. It results in the suffering of local responsiveness. d. It is typically used when firms initially expand abroad.

c. It results in the suffering of local responsiveness.

29. Which of the following is a disadvantage of adopting a global standardization strategy? a. It is organizationally complex. b. It leads to local autonomy. c. It sacrifices local responsiveness. d. It is very difficult to implement.

c. It sacrifices local responsiveness.

46. In the context of knowledge management, which of the following is true of multinational enterprises (MNEs) adopting a global standardization strategy? a. Knowledge is developed at the center and transferred to the various subsidiaries. b. Knowledge is developed and retained within each subsidiary. c. Knowledge is mostly developed and retained at the center and key locations. d. Knowledge is developed jointly and shared worldwide.

c. Knowledge is mostly developed and retained at the center and key locations.

21. _____ means reacting to different consumer preferences and host-country demands. a. Global integration b. Global standardization c. Local responsiveness d. Home replication

c. Local responsiveness

24. The wind energy company Cloud Sail and the solar energy company Sun Burst recently formed a new legal entity called Cloud Burst. This action is known as a _____ between the two companies. a. Contractual alliance b. Equity based alliance c. Merger d. Acquisition

c. Merger

41. The proactive and deliberate pursuit of new opportunities by a subsidiary to expand its scope of responsibility is known as _____. a. Transnational growth b. Global standardization strategy c. Subsidiary initiative d. Opportunity pursuit

c. Subsidiary initiative

36. Which of the following approaches does not allow control over joint activities in an alliance? a. The joint venture approach b. The equity approach c. The contractual approach d. The cross-shareholding approach

c. The contractual approach

48. In the context of cross-border mergers and acquisitions (M&As), which of the following statements is true? a. There are no cultural differences if both sides are from the same continent. b. They do not involve major problems at the employee level. c. There are integration difficulties due to clashes of organizational and national cultures. d. They fail only because of poor strategic fit.

c. There are integration difficulties due to clashes of organizational and national cultures.

26. Which of the following is true of location-specific advantages? a. They are independent of cultural distance of the countries involved in a business. b. They continually grow irrespective of any changes in the formal institution. c. They decline when companies overcrowd or when taxes are raised. d. They can be enjoyed only as a late mover.

c. They decline when companies overcrowd or when taxes are raised.

44. In the context of an institution-based view, which of the following is true of managerial motives that drive acquisitions? a. They are a response to formal rules and regulations. b. They display herd behavior by chasing fads of acquisitions. c. They do not benefit a company overall in the long run. d. They cannot simultaneously coexist with hubristic and synergistic motives.

c. They do not benefit a company overall in the long run.

31. Which of the following statements is true of late movers? a. They face greater technological and market uncertainties. b. They drive some non-dominant firms abroad to avoid clashing with dominant firms in home market. c. They may be able to free ride on the huge pioneering investments of first movers. d. They may erect significant entry barriers for further entry by other firms.

c. They may be able to free ride on the huge pioneering investments of first movers.

42. In the context of modes of entry, _____ refers to efforts among a number of firms to jointly market their products and services. a. franchising b. licensing c. co-marketing d. a joint venture

c. co-marketing

43. Prime Vera is a company that sells electrical baking appliances in over 12 countries. It collaborates with Silibakes Inc. and sells silicon baking cups with its new range of electric oven. This mode of entry is an example of _____. a. a turnkey project b. franchising c. co-marketing d. a joint venture

c. co-marketing

38. Multinational enterprises appoint home-country nationals as the head of a foreign subsidiary because the home-country nationals: a. create a fiefdom of their enterprise in the host-country. b. can deal effectively with two bosses without any major conflict. c. have an understanding of the informal workings of multinational enterprises. d. focus on implementing a localization strategy.

c. have an understanding of the informal workings of multinational enterprises.

37. The party who begins the process of ending an alliance is labeled the _____. a. follower b. partner c. initiator d. retractor

c. initiator

41. Over a period of ten years, Laelle Corp., a technological firm, has acquired 15 companies. All the acquired companies were high-end technology providers. The company's intention was to leverage superior resources through these acquisitions. In this scenario, Laelle Corp.'s acquisitions are driven by a(n) _____. a. hubristic motive b. environmental motive c. synergistic motive d. ethical motive

c. synergistic motive

47. Unlike a transnational strategy, a global standardization strategy involves: a. the development and transfer of knowledge from the center to the subsidiaries. b. the joint development and sharing of knowledge worldwide. c. the development and retention of knowledge at the center and key locations. d. the development and retention of knowledge within each subsidiary.

c. the development and retention of knowledge at the center and key locations.

37. Altonland Inc., a pharmaceutical company based in the United States, generally appoints a U.S. national as the head of its foreign subsidiaries for the first few years after a subsidiary is established. The company has been following this practice from the time it started its overseas operations. The given scenario illustrates: a. a global standardization strategy. b. the formal rules of the game. c. the informal rules of the game. d. a localization strategy.

c. the informal rules of the game.

43. According to the hubristic motive, a winning acquirer may suffer from what is called the ''winner's curse'' when: a. the market price of target firms do not reflect their intrinsic value. b. multiple firms are bidding for multiple targets. c. the winner has overpaid during an acquisition. d. the winner has not paid the acquisition premium.

c. the winner has overpaid during an acquisition.

39. _____ is defined as a project in which clients pay contractors to design and construct new facilities and train personnel. a. An acquisition b. A joint venture c. A greenfield project d. A turnkey project

d. A turnkey project

38. The alliance between Nilesmith Corp. and Pentrall Inc. is set to dissolve. Both the companies are engaged in extensive negotiations with new alliance partners. Which of the following stages of alliance dissolution is shown in the given scenario? a. Going public b. Initiation c. Uncoupling d. Aftermath

d. Aftermath

22. Which of the following is an effect of adopting a local responsiveness strategy? a. Standardized products are developed and distributed. b. Home-country-based competencies are duplicated in foreign countries. c. Regulations on local products are loosened. d. Costs of products and services are increased.

d. Costs of products and services are increased.

17. The business leader of a specific country (or a geographic region) is known as a(n) ______: a. International division b. Locality c. Regional executive d. Country manager

d. Country manager

28. TrinkCan Inc., a soft drink company in Wales, establishes new branches in England, Australia, and the United States. To minimize its costs, the company uses similar packaging, distribution, and promotion across all the countries. According to the integration-responsiveness framework, which of the following strategies is used by TrinkCan? a. Home replication strategy b. Localization strategy c. Transnational strategy d. Global standardization strategy

d. Global standardization strategy

26. Which of the following is true of a localization strategy? a. It has low costs due to duplication of efforts in multiple countries. b. It promotes diffusion of innovation in multiple ways. c. It involves the development and distribution of standardized products worldwide. d. It is effective when pressures for cost reductions are low.

d. It is effective when pressures for cost reductions are low.

33. Which of the following statements is true of a global product division structure? a. It encourages the fragmentation of multinational enterprises into fiefdoms. b. It increases inefficient duplication in multiple countries. c. It is typically used when firms initially expand abroad. d. It is highly responsive to cost reduction pressures.

d. It is highly responsive to cost reduction pressures.

48. In the context of knowledge management, which of the following is true of multinational enterprises (MNEs) adopting a transnational strategy? a. Knowledge is developed at the center and transferred to subsidiaries. b. Knowledge is developed and retained within each subsidiary. c. Knowledge is mostly developed and retained at key locations. d. Knowledge is developed jointly and shared worldwide.

d. Knowledge is developed jointly and shared worldwide.

39. A strain between Firm A (an American company) and Firm B (a Saudi Arabian company) was created when Firm B asked the female executives of Firm A to wear headscarves during meetings. Which factor influencing alliance performance is this an example of? a. Hubristic motivation b. Strategic planning c. Relational capacities d. Nationality

d. Nationality

16. Ink Struck Inc., a publishing company, wants to expand its market worldwide. In this case, which of the following will be a challenge faced by Ink Struck Inc. in host countries? a. Decreased legal differences b. Decreased competition for its products in the host country c. Loss of control over the operations d. Overcoming liability of foreignness due to its nonnative status

d. Overcoming liability of foreignness due to its nonnative status

31. Which of the following is true of relational capabilities while managing interfirm relationships? a. They emphasize competition rather than collaboration. b. They foster potential partner opportunism. c. They are covered in the traditional business school curriculum. d. They are rarely found in managers involved in alliances.

d. They are rarely found in managers involved in alliances.

40. Pro-creations Corp., a tool manufacturing company, has decided to expand its business internationally. Consequently, the company has paid a contractor to construct a manufacturing facility and an office. When the project is complete and ready for operation, the contractor will hand over the facility to Pro-creations Corp. to pursue its business. This mode of entry into international market is an example of _____. a. a franchise b. a greenfield project c. a joint venture d. a turnkey project

d. a turnkey project

21. A(n) _____ is a transfer of the control of operations and management from one firm to another. a. strategic investment b. equity-based alliance c. merger d. acquisition

d. acquisition

22. Genra Technologies, a computer manufacturer that specializes in custom-built computers, recently entered into an agreement with Fronton Corp., a computer hardware manufacturer. According to the agreement, the operations and management control of Fronton Corp. will be transferred to Genra Technologies. In addition, Fronton Corp. will be a unit of Genra Technologies. The given scenario is an example of a(n) _____. a. strategic investment b. contractual alliance c. merger d. acquisition

d. acquisition