MGMT 4860 Ch 7,8,9

Which of the following are characteristics of strategic alliances and joint ventures among foreign partners? 1. communication, trust-building, and coordination costs may be high 2. diverse and conflicting operating practices may be observed 3. differences in corporate values and ethics may lead to tension 4. problems due to language and cultural barriers tend not to exist

1. communication, trust-building, and coordination costs may be high 2. diverse and conflicting operating practices may be observed 3. differences in corporate values and ethics may lead to tension

Which of the following are measures used in calculating industry attractiveness scores in a diversified company? 1. market size and projected growth rate 2. use of third-party contract manufacturing the business units 3. social, political, regulatory, and environmental factors 4. emerging opportunities and threats.

1. market size and projected growth rate 3. social, political, regulatory, and environmental factors 4. emerging opportunities and threats.

Diversified companies might find it desirable to add their existing business lineup for which of the following reasons? 1. counter unfavorable driving forces facing core businesses 2. make use of the potential for transferring resources and capabilities to other related businesses 3. weaken the market position of one of its existing businesses 4. address vulnerabilities due to seasonal or recessionary influences.

1. counter unfavorable driving forces facing core businesses 2. make use of the potential for transferring resources and capabilities to other related businesses 4. address vulnerabilities due to seasonal or recessionary influences.

Which of the following are advantages of licensing? 1. eliminates cost of entering foreign markets 2. allows additional income from royalties in foreign markets 3. eliminates risk associated with committing resources in risky foreign markets 4. provides valuable technological know-how to foreign companies

1. eliminates cost of entering foreign markets 2. allows additional income from royalties in foreign markets 3. eliminates risk associated with committing resources in risky foreign markets

Which of the following are considered advantages of franchising as a strategic option for foreign entry? 1. franchisee bears most of the costs and risks vs the franchisor 2. franchising makes franchisors responsible for recruiting and training 3. franchisees are almost always highly committed to consistency and standardization even in foreign locations 4. compared to licensing, franchising works better for global expansion of service and retailing firms.

1. franchisee bears most of the costs and risks vs the franchisor 2. franchising makes franchisors responsible for recruiting and training 4. compared to licensing, franchising works better for global expansion of service and retailing firms.

Evaluating each business unit's strength and competitive position in its industry 1. indicates each business units likelihood of success 2. cannot meaningfully be done in a highly unrelated diversification strategy. 3. serves as a guide for ordering the units from competitively strangest to weakest. 4. is performed using calculations similar to an assessment of overall industry attractiveness

1. indicates each business units likelihood of success 3. serves as a guide for ordering the units from competitively strangest to weakest. 4. is performed using calculations similar to an assessment of overall industry attractiveness

In which of the following situations is the corporate restructuring an appealing business strategy? 1. many of the company's business are in slow-growth or low-margin industries 2. company has an excessive debt burden and interest payments 3. new technologies threaten one or more important business of the company 4 major business in the company experience ongoing growth in market share.

1. many of the company's business are in slow-growth or low-margin industries 2. company has an excessive debt burden and interest payments 3. new technologies threaten one or more important business of the company

Economies of scope 1. are cost reductions stemming from strategic fit along the value chains of related businesses. 2. can be the result of a related strategy that allows businesses to share technology, facilities, or a common salesforce. 3. are important in achieving a cost-based competitive advantage in a related diversification strategy. 4. are cost savings that accrue directly form a larger operations, such as lower unit costs in a large plant vs. a small plant.

1. are cost reductions stemming from strategic fit along the value chains of related businesses. 2. can be the result of a related strategy that allows businesses to share technology, facilities, or a common salesforce. 3. are important in achieving a cost-based competitive advantage in a related diversification strategy.

Which of the following are considered good strategic options for competing in developing countries? 1. avoid emerging markets where the company's business model cannot be modified to accommodate local circumstances 2. avoid competing on the basis of price and instead appeal to consumers sentimentality 3. try to change the local markets to better match the way the company does business elsewhere 4. maintain the business model used in the firms home country despite local circumstances

1. avoid emerging markets where the company's business model cannot be modified to accommodate local circumstances 3. try to change the local markets to better match the way the company does business elsewhere

Which of these are key strategic decisions that top-level managers must make in crafting a company's diversification strategy? 1. choosing new industries to enter and deciding how to enter those industries 2. seeking buyers for a company's extra business units so they can pare operations down to one core business 3. finding ways to leverage cross-business value chain relationships into competitive advantage 4. investing the company's resources into the most attractive business units 5. taking action to improve the collective performance of all of the company's businesses.

1. choosing new industries to enter and deciding how to enter those industries 3. finding ways to leverage cross-business value chain relationships into competitive advantage 4. investing the company's resources into the most attractive business units 5. taking action to improve the collective performance of all of the company's businesses.

A diversified company can gain from value chain match-ups that present which of the following? 1. opportunities to combine the performance of activities that will reduce costs and capture economies of scope. 2. opportunities to transfer skills, technology, or intellectual capital between businesses. 3. opportunities for interaction between the businesses of a diversified company where all the businesses are unrelated. 4. opportunities to share a well-respected brand name across product or service categories.

1. opportunities to combine the performance of activities that will reduce costs and capture economies of scope. 2. opportunities to transfer skills, technology, or intellectual capital between businesses. 4. opportunities to share a well-respected brand name across product or service categories.

An unrelated diversification strategy 1. represents a willingness by senior management to diversify into any industry where there are opportunities to improve financial results. 2. also called conglomerate 3. usually executed through internal development 4. a company's attempt to achieve competitive advantage in one specific industry

1. represents a willingness by senior management to diversify into any industry where there are opportunities to improve financial results. 2. also called conglomerate

Strategic fit among businesses can enhance shareholder value by 1. sharing facilities or resources to reduce costs. 2. leveraging use of a common brand name 3. transferring skills and capabilities from one business to another. 4. spreading risk across completely different businesses.

1. sharing facilities or resources to reduce costs. 2. leveraging use of a common brand name 3. transferring skills and capabilities from one business to another.

Which of the following is an important consideration in evaluating the potential for strategic fit to deliver competitive advantage and shareholder value in a related diversification strategy? 1. the benefits of cross business strategic fit are not obtained unless management successfully takes internal actions to reach them. 2. Capturing strategic fit through related diversification builds shareholder value in ways that diversified stock portfolio cannot. 3. if the businesses cannot deliver shareholder value as a stand-alone firms, then competitive advantage through strategic fit is unlikely to occur. 4. Realizing cross-business strategic fit benefits is possible only through related diversification.

1. the benefits of cross business strategic fit are not obtained unless management successfully takes internal actions to reach them. 2. Capturing strategic fit through related diversification builds shareholder value in ways that diversified stock portfolio cannot. 4. Realizing cross-business strategic fit benefits is possible only through related diversification.

Under which of the following conditions is a joint venture, a diversified strategy, a strategically good idea? 1. when the expansion-minded company wants to minimize risk in entering an industry with significant political and regulatory factors. 2. when the opportunity involves too much risk or complexity for one company to pursue alone 3. when the expansion-minded company wants to ensure a long-term business arrangement with a partner that fits with their diversification goals. 4. when the opportunities in the new industry require a broader range of capabilities and knowledge than an expansion-minded company has.

1. when the expansion-minded company wants to minimize risk in entering an industry with significant political and regulatory factors. 2. when the opportunity involves too much risk or complexity for one company to pursue alone 4. when the opportunities in the new industry require a broader range of capabilities and knowledge than an expansion-minded company has.

Which of the following are examples of government policies that can negatively affect the operations of foreign companies in their markets? 1. lifting a ban that requires local ownership stakes in foreign company operations in their country 2. charging import tariffs and quotas 3. requiring prior approval of capital spending projects 4. specifying that products contain a certain percentage of locally produced parts and components

2. charging import tariffs and quotas 3. requiring prior approval of capital spending projects 4. specifying that products contain a certain percentage of locally produced parts and components

When conditions allow corporate executives to stick closely with the existing business lineup, they are likely to do which of the following? 1. begin to restructure through new business acquisitions 2. direct corporate resources to the areas with the greatest profitability 3. see to retrench to a narrower diversification base 4. focus on getting the best performance from each of the firms businesses.

2. direct corporate resources to the areas with the greatest profitability 4. focus on getting the best performance from each of the firms businesses.

Which of the following are reasons why a company would expand outside its domestic market to international locations? 1. Solidify market share without entering foreign markets 2. gain access to new customers 3. achieve lower costs 4. gain access to resources in foreign markets

2. gain access to new customers 3. achieve lower costs 4. gain access to resources in foreign markets

Which of the following countries have a higher hrly compensation for manufacutring than the US as of 2015 1. japan 2. norway 3. china 4. germany

2. norway 4. germany

Which of the following are financial options for allocating financial resources in a diversified company 1. making acquisitions to establish positions in new industries 2. paying off existing long-term and short-term debt. 3. repurchasing shares of the company's common stock 4. increasing dividend payments to shareholders.

2. paying off existing long-term and short-term debt. 3. repurchasing shares of the company's common stock 4. increasing dividend payments to shareholders.

Under which of the following conditions does it make more sense to enter a foreign country by establishing a subsidiary from scratch vs acquiring a foreign company? 1. when there is a need for a less risky and cost-efficient means to hurdle barriers of foreign entry 2. when a start up subsidiary will have the size, cost structure, and resource to compete head to head against local rivals 3. when start up subsidiary has the ability to gain good distribution access 4. when adding new production capacity will not adversely impact the supply-demand balance in a foreign market

2. when a start up subsidiary will have the size, cost structure, and resource to compete head to head against local rivals 3. when start up subsidiary has the ability to gain good distribution access 4. when adding new production capacity will not adversely impact the supply-demand balance in a foreign market

Under which of the following condition is it desirable to disperse internal processes across many international locations? 1. when there are low transportation costs that reduce overhead 2. when there are high cross-border trade barriers 3. when diseconomies of large size make it expensive to operate from a single location 4. when byer-related activities need to be located close to buyers

2. when there are high cross-border trade barriers 3. when diseconomies of large size make it expensive to operate from a single location 4. when byer-related activities need to be located close to buyers

Which one of the following is not a factor that a company must contend with in competing in the markets of foreign countries? Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences Country-to-country variations in host-government policies and trade requirements Product designs suitable for one country are sometimes inappropriate in another Vulnerability to adverse shifts in currency exchange rates A need to convince shippers to keep transportation costs low

A need to convince shippers to keep transportation costs low

Which of the following is NOT one of the elements of crafting corporate strategy for a diversified company? A. picking new industries to enter and deciding on the means of entry B. Standardizing the resource fit across the group of businesses the company has diversified into C. pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage D. establishing investment priorities and steering corporate resources into the most attractive business units E. initiating actions to boost the combined performance of the businesses the firm has entered

B. Standardizing the resource fit across the group of businesses the company has diversified into

Which of the following is not a potential motivation for entering into strategic alliances or other cooperative arrangements with foreign companies? Gain wider access to attractive country markets Gain better access to scale economies in production and/or marketing Fill competitively important gaps in their technical expertise and/or knowledge of local markets Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization Share distribution facilities and dealer networks, thus mutually strengthening the allies' access to buyers

Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization

Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct? Observing and following the lead of local competitors is the sole guarantee of success in developing markets. Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. Entering an emerging market should always involve a best-cost strategy. Standardized products are typically more successful in emerging country markets. Profitability always comes quickly to entrants into developing markets because of global branding

Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers.

In terms of purchasing power, which of the following countries is the largest economy after the United States China India Russia UK

China

Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of developing country markets? Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals. Prepare to compete on the basis of low price. Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding). Try to change the local market to better match the way the company does business elsewhere. Stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.

Develop new sets of core competencies that allow a company to offer value to consumers of

Which one of the following statements concerning the impact of fluctuating exchange rates on companies competing in foreign markets is not true? Fluctuating exchange rates pose significant risks to a company's competitiveness in foreign markets. Exchange rate shifts can produce sometimes favorable and sometimes unfavorable effects on a company's competitiveness. Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made. Exporters win when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries to which goods are being exported. If the exchange rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has grown weaker.

Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

A significant risk in the desirability of a country for low-cost manufacturing is an adverse change in the country's currency _____________ rate

Exchange

To hedge against risks of fluctuating exchange rates and adverse political developments, it would be strategically advantageous for a transnational company to locate advertising and after-sale services in different country from that of its buyer carry out value change activities in only a few locations disperse internal processes across many countries limit internal processes to only a few countries

disperse internal processes across many countries

In a _________, one central business accounts for 50 to 80% of total revenues and several smaller businesses contribute the rest. dominate-business enterprise broadly diversified firm mixed-diversified enterprise narrowly diversified firm

dominate-business enterprise

T/F Resource fit in a diversified company extends beyond financial resources.

T

T/F a company can maintain a national, one-country production base and expand its domestic market by exporting

T

T/T Diversification into new industries merits strong consideration when a single-business company encounters diminishing market opportunities and stagnating sales in its principal business.

T

Which of the following most accurately defines related businesses? The businesses depend on the same set of suppliers for key materials and inputs. the value chain of the businesses possess competitively valuable cross-business relationships businesses use an overlapping marketing strategy targeting essentially the same customer groups the businesses all sell the same products within the same industry.

the value chain of the businesses possess competitively valuable cross-business relationships

Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets? The ability to shift the costs and risks to the licensee The ability to generate income from royalties The ability to enter international markets even though the company lacks international organizational capabilities and the resources to do so The ability to avoid risks of committing resources to country markets that are unfamiliar or otherwise risky The ability to safeguard the company's technical know-how or patents

The ability to safeguard the company's technical know-how or patents

Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous when high transportation costs make it expensive to operate from central locations. whenever buyer-related activities are best performed in locations close to buyers. if economies of scale are essential to achieving acceptable production costs. Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers. if trade barriers and transportation costs fall, making it more profitable to operate from a central location in the company's home market.

Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers.

A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when customer preferences vary significantly from country to country. it is necessary to delegate strategy making to local managers with firsthand knowledge of local conditions. plants need to be scattered across many countries to avoid high shipping costs. country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy. host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.

country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy.

The strategic appeal of related diversification is that it: a) Allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities. b) Is less capital intensive than unrelated diversification because related diversification emphasizes getting into cash cow businesses (as opposed to cash hog businesses). c) Involves diversifying into industries having the same kinds of key success factors. d) Is less risky than unrelated diversification because it avoids the acquisition of cash hog businesses. e) facilitates the achievement of greater economies of scale since the company only enters those businesses that serve the same types of buyer groups and/or buyer needs.

a) Allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities.

Assessing the competitive advantage potential of cross-business strategic fit among the company's various business units involves: a) Examining a company's costs relative to the costs of its chief rivals in the industry. b) Evaluating how much benefit a diversified company can gain from cross-business value chain matchups and resource sharing. c) Considering what competitive value can be generated from a strategic fit. d) Determining if there are opportunities to exploit outsourcing opportunities by a diversified company's lineup of businesses. e) evaluating a diversified company's profitability relative to its competitors.

a) Examining a company's costs relative to the costs of its chief rivals in the industry.

As a strategy for diversification, _________ allows a company to move straight to building a strong market position in the target industry without getting tangled up in launching a start-up. starting a subsidiary a joint venture acquisition internal development

acquisition

The advantages of manufacturing goods in a particular country and exporting them to foreign markets are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country. are greatest when local consumers prefer products manufactured inside the country's borders. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. are largely unaffected by tariffs or quotas.

are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold.

The basic purpose of calculating competitive strength scores for each of a diversified company's business units is to: a) Determine which business unit has the greatest number of resources, competencies, and competitive capabilities and which one has the least. b) Assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender. c) Rank each business unit's strategic fit from highest to lowest. d) Rank each business unit's resource fit from highest to lowest. e) rank each business unit's strategy from best to worst.

assess how strongly positioned each business unit is in its industry and the extent to which it already is or can become a strong market contender.

Which of the following does not accurately describe entering a new business via acquisition, internal development, or a joint venture? a) The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for a successful company or to buy a struggling company at a bargain price. b) 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. c) Acquisition is the most popular means of diversifying into another industry, has the advantage of being quicker than trying to launch a brand-new operation, and offers an effective way to hurtle entry barriers. d) Joint ventures are an attractive way to enter new businesses when the opportunity is too complex, uneconomical, or risky for one company to pursue alone, when the opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its own, and/or when it aids entry into a foreign market. e) The big drawbacks to entering a new industry via internal development include the costs of overcoming entry barriers, building an organization from the ground up, and the extra time it takes to build a strong and profitable competitive position.

b) 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 strategic business units generate operating cash flows over and above internal requirements, thereby providing financial resources that may be used to finance new acquisitions, fund share buyback programs, or pay dividends? a) Cash hogs b) Cash cows c) Star businesses d) Stars e) cash dogs

b) Cash cows

Once a firm has diversified and established itself in several different businesses, then its main strategic alternatives include all but which one of the following? a) Broadening the firm's business scope by diversifying into additional businesses. b) Shifting from a multiple-country to a global strategy. c) Restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup. d) Sticking closely with the existing business lineup and pursuing the opportunities these businesses present. e) Divesting some businesses and retrenching to a narrower base of business operations

b) Shifting from a multiple-country to a global strategy.

Which of these is the last step in evaluating the strategy of a diversified company? assessing the competitive strength of the business units checking whether the firms resources fit the requirements of its present business lineup crafting new strategic moves to improve overall corporate performance assessing the attractiveness of the industries represented by the company's business units.

crafting new strategic moves to improve overall corporate performance

The defining characteristic of unrelated diversification (as opposed to related diversification) is: a) The presence of cross-business resource fit (whereas the defining characteristic of related diversification is the presence of cross-business strategic fit). b) That the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities). c) The presence of cross-business strategic fit (whereas the defining characteristic of related diversification is the presence of cross-business resource fit). d) That the company's businesses are in different industries. e) the presence of cross-business financial fit.

b) That the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities).

The defining characteristic of related diversification (as opposed to unrelated diversification) is a) That the diversified businesses are utilizing similar competitive strategies. b) The presence of cross-business value chain relationships and strategic fits. c) That each business the company has diversified into has very similar core competencies and competitive capabilities. d) That the company has about the same number of cash cow businesses as it has cash hog businesses. e) the existence of cross-industry resource fits and similar key success factors from industry to industry.

b) The presence of cross-business value chain relationships and strategic fits.

The multidomestic strategy of "think local, act local" is most appropriate when the need for local responsiveness is low. avoids host country ownership requirements and import quotas. facilitates the transfer of a company's capabilities, knowledge, and other resources across country borders. is the only global market entry strategy conducive to building a single worldwide competitive advantage. becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly

becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly

In justifying diversification as a strategy to build shareholder value, the _____ test says that diversifying into a new business must offer potential for the company's existing business and the new business to perform better after consolidation than a stand alone business. better-off industry attractiveness cost of entry 1+1=3

better-off

Which of the following is not an example of unrelated diversification? a) Homebuilder acquiring a forest products company b) A manufacturer of golf shoes acquiring a retailer of fishing rods and lures c) A producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans) d) A steel producer acquiring a hardware store e) An online merchandiser acquiring a retail supermarket that specializes in natural and organic foods

c) A producer of snow skis and ski boots acquiring a maker of ski apparel and accessories (outerwear, goggles, gloves and mittens, helmets and toboggans)

Ranking a diversified company's businesses in terms of priority for resource allocation and new capital investment: a) Should be done chiefly on the basis of appealing industry attractiveness and resource fit and secondarily on the basis of competitive strength and strategic fit with other businesses. b) Entails arraying the various businesses from the biggest cash hog down to the biggest cash cow; big cash hogs get the highest priority for resource allocation and big cash cows get the lowest priority. c) Should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits. d) Should be based chiefly on relative market share, recent profitability, and potential for achieving cash cow status. e) should be based primarily on cross-business resource fit considerations, each business unit's relative market share, and each business's projected ability to cover its debt payments and generate positive cash flows.

c) Should be done principally on the basis of which businesses offer the best prospects (given their industry attractiveness and competitive strength) and have solid and appealing strategic fits and resource fits.

Economies of scope: a) Are derived from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic area. b) Have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain. c) Stem from cost-saving strategic fits along the value chains of related businesses. d) Refer to the cost savings that flow from being able to combine the value chains of different businesses into a single value chain. e) are like economies of scale and arise from being able to lower costs via a larger volume operation.

c) Stem from cost-saving strategic fits along the value chains of related businesses.

Using domestic plants as a production base for exporting goods to selected foreign country markets is usually a superior approach to competing in international markets. can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country. can be an excellent initial strategy to pursue international sales. is usually a weak strategy when competitors are pursuing licensing strategies. can be a powerful strategy because the company is not vulnerable to tariffs or quotas.

can be an excellent initial strategy to pursue international sales.

Global and multinational corporates are able to achieve ___________ advantages by coordinating activities across national borders.

competitive

When there is a steep learning curve associated with performing an internal activity, a company operating internationally should shut down its foreign locations in order to limit the risk of excessive overhead. disperse production over many locations to take advantage of multiple cross=cultural resources in moving up the learning curve more rapidly. use a multidomestic approach to manufacturing, delegating operations to local country managers to determine manufacturing processes. concentrate production in only a few locations to increase the experience of the plants workforce as rapidly as possible.

concentrate production in only a few locations to increase the experience of the plants workforce as rapidly as possible.

One of the big strategic issues in expanding internationally is how much to charge for licensing a company's brand in a foreign market customizing products in each country market to match preferences of local buyers vs. competitive pressure to keep costs down. adapting to language differences determine whether to employ an international or global strategy in the early stages of entering a company's largest foreign markets.

customizing products in each country market to match preferences of local buyers vs. competitive pressure to keep costs down.

Checking a diversified company's business lineup for resource fit does not involve which one of the following "tests"? a) Determining whether a company has or can develop the specific resources and competitive capabilities needed to be successful in each of its businesses. b) Determining whether recently acquired businesses are acting to strengthen the company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thin. c) Determining whether each business adequately contributes to achieving companywide performance targets. d) Determining whether the company has enough cash hog businesses to supply capital to its cash cow businesses. e) Determining whether the company has adequate financial strength to fund the needs of its various businesses and maintain a healthy credit rating

d) Determining whether the company has enough cash hog businesses to supply capital to its cash cow businesses.

Which of the following makes acquisition an attractive approach to diversifying into another industry? a) If it is not time-consuming and allows the firm to realize great profits and a sustainable competitive advantage b) Only if it is less expensive, less risky, and more effective than launching a new startup operation c) If it satisfies all three diversity tests (industry attractiveness test, cost-of-entry-test, better-off test) to grow shareholder value over the long term d) If it is quicker than trying to launch a brand-new operation, offers an effective way to hurtle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry e) If due diligence and integration can be done easily and at low cost

d) If it is quicker than trying to launch a brand-new operation, offers an effective way to hurtle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry

Calculating quantitative attractiveness ratings for the industries a company has diversified into involves: a) Determining the strength of the five competitive forces in each industry, calculating the ability of the company to overcome or contend successfully with each force, and obtaining overall measures of the firm's ability to compete successfully in each of its industries. b) Determining each industry's average profit margins, calculating how far the firm's profit margins are above or below the industry averages, and then using these values to draw conclusions about industry attractiveness. c) Rating the attractiveness of each industry's strategic and resource fit, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not. d) Selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group. e) identifying each industry's average price, rating the difficulty of charging an above-average price in each industry, and deciding whether the company's prospects for being able to charge above-average prices make the industry attractive or unattractive.

d) Selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.

To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests: a) The attractiveness test, the barrier-to-entry test, and the growth test. b) The strategic fit test, the resource fit test, and the profitability test. c) The barrier-to-entry test, the growth test, and the shareholder value test. d) The attractiveness test, the cost-of-entry test, and the better-off test. e) the resource fit test, the strategic fit test, the profitability test, and the shareholder value test.

d) The attractiveness test, the cost-of-entry test, and the better-off test.

The Nine-Cell Industry Attractiveness-Competitive Strength Matrix: a) Is a valuable tool for ranking a company's different businesses from best to worst based on strategic fit. b) Shows which of a diversified company's businesses have a good or poor resource fit. c) Indicates which businesses have the highest or lowest economies of scale and which have the highest or lowest economies of scope. d) Involves assigning quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix; the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness. e) pinpoints which of a diversified company's businesses are resource-rich cash cows and which are resource-poor cash hogs.

d) involves assigning quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix; the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness.

In a company pursuing unrelated diversification, the objective is to acquire as many businesses as possible within a short time frame to signal to shareholders that the diversification strategy is very aggressive. divest any businesses that do not have cross-strategic business fit with their value chains earn an immediate and short-term return on investments to please shareholders deliver returns that on average rise enough annually to reward shareholders.

deliver returns that on average rise enough annually to reward shareholders.

Which of the following is the biggest strategic issue when competing in the markets of foreign countries? determining whether to standardize or customize the company's offerings. learning about the regulation processes and political and capital requirements of each country market. selecting among global, transnational, or international entry strategies. deciding which price strategy to follow. avoiding the risks posed by fluctuating exchange rates.

determining whether to standardize or customize the company's offerings.

The procedure for evaluating a diversified company's strategy involves all of the following steps except: a) Checking whether the firm's resources fit the requirements of its present business lineup. b) Assessing the competitive strength of each business the company has diversified into and determining which ones are strong or weak contenders in their respective industries. c) Ranking the performance prospects of the various businesses from best to worst and determining what the corporate parent's priorities should be in allocating resources to its different businesses. d) Checking the competitive advantage potential of cross-business strategic fit among the company's various business units. e) A determination of the degree of risk involved with each business unit.

e) A determination of the degree of risk involved with each business unit.

As long as a single-business company can achieve profitable growth opportunities in its present industry, a) It needs to avoid putting all of its "eggs" in one industry basket. b) It will face diminishing market opportunities and stagnating sales in its principal business. c) Its opportunities are limited to leverage existing competencies and capabilities by expanding into businesses where these same resources are key success factors and valuable competitive assets. d) It has diminished prospects to lower costs by entering closely related businesses and/or an opportunity to transfer a powerful and well-respected brand name to the products of other businesses and thereby increase the sales and profits of these newly entered businesses. e) There is no urgency to pursue a diversification strategy.

e) There is no urgency to pursue a diversification strategy.

____________ are cost reductions stemming from strategic fit along the value chains of related businesses strategic diversification economies of scope competitive fit economies of scale

economies of scope

when firms want control over all aspects of value chain activities in a foreign market they establish a subsidiary create franchises license export

establish a subsidiary

Of the various international expansion strategies, the most conservative way to "test the waters" as a conservative mode of entry is licensing exporting creating a foreign subsidiary franchising

exporting

A "think local, act local" multidomestic type of strategy: focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business. always makes a company vulnerable to rivals employing "think global, act global" strategies. protects a multinational firm against fluctuating exchange rates.is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy. employs essentially the same basic competitive strategy theme in all country markets.

focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business.

A key problem with _________ as a foreign entry strategy is whether to allow the foreign company to tailor products to tastes and preferences of local buyers vs. insisting on worldwide standardization of products regardless of local expectations

franchising

The primary reasons that companies opt to expand into foreign markets are to: boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.

gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.

Companies that compete in _____ industries are best suited for a global strategy transnationally consistent globally standardized locally differentiated manufacturing

globally standardized

A star business generates operating cash flows that are too small to fully fund is operations and growth, and must receive cash from the parent company. generates operating cash flows over and above its internal requirements but has few financial resources that can be invested elsewhere. often results from investing in a promising cash cow business overtime. has a strong or market-leading competitive position in an attractive, high-growth market and a high level of profitability.

has a strong or market-leading competitive position in an attractive, high-growth market and a high level of profitability.

The advantages of using a franchising strategy to pursue opportunities in foreign markets include: being particularly well-suited to the international expansion efforts of companies with global strategies. having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees. helping build brand awareness in international markets. being well suited to companies that employ cross-market subsidization. gaining support from local governments in the form of subsidies and meeting local content requirements.

having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees.

Ranking the performance prospects of business units in a diversified company from best to worst should largely be determined by where resources are currently being allocated among the business units. helps corporate management decide where to allocate resources and capital investments among the business units. should not take into consideration past financial performance of the businesses since it does not guarantee future performance indicates which businesses are cash hogs that will need additional investment

helps corporate management decide where to allocate resources and capital investments among the business units.

In order to minimize its direct investments in foreign countries, companies pursue a strategy of entering into a joint venture with a foreign company home-based production and exports franchising establishing a foreign subsidiary

home-based production and exports

Which of these is not one of the steps in evaluating the strategy of a diversified company? assessing the competitive strength of the business units ranking the performance prospects of the business from best to worst and determining how to allocate resources. independently evaluating the value chain of each business unit as a stand-alone entity. assessing the attractiveness of the industries represented by the company's business units.

independently evaluating the value chain of each business unit as a stand-alone entity.

in a nine-cell matrix for evaluating the strength of a diversified company's business lineup, __________ is plotted on the vertical axis and ________ is plotted on the horizontal axis. percentage of revenue generated; resource allocation priority industry attractiveness; competitive strength competitive strength; industry attractiveness importance weight; industry rating

industry attractiveness; competitive strength

_______________ requires creating a new business subsidiary from its inception related diversification international expansion internal development external development

internal development

When a company has a valuable technical know-how or a unique patented product but neither the international organizational capability nor resources to enter a foreign market on its own it can pursue a ______________ Strategy. licensing host-country manufacturing foreign subsidiary strategy exporting

licensing

Export-minded firms in industrialized nations have historically sought alliances with firms in less developed countries to import and market products locally, due to local government regulations limits on exports low costs of tariffs in less-developed countries lack of employees who spoke foreign languages

local government regulations

The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that a "think global, act local" approach involves charging much different prices in the various country markets where the company competes. a "think global, act local" approach involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets. a "think global, act local" approach involves considerably less adherence to utilizing the same capabilities, distribution channels, and marketing approaches worldwide. local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions. a "think global, act global" approach involves selling under a single brand worldwide, whereas a "think global, act local" approach involves the use of multiple brands (often a local brand for each local market).

local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions.

When there are significant country-to-country differences in customer preferences and buying habits and significant cross-country differences in distribution channels and marketing, a __________ strategy is essential pan-country transnational multidomestic foreign

multidomestic

Thinning out unwanted businesses to form a more narrow diversification base normally improves corporate performance should only be a last resort option to improve financial performance is rarely a successful strategic move is preferable to a divestiture

normally improves corporate performance

In general, corporate executives of a company that has extensively diversified into unrelated businesses are forced to "manage by the _______," meaning that they need to rely on the financial and operating results of each business.

numbers

Which of the following is generally not true of unrelated diversification odds are, the results will be 1+1=3 few companies have top management capabilities that are capable of successfully managing a diverse set of businesses. competently overseeing widely diverse businesses is harder than it sounds. the failure rate of financial results in higher than the success rate.

odds are, the results will be 1+1=3

An unrelated diversification strategy offers limited potential for competitive advantage beyond what each business can generate on its own. is more likely than related diversification to exhibit a high degree of strategic fit and therefore a greater chance of competitive advantage. offers significantly better potential for competitive advantage compared to what each business could generate on its own. Is likely to offer enhanced consolidated performance compared to the sum of what the individual businesses could achieve independently.

offers limited potential for competitive advantage beyond what each business can generate on its own.

In order to use location to build competitive advantage when competing on domestic and international level, a company must transfer company expertise to cross-border markets and initiate actions to contend on an international level. pursue blue-ocean opportunities both in the company's home country market and in global markets. use acquisition and rapid-growth strategies to better defend against expansion-minded international rivals. try to change the local market to better match the way the company does business elsewhere. consider whether to concentrate each activity it performs in a few select countries or disperse the performance of the activity to many nations, and determine in which countries it should locate particular activities

pursue blue-ocean opportunities both in the company's home country market and in global markets.

What is it called when a company owns a variety of businesses that increase its effectiveness, while having plenty of resources to add customer value to these businesses without financially stressing itself? industry leadership diverse marketing resource fit competitive mix

resource fit

Which of the following is not one of the actions needed by corporate executives to succeed in an unrelated diversification strategy? overseeing the businesses so that they perform at a higher level than they would as a stand-alone businesses identifying and acquiring new businesses that can produce good earnings and returns on investment negotiating favorable acquisition prices taking a completely "hands off" approach to let each of the unrelated businesses run itself.

taking a completely "hands off" approach to let each of the unrelated businesses run itself.

Multinational competitors tend to concentrate activities in a limited number of locations when prices and competitive conditions are strongly linked across country markets to form a world market. there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. the risk of fluctuating exchange rates is very high. host-country governments can be persuaded to erect high tariff barriers to protect the company's operations from foreign competitors and it is not imperative to be responsive to buyer needs and competitive conditions in each country. competitive conditions make it infeasible to employ a profit sanctuary strategy or an export strategy.

there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages.

A ___________ Strategy involves employing essentially the same strategic theme (low-cost, differentiation, focused, best-cost) in all country markets, while allowing some country-to-country customization to fit local market conditions global multidomestic localized transnational

transnational

which of the following statements is true about unrelated diversification of a firm? unrelated diversification offers limited potential for competitive advantage beyond what each business generates on its own unrelated diversification leads to good cross-business strategic fit unrelated diversification is a good strategy for transferring capabilities and skills among business units the performance of unrelated businesses as a group is much better than what the sum of performances of each business would be independently.

unrelated diversification offers limited potential for competitive advantage beyond what each business generates on its own

A ____________ discounts the importance of cross-business strategic fit, focusing instead on entering businesses that allow the company as a whole to increase earnings. related diversification strategy acquisition strategic alliance unrelated diversification strategy

unrelated diversification strategy

In the calculation of industry attractiveness scores, the relative importance given to various measures of attractiveness is determined by using factors called _______________, which together add up to 1.0

weights

Companies tend to concentrate their activities in a limited number of locations where the costs of manufacturing or other activities are significantly higher. where there are significant scale diseconomies. when there is a steep learning curve associated with performing an activity. when certain locations have inferior resources or allow for poorer coordination of related activities. where sophisticated production facilities or highly trained local personnel are unavailable.

when there is a steep learning curve associated with performing an activity.

One of the biggest strategic challenges to competing in the international arena is: whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers. determining how many foreign firms to license to produce and distribute the company's products. whether to pursue a global strategy or an international strategy. whether to offer a product at a priced based on the median income of the population. whether to charge the same price in all country markets.

whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.