MGT 449 Exam 3
Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena: A) is also the CEO of other companies. B) is likely to provide the board with valuable inside information. C) is a board member of a major client. D) is more likely than other board members to take care of the stockholders
B
Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) ________. A) international strategy B) global-standardization strategy C) multidomestic strategy D) localization strategy
B
The ________ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A) real-options perspective B) relational view of competitive advantage C) non-differentiation strategy D) stakeholder strategy
B
The day-to-day operations of a publicly traded company are conducted by: A) people who finance the company, such as investors. B) its managers and lower-level employees. C) the CEO and the board of directors. D) people who own the company, such as shareholders.
B
The global-standardization strategy arises out of the combination of: A) low pressure for both local responsiveness and cost reductions. B) high pressure for cost reductions and low pressure for local responsiveness. C) high pressure for both local responsiveness and cost reductions. D) high pressure for local responsiveness and low pressure for cost reductions.
B
Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc. headquartered in United Cadvia. The parent companies, together, have established a standalone firm called Genuine Autos Inc. This arrangement best exemplifies a ________. A) partnership B) joint venture C) proprietorship D) non-equity alliance
B
Welcome Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. Welcome Inc. is most likely doing this to: A) increase its economic distance from the other countries. B) reduce its cultural distance from the other countries. C) reduce its geographical distance from the other countries. D) increase its administrative distance from the other countries.
B
When does a merger between companies typically occur? A) When a target firm does not want to be acquired B) When two firms of comparable size join to form a combined entity C) When two or more firms enter a temporary vertical strategic alliance D) When large, incumbent firms buy startup companies
B
When large, incumbent firms buy startup companies, the transaction is generally described as a(n) ________. A) alliance B) acquisition C) partnership D) joint venture
B
Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry? A) Galleon Group's decision to trust Rajat Gupta's information as accurate B) Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs C) Warren Buffet's decision to inject a huge amount of money into Goldman Sachs based on its financial reports D) Rajaratnam receiving information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs
B
Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy? A) They have to be highly responsive to local needs and preferences. B) They are highly affected by exchange rate fluctuations. C) They cannot reap the benefits of economies of scale due to their highly customized products. D) They cannot leverage their home-based core competencies in foreign markets.
B
Which of the following is an important internal corporate-governance mechanism? A) Market for corporate control B) Board of directors C) Shareholder capitalism D) Activist investors
B
Which of the following modes of entering a foreign market allows for the lowest level of control? A) Joint ventures B) Exporting C) Acquisitions D) Greenfield ventures
B
Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A) Germany's unfamiliarity with retail discount powerhouses B) Significant differences between its U.S. personnel policies and Germany's culture C) Metro's hostile takeover of Walmart in Germany D) Inability to implement its trademark focused-differentiation strategy in the German market
B
Which of the following statements is true of a multidomestic strategy? A) The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation. B) Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. C) Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level. D) The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage.
B
Which of the following types of organizations comparatively requires the lowest levels of investment and control? A) Greenfield operations B) Franchising C) Joint ventures D) Acquisition
B
Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A) Terra, which is located close to Zeda and is easily accessible by road B) Segar, where people speak English and have a low standard of living C) Jordax, which has a very profitable economy and where people speak Jordaxian D) Olax, which has the same wealth and per capita income as Zeda
B
Zenovia Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Marva, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Zenovia Inc.? A) It will be able to easily sell products for which demand varies by income. B) It will be able to benefit from economic arbitrage. C) It will be able to replicate its existing business model easily. D) It will be able to successfully leverage its competitive advantage from economies of standardization.
B
A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it: A) is pursued in response to low pressure for local responsiveness and low pressure for cost reduction. B) attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company. C) attempts to reap significant economies of scale by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. D) operates on the assumptions made in the globalization hypothesis in order to lower costs.
B
All public companies listed on the U.S. stock exchanges must file a number of financial statements with the ________. A) Wall Street Journal B) Securities and Exchange Commission (SEC) C) GovernanceMetrics International (GMI) D) EDGAR database
B
Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) ________. A) inside director-outside director conflict B) principal-agent problem C) shareholder capitalism scenario D) fiduciary responsibility oversight
B
Ethics is: A) always universal and cannot differ between cultures. B) not synonymous with law. C) impossible to codify into law. D) the minimum acceptable standard in business practice.
B
Glova Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. RightMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A) Glova Inc. will be better protected from exchange rate fluctuations when compared to RightMart Inc. B) Glova Inc. will sell the same products and services in both domestic and foreign markets, whereas RightMart Inc. will customize its product offerings to suit local requirements. C) Glova Inc. will pursue a differentiation strategy at the business level, whereas RightMart Inc. will pursue a cost-leadership strategy at the business level. D) Glova Inc. will not be able to leverage its home-based core competencies in foreign markets as much as RightMart Inc.
B
For a multinational enterprise (MNE), applying the globalization hypothesis would mean: A) manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. B) being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction. C) customizing each product sold by an enterprise to differentiate it from its competitors. D) pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage.
A
How has the administrative and political distance between Canada, Mexico, and the United States been reduced? A) By establishing the North American Free Trade Agreement (NAFTA) B) By lowering the disparities between their per capita incomes C) By reducing their linguistic differences D) By adopting similar national cultures
A
In principal-agent relationships, ________ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts. A) moral hazard B) adverse selection C) on-the-job consumption D) the agency problem
A
Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the ________ that firms can experience when expanding overseas. A) intellectual property exposure B) threat of new entrants C) loss of reputation D) liability of foreignness
A
John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies ________. A) the strong relationship between executive compensation and company performance B) the inversely proportional relationship between CEO compensation and the pay of the average employee C) the avoidance of control mechanisms to guide performance D) the public's perception of a company's stock value based on executive compensation figures
A
Hashim is a board member at Kluster Motors Inc. He is also a senior executive of the firm. On the other hand, the board is chaired by Compton Smith, the CEO of Jensen Electronics. According to this scenario, Hashim ________. A) cannot serve on the board of any other organization B) is an inside director of Kluster Motors C) can use information from board meetings to trade stocks of Kluster Motors D) is more likely than Compton to take care of stockholder interests
B
Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario? A) Torque Inc. focuses more on cost reductions when compared to Marc Works Inc. B) Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide. C) Torque Inc. is exposed to greater risks of exchange rate fluctuations. D) While Marc Works Inc.'s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities.
A
McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast food chain pursuing? A) Multidomestic strategy B) International strategy C) Global-standardization strategy D) Focused differentiation strategy
A
Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.? A) Acquisition B) Licensing C) Exporting D) Franchise agreement
A
Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and Rajat Gupta himself is an example of ________. A) moral hazard B) shareholder capitalism C) shared value creation D) adverse selection
A
Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because: A) it underestimates its liability of foreignness when entering the Zevar market. B) it underestimates its dwindling reputation before it enters the Zevar market. C) it overestimates its need to protect its intellectual property. D) it overestimates the geographic and cultural distance between Pelo and Zevar.
A
The ________ is the centerpiece of corporate governance and is composed of inside and outside members. A) board of directors B) group of shareholders C) institutional investors group D) scientific advisory board
A
The process of alliance management begins with ________. A) selecting the best possible partner B) designing the alliance C) creating resource combinations that obey the VRIO criteria D) choosing an appropriate governance mechanism
A
The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by ________. A) information asymmetry B) groupthink C) stakeholder strategy D) corporate governance
A
The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the: A) informational advantage of the lower-level employees. B) knowledge of employees regarding day-to-day tasks. C) higher number of lower-level employees than senior executives. D) operational expertise of lower-level employees in concentrated areas of a particular field.
A
To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A) A global-standardization strategy B) A localization strategy C) A transnational strategy D) A multidomestic strategy
A
United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of: A) luxury items manufactured in United Nerumbia. B) iron ore extracted in Fernsland. C) food processed in Fernsland. D) movies and TV shows produced in United Nerumbia.
A
Which of the following best defines duality in a board of directors? A) A person holds both the role of CEO and chairperson of the board. B) A person holds both the role of inside director and outside director of the board. C) A person holds the role of CEO on the boards of two companies. D) A person holds both the role of director and shareholder of the company.
A
Which of the following factors is the most important determinant of economic distance? A) The wealth and per capita income of consumers B) The ethnicity and religion of consumers C) The topography of a country D) The presence of legal institutions in a country
A
Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A) Exporting B) Brownfield operations C) Greenfield operations D) Crowdsourcing
A
Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally? A) Transnational strategy B) Focused-differentiation strategy C) Global-standardization strategy D) International strategy
A
Which of the following is a major issue at the forefront of CEO compensation in recent years? A) The absolute size of the CEO pay package compared with the pay of the average employee B) The performance of the CEO as an employee versus the performance as a board member C) A comparison of the compensation of senior management hired during and before the CEO's tenure D) A comparison of the performance of the organization before and after the CEO's tenure
A
Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. B) Leading by ethical example often has a less strong effect on employee behavior than words. C) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful. D) Very few and specific corporate governance mechanisms can be effective in addressing the principal-agent problem.
A
Which of the following is an important external corporate-governance mechanism? A) Market for corporate control B) Executive compensation C) Shareholder capitalism D) Board of directors
A
Which of the following is true of acquisitions? A) Acquisitions can be friendly or hostile. B) In acquisitions, two independent companies join to form a separate third entity. C) Acquisitions can occur only when the involved entities are of comparable size. D) Acquisitions increase the competitive intensity in an industry.
A
Which of the following proves that GE's board of directors is significantly independent? A) 16 of the 17 board directors are from outside the organization. B) 26 percent of the board members at GE are female. C) The CEO of GE is also the chairman of the board. D) GE's board has five committees, each with its own chair.
A
Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A) Based on a tipoff by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement. B) Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. C) Goldman Sachs was party to the Abacus deal despite knowing its shortcomings. D) GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy
A
Which of the following scenarios best illustrates horizontal integration? A) Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors. B) Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. C) Regal Autos Inc. sets up its own distribution channel and retail stores. D) Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor.
A
Which of the following statements is true of shareholders in a public stock company? A) They are granted a charter of incorporation by the state and legally own company stock. B) They directly supervise and coordinate the manufacture of products and delivery of services. C) They are the centerpiece of corporate governance. D) They are appointed by a board of directors to oversee the company's management.
A
________ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A) Licensing agreements B) Acquisitions C) Cartels D) Equity alliances
A
Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior: A) typically exemplifies the agency problem of adverse selection. B) can be stopped by implementing performance incentives and strict control mechanisms. C) is neither unlawful nor unethical; hence, Neville and Andre cannot be reprimanded. D) goes against the principles of shareholder capitalism.
B
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that: A) the foreign firm will need to make larger investments when compared to entering the new market on its own. B) all potential business risks in the new market will have to be faced alone by the foreign firm. C) some of the firm's proprietary know-how may be appropriated by the foreign partner. D) the shareholder value of the foreign partner will decline drastically
C
For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country? A) A firm that produces movies B) A firm that manufactures cell phone batteries C) A firm that extracts and exports iron ore D) A firm that sells wrist watches
C
GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A) The CEO might be able to influence the board through setting the meeting agendas. B) The CEO is likely to be more responsible because he is setting his own performance targets. C) The CEO possesses invaluable inside information that can help chair the board effectively. D) The CEO will suggest board appointees who are friendly toward him or her.
C
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A) The expectation that the agent will go above and beyond the call of duty B) The expectation that the agent will reconnect economic and social needs C) The expectation that the agent will act in the principal's best interest D) The expectation that the agent will follow the country's laws and regulations
C
In which of the following situations is pursuing an international strategy advisable? A) When a firm manufactures products related to national and religious identity B) When a firm operates in an industry where the pressure to keep the costs low is extremely high C) When a firm enjoys a large domestic market, strong reputation, and brand name D) When a firm wants to be perceived as a domestic company by the host country consumers
C
Johan is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A startup recruits Johan based on his stated credentials without verifying them. Two days into the job, Johan's team lead realizes that Johan does not know much of what he claimed to know during the interview. This scenario best exemplifies ________. A) shared value creation B) corporate governance C) adverse selection D) moral hazard
C
One Stop Inc., a supermarket chain, is implementing a multidomestic strategy. Solar Com Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A) One Stop Inc. will have its business functions spread across the world; Solar Com Inc.'s business functions will be highly centralized. B) One Stop Inc. will focus more on cost-reduction than Solar Com Inc. C) Unlike Solar Com Inc., One Stop Inc. will be able to pursue a differentiation strategy at the business level. D) Unlike Solar Com Inc., One Stop Inc. will be able to reap significant economies of scale and location economies.
C
Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of ________. A) cartel arrangements B) equity alliances C) non-equity alliances D) joint ventures
C
The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate? A) A joint venture B) A merger C) An acquisition D) An equity alliance
C
Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of ________. A) shared value creation B) adverse selection C) on-the-job consumption D) corporate governance
C
When a firm pursues a(n) ________, it sells the same products or services in both domestic and foreign markets. A) localization strategy B) differentiation strategy C) international strategy D) domestic strategy
C
When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ________. A) political distance B) administrative distance C) cultural distance D) geographic distance
C
Which of the following do NOT serve as additional external-governance mechanisms? A) Industry analysts B) Government regulators C) Board of directors D) Auditors
C
Which of the following is true of the board of directors in a public stock company? A) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. B) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs. C) Votes at shareholder meetings determine whose representatives are appointed to the board of directors. D) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision
C
Which of the following statements is NOT true of tacit knowledge? A) It is knowledge that cannot be easily codified. B) It is concerned with knowing how to do a certain task. C) It is regularly shared between partners in a non-equity alliance. D) It is acquired only through actively participating in the process.
C
Which of the following statements is true with regard to international trade between countries? A) Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. B) Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. C) Wealthy countries engage in relatively more cross-border trade than poorer ones. D) Political integrations decrease the expected trade intensity between two countries
C
Who appoints the board of directors in a public stock company? A) CEOs B) Employees C) Shareholders D) Auditors
C
Why did the American MTV network cable channel fail when pursuing a global-standardization strategy? A) Because the globalization hypothesis holds true for the music industry B) Because an international strategy was more suitable for the music industry C) Because cultural distance most affects products with high linguistic content D) Because MTV failed to understand that music videos were a commodity product
C
With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A) To transfer its knowledge of a completely new production system B) To better understand the American work force C) To learn the lean manufacturing system pioneered by Toyota D) To get access to Toyota's distribution system and marketing expertise
C
________ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. A) Stakeholder impact analysis B) Corporate social responsibility C) Corporate governance D) Shareholder capitalism
C
Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) ________. A) joint venture B) greenfield venture C) acquisition D) non-equity alliance
D
At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of ________. A) moral hazard B) shared value creation C) corporate governance D) adverse selection
D
Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? A) Frank is a stockholder of Lofloy Greens. B) Frank cannot serve as a director on Spinson Locomotives' board. C) Frank is a part-time employee at Lofloy Greens. D) Frank is an outside director on Lofloy's board of directors.
D
GearOne Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, GearOne Autos Inc. is reaping the benefits of ________. A) resource immobility B) resource ambiguity C) economies of scope D) location economies
D
In a strategic alliance, the firm that learns faster: A) has the incentive to invest further in the alliance. B) has the tendency to lose its competitive advantage. C) has the tendency to move up a learning curve. D) has the incentive to reduce its knowledge sharing
D
In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as ________. A) shareholders B) principals C) clients D) agents
D
One of the ways to foster ethical behavior in employees is to: A) view clients as counter parties to transactions. B) align the vision statement of the organization with its informal culture. C) avoid codifying organizational culture. D) create a control system that encourages desired values.
D
Postrupe Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to Postrupe's board to achieve board independence? A) 5 B) 1 C) 3 D) 7
D
Saul is a manager at Holden Apparels Inc. and is friends with the company's CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months. Are Saul's actions unethical? Why? A) Yes, because it is illegal and unethical for Saul to possess any kind of insider information. B) No, because Saul did not make any profits from trading stocks using this information. C) No, because Saul did not ask the CEO to disclose such information to him. D) Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.
D
The administrative and political distance between two trading countries reduces when: A) there are tariffs and trade quotas in the host country. B) there are FDI restrictions in the host country. C) there is no independent central bank in the host country. D) there is a well-functioning capital market in the host country.
D
The board of directors of a public stock company consists of: A) employees of a company who belong to the senior management and directly report to the CEO of the firm. B) managers appointed by the owners of a company to run its day-to-day operations. C) the legal owners of a publicly traded company that was purchased in a leveraged buyout. D) individuals who formally represent the firm's shareholders and oversee the work of executives.
D
The conflict in a principal-agent relationship arises when: A) stockholders and agents are involved in the day-to-day operations of the company. B) the company has more outside directors than inside directors. C) the strategy adopted by the company's agents tries to emulate the mission statement created by the principals. D) the goals of the principals and agents are not aligned with each other
D
The informational advantage that agents possess over principals is often based on the fact that: A) the information is extremely secure and protected from exposure to anyone outside the company. B) public stock companies are characterized by information symmetry. C) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals. D) insiders are the first to learn about important developments before the information is released to the public.
D
The main reason behind Google's decision to acquire the Israeli startup company Waze for $1 billion was to: A) share its capabilities with Waze. B) gain access to technology that is alien to it. C) support startup companies with venture capital. D) preempt its competitors from buying Waze.
D
Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the: A) upper echelons theory. B) real options perspective. C) global scaling theory. D) globalization hypothesis.
D
Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to: A) the product information documented in Tesla's database. B) the lean manufacturing process pioneered by Tesla. C) the safety measures followed in Tesla, recorded in its user manuals. D) the entrepreneurial spirit in Tesla.
D
Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with: A) physical remoteness. B) the lack of connective ethnic and social networks. C) differences in climates and time zones. D) the absence of a trading bloc
D
Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A) To bring about a separation of CEO/chair duality B) To change the liability of shareholders from limited to unlimited C) To reduce the transferability of stocks between stockholders D) To align incentives between shareholders and management
D
Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) Adopting the principles of shareholder capitalism B) Adopting a narrow shareholder perspective C) Separating economic interests and social needs D) Practicing effective corporate governance
D
Which of the following is a feature of a multinational company pursuing a global-standardization strategy? A) Its key business functions are located at the home country headquarters. B) Its core competency lies in its strong product differentiation. C) Its competitive advantage lies in its high local responsiveness. D) Its business-level strategy tends to be cost leadership.
D
Which of the following is an advantage of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They can be easily initiated and terminated. C) They require the lowest amount of investment relative to the other alliance types. D) They create strong ties, trust, and commitment between the partners.
D
Which of the following is the source of the principal-agent problem in publicly traded companies? A) Transferability of investor ownership B) The law of legal personality C) Limited liability for investors D) The separation of ownership and control
D
Which of the following is true of business ethics? A) Business ethics is an agreed-upon code of conduct in business, based on laws. B) The perception of what is ethical and what is not is similar across different cultures. C) Business ethics needs to be codified into law in order to be followed. D) Certain notions such as fairness, honesty, and reciprocity are universal norms.
D
Which of the following is true of the codes of conduct of an organization? A) They help the board of directors and the CEO implement shareholder capitalism. B) They are a guide to determine what is lawful and what is unlawful. C) They are a reiteration of the laws pertaining to business dealings in a corporate environment. D) They detail how the organization expects an employee to behave and to represent the company in business dealings.
D
Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A) Because NAFTA prohibits Walmart from investing in countries outside North America B) Because Walmart's low-cost strategy has not been accepted by Indian consumers C) Because of the political differences between India and U.S. D) Because of the large economic distance between U.S. and India
D
Which of the following statements is true of an international strategy? A) It effectively protects a firm from exchange rate fluctuations. B) It is advantageous when firms face high pressures for both local responsiveness and cost reductions. C) It relies on joint ventures to reap economies of scale by accessing a larger market. D) It enables firms to leverage their home-based core competencies in foreign markets.
D
Which of the following statements is true of joint ventures? A) They are characterized by single reporting lines. B) They cannot entail long negotiations. C) They reduce the possibilities of trust and commitment. D) They enable the exchange of both tacit and explicit knowledge
D
________ are board members who are not employees of the firm but frequently are senior executives from other firms or full-time professionals. A) Auditors B) CEOs C) Inside directors D) Outside directors
D
________ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team. A) Moral hazard B) Shareholder capitalism C) Information asymmetry D) Adverse selection
D
A ________ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A) strategic alliance B) proprietorship C) cooperative D) leveraged buyout
A
A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A) The VRIO framework B) The transaction-cost economics model C) The Boston Consulting Group (BCG) matrix D) The core competence matrix
A
Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) sole proprietorship
A
Outside directors are more likely to watch out for the interests of shareholders of their firm because: A) they have more independence than inside directors. B) they are part-time employees of the firm. C) they do not have the safety of serving on the boards of other firms. D) they are more likely to benefit from using inside information to trade stocks
A
________ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A) Learning races B) Learning networks C) Learning matrices D) Learning effects
A
________ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A) Inside directors B) Auditors C) Investors D) Outside directors
A
distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) Accessing critical complementary assets B) Reducing differentiation of product and service offerings C) Procuring additional capital investments D) Increasing competitive intensity
A
A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) ________. A) bonus B) stock option C) stock exchange D) commission
B
A greater cultural distance between two trading countries: A) reduces the transaction costs associated with business. B) increases the liability of foreignness. C) increases linguistic similarities between the two countries. D) reduces the uncertainty of doing business.
B
An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) ________. A) agent B) principal C) manager D) employee
B
Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because: A) they are highly responsive to the local needs and preferences of customers in the host countries. B) they offer the same products or services in all their stores throughout the world. C) they attempt to combine benefits of localization and standardization strategies simultaneously. D) they pursue a cost-leadership strategy in their respective industries.
B
Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures: A) the readiness to accept short-term sacrifices to ensure long-term awards. B) aspects of cultural fit between different firms in an alliance. C) the willingness to make available necessary resources. D) features of the financial health of the different alliance partners.
B
Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A) Non-equity alliance B) Equity alliance C) Greenfield venture D) Joint venture
B
Which of the following is a disadvantage of equity alliances? A) They do not permit the exchange of explicit knowledge. B) They can entail significant investments. C) They can bring about a lack of commitment. D) They are reflective of weaker ties between firms.
B
Which of the following is NOT true about the members of the board of directors in a public stock company? A) They may hire and fire top management. B) They oversee the firm's operations. C) They are not responsible to shareholders. D) They represent the shareholders' interests
C
A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A) The bank is not aware of the investments made by the customer. B) The bank is depending on the customer to pay back the loan before term completion. C) The bank knows that the customer will be unable to pay the loan if the interest rate rises. D) The bank has the financial statements of the customer, but it is not aware of each source of income
C
According to the agency theory, ________. A) companies should focus on generating profits for stockholders B) principals and agents have interchangeable roles C) conflicts that arise in corporations should be addressed in the legal realm D) corporations are more than a set of contracts between parties
C
New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first ________ in the U.S. automobile industry. A) hostile takeover B) equity alliance C) joint venture D) non-equity alliance
C
Which of the following is NOT true of corporate governance in public stock companies? A) Corporate governance attempts to address the principal-agent problem. B) Corporate governance seeks to benefit multiple stakeholders, not just shareholders. C) Corporate governance seeks to create a separation between ownership and control. D) Corporate governance provides rules for making decisions on corporate affairs.
C
Which of the following is an advantage of non-equity alliances? A) They facilitate the sharing of tacit knowledge between the alliance partners. B) They are based on ownership rather than contracts. C) They are flexible and easy to initiate and terminate. D) They produce strong ties between alliance partners as they are permanent in nature
C
Which of the following is one of the features of an international strategy? A) It is characterized by cost-leadership as a preferred business strategy. B) It is often used successfully by firms with relatively small domestic markets. C) It is characterized by limited local responsiveness. D) It is one of the newest types of global strategies
C
Which of the following is part of Geert Hofstede's cultural dimensions? A) Self-efficacy B) Span of control C) Power distance D) Locus of control
C
Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode? A) They are easy to initiate and terminate. B) They are based on contracts rather than ownership. C) They reduce a firm's exposure to loss of reputation. D) They require low amounts of investments in terms of capital.
C
A firm following a multidomestic strategy: A) is highly efficient. B) lacks local responsiveness. C) requires exposing explicit knowledge because products are manufactured locally. D) faces a greater risk of intellectual property (IP) appropriation.
D
A(n) ________ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. A) global standardization strategy B) transnational strategy C) international strategy D) multidomestic strategy
D
A(n) ________ is best described as a partnership in which at least one partner takes partial ownership in the other partner. A) non-equity alliance B) acquisition C) joint venture D) equity alliance
D
Adverse selection in a public stock company occurs when: A) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. B) an agent manipulates information to benefit stockholders. C) a principal is not aware of the context from which information from an agent is derived. D) information asymmetry increases the likelihood of selecting inferior alternatives.
D
Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A) The firm customizes products and services to better suit local requirements. B) The firm follows a differentiation strategy at the business level. C) The firm has all its key business functions located in the home country. D) The firm reaps significant economies of scale and location economies
D
Which of the following is a drawback of pursuing a multidomestic strategy? A) The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy. B) The strategy allows for the lowest possible local responsiveness. C) The strategy lowers the differentiation of a firm's product and service offerings. D) The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.
D
A(n) ________ arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A) transnational strategy B) international strategy C) global-standardization strategy D) multidomestic strategy
A
Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement? A) A multidomestic strategy B) An international strategy C) A one-product strategy D) A global-standardization strategy
A
Food Works Inc. is a multinational fast food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company? A) Each country unit owned by the company will tend to be highly autonomous. B) The company's competitive advantage lies in leveraging its home-based core competencies in foreign markets. C) The company will not face any operational inefficiency as the key business functions do not have to be duplicated. D) Majority of the value creation for the company will take place in its home country
A
How will an increase in coordinated economic and political integration between countries affect the world economy? A) There will be gains in social welfare and living standards across the globe. B) There will be a movement away from global-collaboration networks among multinational enterprises (MNEs). C) The cost of labor will further decline in emerging economies. D) The world's market economies will become self-sufficient and independent.
A
In a non-equity alliance, which of the following types of information would firms most likely share? A) The documented information about the material composition of a product B) A top-level manager's experience related to making strategic decisions C) A manager's knowledge related to solving non-routine problems D) The employees' entrepreneurial skills
A
India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because: A) of an abundance of well-educated, English-speaking young people. B) it has emerged as a manufacturing powerhouse. C) it has an abundance of uneducated workers who are highly trainable. D) of an efficient infrastructure and high labor costs.
A
Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a ________ in the automobile industry. A) national competitive advantage B) liability of foreignness C) capital gain D) trade surplus
A
The downside of equity alliances is: A) the amount of investment that can be involved. B) that they are not useful stepping stones toward full integration of the partner firms. C) the weaker ties and reduced trust between partners. D) that the alliances cannot be abandoned if not promising.
A
The success of the Pixar-Disney strategic alliance demonstrated that: A) the two entities' complementary assets matched. B) the companies were effectively managing an unrelated diversification strategy. C) Disney was in desperate need of Pixar's graphic display systems. D) it was easier for the alliance partners to reduce the value gap created.
A
Today, Hollywood movies are banking more on foreign sales for their overall revenues. Hollywood studios have been adapting scripts to appeal to global audiences, and casting foreign actors in leading roles. Which of the following statements most accurately explains the reason for this change? A) Hollywood is now a truly global enterprise with the vast majority of revenues coming from outside the United States. B) The movie industries of other countries are not doing so well. C) The purchasing power of the U.S. audience has reduced drastically. D) Hollywood actors and actresses are no longer willing to participate in domestic productions since there is no money in this industry
A
Which of the following best illustrates an equity alliance? A) A partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc. B) A contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market C) An alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company D) A collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices
A
Which of the following is NOT a reason why firms enter alliances? A) To replace competitive advantage with competitive parity B) To enter new markets, either in terms of geography or products and services C) To learn new capabilities D) To strengthen competitive position
A
Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases the potential for legal repercussions. B) It increases the costs associated with increasing value. C) It increases the threat of new entrants in an industry. D) It increases competitive intensity within an industry
A
Which of the following is a result of horizontal integration in terms of Porter's five forces model? A) There is a reduction of excess capacity in the market. B) The industry structure becomes potentially less profitable. C) The industry structure becomes less consolidated. D) There is an increase in rivalry among existing firms.
A
Which of the following is an advantage of equity alliances when compared to non-equity alliances? A) They produce stronger ties between partners. B) They are based on contracts rather than ownership. C) They are more flexible and easy to initiate and terminate. D) They require smaller capital investments
A
Which of the following statements best describes local responsiveness? A) The need to tailor product and service offerings to fit native consumer preferences and host-country requirements B) The additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances C) The process of producing goods in one country and selling them in another D) The belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogeneous
A
Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost? A) A transnational strategy B) A multidomestic strategy C) A global-standardization strategy D) An international strategy
A
A(n) ________ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain. A) greenfield venture B) non-equity alliance C) equity alliance D) joint venture
B
As a result of globalization, the: A) cost of doing business around the world is increasing. B) world's market economies are becoming more integrated. C) cultural distance between countries is increasing. D) economies around the world are becoming more independent.
B
FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate? A) Managerial capitalism B) Managerial hubris C) Managerial feasibility D) Managerial empathy
B
Gamma Foods Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. RiverGem Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A) Gamma Foods Inc. will face greater pressure for cost reductions than RiverGem Inc. due to its strategy choice. B) Both Gamma Foods Inc. and RiverGem Inc. will have to duplicate key business functions in multiple host countries. C) While Gamma Foods Inc. will require a global matrix structure, RiverGem Inc. will require a traditional headquarters model. D) While RiverGem Inc.'s competitive advantage will lie in its high local responsiveness, Gamma Foods Inc. will lack such competencies.
B
Garnet Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Garnet Mobiles Inc. most likely pursue? A) Localization strategy B) Global-standardization strategy C) International strategy D) Multidomestic strategy
B
How does horizontal integration within an industry affect the surviving firms? A) By increasing the threat the surviving firms will face from new entrants B) By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers C) By strengthening the rivalry among existing firms D) By requiring the surviving firms to shift their focus from non-price to price competition
B
How has China been affected by its one-child-per-family policy and appreciation of its currency? A) The purchasing power of its workforce has reduced. B) The country's advantage in low-cost manufacturing has reduced. C) The standard of living within the economy has lowered. D) The value added to production has reduced.
B
Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A) Forward integration B) Horizontal integration C) Vertical integration D) Backward integration
B
To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) ________. A) exit strategy B) acquisitions-led growth strategy C) unrelated diversification strategy D) harvest strategy
B
When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to: A) enter into a licensing agreement. B) consider an outright acquisition. C) borrow via a contractual agreement. D) pursue internal development.
B
Which of the following is a drawback of joint ventures? A) They are based on contractual agreements rather than partial ownership. B) They necessitate the sharing of rewards between the partners. C) They produce weak ties, trust, and commitment between the partners. D) They do not enable the transfer and sharing of tacit knowledge.
B
Which of the following is an ineffective practice in alliance management? A) Coordinating a firm's portfolio of alliances B) Focusing on developing an alliance-management capability in isolation C) Establishing knowledge-sharing routines between alliance partners D) Developing relational capabilities to manage mergers and acquisitions
B
Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A) The need to reduce its level of horizontal integration B) The desire to gain a new capability C) The desire to pursue an unrelated diversification strategy D) The need to enter a new geographical market
B
Which of the following types of strategic alliances is the least common in terms of frequency? A) Mergers B) Joint ventures C) Equity alliances D) Acquisitions
B
Why did Yahoo enter into a strategic alliance with Microsoft? A) To share its continuously updated search technology with Microsoft B) To overcome its competitive disadvantage in comparison to Google C) To pursue an unrelated diversification strategy D) To invest its excess cash flow in Microsoft's superior technology
B
Adidas acquired Reebok primarily to ________. A) pursue an unrelated diversification strategy B) get access to the superior technology of Reebok C) overcome its competitive disadvantage against Nike D) overcome its principal-agent problems
C
After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A) The company will be able to reap greater benefits from economies of scale. B) The company's operations will become more cost efficient. C) The company's exposure to exchange rate fluctuations will reduce. D) The company will be exposed to a lower risk of intellectual property appropriation.
C
Aro Shoes Inc. and Mova Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Aro Shoes entered the strategic alliance to acquire the production system pioneered by Mova Shoes. Similarly, Mova Shoes agreed to the strategic alliance to study the designing process of Aro Shoes. However, Aro Shoes was more successful and faster than Mova Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) Time compression diseconomies B) Network effects C) Learning races D) Economies of scope
C
Disney became the world's leading media company to a large extent by pursuing a corporate strategy of ________. A) hostile takeovers B) cost-leadership C) related-linked diversification D) unrelated diversification
C
In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A) To access GM's distribution system and marketing expertise B) To access GM's completely new production system C) To learn how to implement its lean manufacturing program with an American work force D) To learn and implement the just-in-time inventory system pioneered by GM
C
Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a ________. A) non-profit organization B) sole proprietorship C) multinational enterprise D) nationalized firm
C
NorthStar Inc. and The Royal Group have together established The Royal Star Group of hotels. NorthStar owns 49 percent and The Royal Group has a 51 percent share in The Royal Star Group of hotels. However, the management of The Royal Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? A) Sole Proprietorship B) Non-equity alliance C) Joint venture D) Equity alliance
C
Onico Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Onico Inc. most likely pursue? A) A transnational strategy B) A global-standardization strategy C) An international strategy D) A multidomestic strategy
C
The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) ________. A) joint venture B) non-equity alliance C) equity alliance D) acquisition
C
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because: A) the strategic alliance will reduce the differentiation of its product and service offerings. B) the local partner can better protect its proprietary know-how. C) building downstream complementary assets can be expensive and time-consuming. D) the value gap created by the firm can be easily lowered in an alliance.
C
Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.? A) GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. B) GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase. C) GD Inc. and VS Inc. join together to form a single new company called GDVS Inc. D) GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately
C
Which of the following best illustrates a non-equity alliance? A) An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc. B) A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices C) A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. D) An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company
C
Which of the following statements is true of explicit knowledge? A) Explicit knowledge is knowledge that cannot be codified. B) Equity knowledge is acquired only through actively participating in a process. C) Explicit knowledge is shared in non-equity alliance firms. D) Explicit knowledge is about knowing how to do a certain task.
C
Which of the following statements is true of strategic alliances? A) They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. B) They are always focused on joining the same value chain activities. C) They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles. D) They enable firms to achieve goals faster, but at higher costs
C
Equity alliances are less common than non-equity alliances because they: A) produce weaker ties between partners. B) depend on contractual agreements. C) fail to facilitate the transfer of tacit knowledge. D) often require larger investments.
D
For which of the following products is an international strategy most suitable? A) For products with high linguistic content B) For products with low value-to-weight ratios such as steel C) For food products that are specific to certain cultures D) For luxury goods that can be shipped across the globe
D
GM entered China in 1997 through a joint venture with Shanghai Automotive Industrial Corp. (SAIC). Which of the following factors best contributes to the fact that the Chinese market already accounts for 25 percent of GM's total revenues? A) GM's China operation has never been cost-competitive. B) The company operates a larger number of assembly plants in China than the U.S. C) The China operation sells more vehicles while employing twice the number of employees. D) Chinese workers cost only a fraction of what U.S. workers do.
D
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A) By preventing mergers from taking place B) By facilitating excess capacity in the industry C) By increasing the threat of entry in the industry D) By lowering competitive intensity in the industry overall
D
Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.? A) Acquisition B) Export C) Joint venture D) Greenfield operation
D
PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A) PureSource Pharma will increase its cost of distribution. B) PureSource Pharma will reduce the size of its sales force. C) PureSource Pharma will diminish its economic value creation. D) PureSource Pharma will lower its costs through economies of scale.
D
Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use? A) A focused-differentiation strategy B) An international strategy C) A multidomestic strategy D) A transnational strategy
D
The ________ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally. A) dynamic capabilities framework B) local responsiveness hypothesis C) real option framework D) death-of-distance hypothesis
D
The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of: A) experience-curve effects. B) resource ambiguity. C) time compression diseconomies. D) principal-agent problems
D
Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations onsite while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of ________. A) network effects B) learning races C) economies of scope D) location economies
D
Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario? A) A proprietorship B) A leveraged buyout C) An acquisition D) A strategic alliance
D
What did Microsoft do to gain a foothold in the online search and advertising market dominated by Google? A) It sold part of its equity to Yahoo. B) It acquired Yahoo. C) It outsourced its non-core business activities to Yahoo. D) It entered into a strategic alliance with Yahoo.
D
When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) ________. A) proprietorship B) non-equity alliance C) equity alliance D) joint venture
D
When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement? A) When the resource in question is highly tradable B) After it has been established that the firm's internal resources are sufficient to build C) Before the strategist has considered borrowing the necessary resources through integrated strategic alliances D) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge
D
Which of the following is not included within the types of strategic alliances? A) Licensing B) Joint ventures C) Franchising D) Acquisitions
D
