FINAL EXAM
Problems associated with acquisitions include all of the following EXCEPT: (A) managers overly focused on acquisitions. (B) integration difficulties. (C) large or extraordinary debt. (D) excessive time spent on the due diligence process.
(D) excessive time spent on the due diligence process.
multinational enterprise (MNE)
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries. makes up less than 1%; however, makes good money
CAGE distance framework
A decision framework based on the relative distance between home and a foreign target country along four dimensions: 1. cultural distance 2.administrative and political distance 3.geographic distance 4economic distance.
wiss-based Nestlé, the largest food company in the world is well known for customizing its product offerings to suit local preferences, tastes, and requirements. Which of the following strategies does the company pursue? A global-standardization strategy A cost-reduction strategy A multidomestic strategy A one-product multiple markets strategy multidomestic strategy- Strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies.
A multidomestic strategy
corporate governance
A system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. A relationship among stakeholders used to direct and control the strategic direction and performance of organizations
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'smanagement.
A) They are granted a charter of incorporation by the state and legally own company stock.
Which of the following foreign entry modes requires the highest level of investment in terms of capital and other resources and allows for a high level of control? Acquisitions Franchising Joint ventures Exporting
AQUSITIONS
International Expansion
Advantages: Access to new markets, access lower-cost inputs, develop new competencies Disadvantages: Liability of foreignness, loss of reputation, loss of intellectual property
A trend observed during the globalization 3.0 stage involves A. countries around the globe becoming more self-sufficient and independent. B. multinational companies organizing as global-collaboration networks C. privately-owned firms getting nationalized. D. world's market economies becoming less integrated
B. multinational companies organizing as global-collaboration networks
Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? Benefits from lower labor costs in manufacturing and services Free use of formerly protected intellectual property Exporting newly available raw materials, such as rubber and coal Increasing trade barriers that protect businesses
Benefits from lower labor costs in manufactoring and services
After industry enters the growth stage
Better producing product
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 stockholdersto the management without any real authority. B) The functions of the board of directors are limited to ensuring the hiring andfiring of CEOs. C) Votes at shareholder meetings determine whose representatives are appointed tothe board of directors. D) Because shareholders generally have uniform interests, the composition of theboard is generally a unanimous decision.
C) Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
A firm pursuing a transnational strategy would believe that A. key business functions should be located in its home country headquarters. B. local responsiveness is more important than cost reductions for competitive advantage. C. best practices, ideas, and innovations should be diffused throughout the world. D. the majority of the value creation should take place in the home country.
C. best practices, ideas, and innovations should be diffused throughout the world.
When resources are combined...
Core competnetence
The strategic foundations of the globalization hypothesis are based primarily on Product differentation Local responsiveness Cost reduction Superior customer service
Cost reduction
Which of the following is common result from a hostile takeover of a company A) The new owner keeps the company intact. B) The new owner enhances the reputations of the company's management. C) The new owner keeps the board of directors of the company the same. D) The new owner sells the company in pieces.
D) The new owner sells the company in pieces.
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) To align incentives between shareholders and management stock options- An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future.
The agency relationship exits when one party delegates
Decision making responsibility to a second party.
When a firm maintains a competitive advantage
Direct immitation
According to the Industry Organization, the key to success is
Selecting the right industry
Which of the following foreign entry modes requires primarily involves producting goods in one country to see in another? Crowdsourcing Exporting Brownfield operations Greenfield operations
Exporting
Choices of International Entry Mode
Exporting- Low cost to expand, high transportation costs, potential tariffs, transportation costs, potential tariffs, low control over marketing/distribution, low control over marketing/distribution, contract based Licensing- Low cost to expand, low risk, low control over manufacturing/marketing, control over manufacturing/marketing, lower potential returns, risk of lower potential returns, risk of copy cats Alliances- Shared costs, shared resources, shared risks, difficult to manage, shared risks, difficult to manage ,facilitates learning facilitates learning Acquisition- Quick access to new market, high cost, complex negotiations, integration cost, complex negotiations, integration problems with domestic operations problems with domestic operation Greenfield Venture- Complex, costly, time consuming, high risk, maximum control, maximum risk, maximum control, maximum potential returns
The process of closer integration and exchange between different countires and peoples worldwide is Standardization Globalization Diversification Modification
Globalization
The problems associated with Exporting.....
High transportation costs.
Which of the following statements is true of local responsiveness? It helps reinforce a cost-leadership strategy at the business level. It forms the basis for the globalization hypothesis. It reduces the differentiation of products and services It generally entails higher costs. local responsiveness The need to tailor product and service offerings to fit local consumer preferences and host-country requirements.
It generally entails higher costs
_ is best described as the additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances. Liability of foreignness Opportunity cost Social cost Economic embargo
Liability of foreignness
are described as the benefits from locating value chain activities in prime geographies for a specific activity Ploycentric innovation strategies Location economies Liability of forgiveness Communities of learning
Location economies
is the term that describes the difficulty of the principal to ascertain whether the agent has really put forth a best effort
Moral Hazard
Multinational vs Transnational Corporation vs Global
Multinational- Determined locally Transnational- Standards that are both universal and local Global- Home country reporting standards applied universal
Agency Relationship
Occurs when one party (principal) pays another (agency) to represent them
Internal corporate governance mechanisms
Ownership concentration- Relative amounts of stock owned by individual shareholders and institutional investors Board of directors- The centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders. Individuals responsible for representing the firm's owners by monitoring top-level managers' strategic decisions Group of elected individuals whose primary responsibility isto act in the owners' interests by formally monitoring andcontrolling the corporation's top-level executives Executive compensation- Use of salary, bonuses, and long-term incentives to align managers' interests with shareholders' interests
Which of the following is a problem that corporate governance seeks to address? Limited liability for investors Ecomagination problem Shared value creation Principal-agent problem
Principal-agent problem
Many of the first railroads....
Product-related
The comination of independ/emergent stratgies are called?
Realized strategy
All of the following are examples of external-governance mechanisms except Auditors Shareholders Industry Analysts Government
Shareholders
Ownership of corportation is dilluted
Shareholders ownership decreases
Which of the following factors best helps capture administrative and political distances? The absence or presence of weak legal and financial institutions The wealth and per capita income of consumers The physical size and topography of a country The linguistic and religious differences between two countries
The absence or presence of weak legal and financial institutions
According to the CAGE distance framework, what does cultural distance represent? The cultural disparity between an internationally expanding firm's home country and its targeted host country The geographical distance between two countries that have similar national cultures The cultural disparity between the employees of two companies in a joint venture The difference between a firm's organizational culture and its competitor's organizational culture CAGE distance framework- A decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance.
The cultural disparity between an internationally expanding firm's home country and its targeted host country
Globalization
The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.
According to Michael Porter, which of the following is a problem with many pulicly traded companies?
They have defined value creation too narrowly in terms of financial performance
shared value creation framework
a model proposing that managers have a dual focus on shareholder value creation and value creation for society
Agency Theory
a theory that views the firm as a nexus of legal contracts
Research shows that shareholders of acquired firms recieve
above average returns
A leveraged buyout (LBO)
changes the ownership structure of a company from public to private leveraged buyout (LBO)- A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private.
According to Porter's diamond of national competitive advantage, factor conditions are best described as a country's: ethnographic conditions and trends that affect its growth and development. level of political and economic integration with other countries. endowments in terms of natural, human, and other resources. cultural and social environment that influence its economic health. National competitive advantage- World leadership in specific industries.
endowments in terms of natural, human, and other resources.
CuppaCuppa Inc. is a company that owns coffee plantations in Brazil. The company trades its coffee produce directly with coffee merchants in foreign markets who later resell and distribute it throughout their country. In this scenario, CuppaCuppa Inc.'s activities best illustrate _____. exporting a greenfield operation a strategic alliance importing
exporting
Bric Autos Inc., a Campora-based automobile company, made a capital investment of $300,000 to set up production units and distribution channels in the country of Bryon from where it plans to access the Bryonian market. Such investments are best known as _____. foreign exchange corporate leveraged buyouts corporate venture capital investments foreign direct investments foreign direct investment (FDI)- A firm's investments in value chain activities abroad.
foreign direct investments
Zenovo Inc. is an electronics company based in the country of Linx. Zenovo has manufacturing facilities in four other countries where labor costs are low. It also has its research centers in three other countries, because these countries offer best-of-class capabilities. However, Zenovo does not offer much product differentiation because of which price is the main competitive weapon. In this scenario, Zenovo Inc. most likely implements a _____. multidomestic strategy global-standardization strategy global matrix strategy transnational strategy
global-standardization strategy
Agency Costs
internal costs incurred due to the competing interests of shareholders (principals) and the management team (agents). Incentives- Executive compensation Managerial labor market Monitoring- Board of directors Block shareholders Institutional owners Enforcement- Board of directors Regulators Market for corporate control Financial Loss when governence fails- Shareholders
XPro Inc. is a luxury condominium-building company that is based in the country of Benom. It sells highly priced homes to consumers in Benom as well as to consumers in other countries. It has extremely high brand loyalty. The industry it operates in is characterized by low pressure for local responsiveness and low pressure for cost reductions. In this scenario, XPro Inc. most likely pursues a(n) _____. transnational strategy multidomestic strategy localization strategy international strategy
international strategy
In his research, Geert Hofstede defined and measured _____ as the collective mental and emotional "programming of the mind" that differentiates human groups. national culture political orientation locus of control self-efficacy
national culture
Companies from wealthy countries tend to trade with other rich countries rather than poor countries because they can take advantage of the price differences between the two markets increase the per capita income of consumers in the poor countries. benefit from economic arbitrage. replicate their existing business model more easily.
replicate their existing business model more easily.
The threat is high when
sup product is lower price
According to the CAGE distance framework, cultural distance most affects industries or products: with low value-to-weight ratio. that a foreign government views as vital to national security. for which demand varies by income. that are related to national and/or religious identity.
that are related to national and/or religious identity.
The risks of a cost leadership strategy include:
the develop more efficient
Ownership Concentration
the number of large-block shareholders and the total percentage of the firm's shares they own
Regionalization
the organization of earth's surface into distinct areas that are viewed as different from other areas
Agency Problem
the possibility of conflict of interest between the stockholders and management of a firm. aka MANAGERIAL OPPORTUNISM Occurs when The desires/goals of the principal and agent diverge It is difficult or expensive for the principal to verify that the agent has behaved appropriately, i.e., information asymmetry Adverse Selection-A situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives. Moral Hazard-A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party. Misdirected Free Cash Flow and overdiversfication
Michael Porter is in favor of the shared value creation framework because he believes that it
will not only allow companies to gain and sustain a competitive advantage, but it will also reshape capitalism and tis relationship to society
