MGT 3830 Ch. 5,7,8
10. By strategy, structure and rivalry Porter means things such as intense domestic competition - e.g. good restaurants in France. a. T b. F
*a. T
11. A criticism of the national diamond is that it is so general it does not produce testable (falsifiable) predictions. a. T b. F
*a. T
11. A shift from radical to incremental innovation takes place when an industry coalesces around a leading technology and design. a. T b. F
*a. T
2. Massive and unpredictable changes occur in some industries, but less so in others. a. T b. F
*a. T
20. Empirical research indicates there are diminishing profit returns for diversification beyond some threshold. a. T b. F
*a. T
26. Where there is volatile, uncertain demand for a resource, it is more likely that this resource will be outsourced, but not in all cases. a. T b. F
*a. T
28. An "arm's length" customer-supplier relationship is one where there is no element of the relationship which distorts the market price for a transaction. a. T b. F
*a. T
30. In recent years there has been a trend away from arm's length contracts towards long-term single-supplier contracts a. T b. F
*a. T
5. Fifty years ago, vertical integration was a fashionable strategy, whereas nowadays the trend is towards de-integration. a. T b. F
*a. T
8. Knowledge influences the characteristics of an industry in different ways depending on the stage of the industry life cycle. a. T b. F
*a. T
9. "Brand extension" is also a way to achieve an "economy of scope", by using a good reputation built around one product to help sell a different product or service. a. T b. F
*a. T
15. A firm which is international automatically has several competitive advantages over purely national firms. a. T b. F
*b. F
15. Cash-rich companies in low-growth, declining industries have to diversify to avoid having to pay huge costly dividends to shareholders. a. T b. F
*b. F
15. It's a good idea to reduce product innovation as soon as possible so as to precipitate a shift to the growth phase. a. T b. F
*b. F
16. The terms "public sector" and "not-for-profit" sector are different terms for the same thing. a. T b. F
*b. F
17. A not-for-profit organization is legally obliged not to make any profit. a. T b. F
*b. F
18. Michael Porter suggested that the main indicator that diversification would create value is if the chosen industry is attractive. a. T b. F
*b. F
18. Theodore Levitt was undoubtedly right in 1983: consumer tastes have become the same pretty well across the globe. a. T b. F
*b. F
19. Michael Porter suggests that one test of whether a diversification makes sense is whether the managers will be better-off as a result. a. T b. F
*b. F
19. Public sector organizations are not driven by the need to return a profit for shareholders, and are therefore less accountable than private sector firms. a. T b. F
*b. F
25. International business strategy has largely identified and solved the main issues faced by practical business people in the twenty first century. a. T b. F
*b. F
29. A franchise agreement is an example of an arm's length contract. a. T b. F
*b. F
3. "How profitable do we want to be?" is the starting-point of corporate strategy. a. T b. F
*b. F
69. A symbol of TNCs acting differently from MNCs is: a. Creating or moving divisional or corporate headquarters out of the firm's country of origin b. Developing product logos that are globally recognizable c. Listing the company's shares on several global stock markets d. All of the above
a. Creating or moving divisional or corporate headquarters out of the firm's country of origin
48. Porter's national diamond identifies some factors that: a. Determine a country's competitive advantage for a sector b. Determine a country's national income c. Determine the growth rate of a country's national income d. Determine the growth rate of its exports
a. Determine a country's competitive advantage for a sector
66. International retailing has generally not succeeded because: a. It should be a pleasurable experience that varies with national cultural differences b. It should be a pleasurable experience unless you have no money c. Retailers find it hard to get the same products at the same prices around the world d. Retailers find it hard to replicate the same logistic systems around the world
a. It should be a pleasurable experience that varies with national cultural differences
61. Knowledge-based assets are best exploited through: a. Replicating the product or service in other countries or markets b. Internationalizing the product or service c. A focus strategy d. Moving employees around every two years
a. Replicating the product or service in other countries or markets
56. Mergers and acquisitions are frequent. Diversifying into another industry this way: a. Tends to be particularly unsuccessful b. Tends to be particularly quickly successful, hence the frequency of this method c. Is advisable, because it's a relatively low-cost entry method d. Is preferred by shareholders, hence the frequency of this method
a. Tends to be particularly unsuccessful
41. Adam Smith, the famous economist, called the market mechanism: a. A necessary evil b. The invisible hand c. The visible hand d. The iron fist in the velvet glove
b. The invisible hand
40. Firms entering a new industry who were already established in a related industry are sometimes known as: a. dallaglio entrants b. de aglio entrants c. de alio entrants d. de olio entrants
c. de alio entrants
62. When a customer and a supplier choose to, or are technically obliged to, integrate their processes: a. There can no longer be a market operating between them for the item concerned b. There can be an adversarial relationship as each tries to gain advantage c. There can be strategic benefit, so long as the partners try to jointly maximise their profit in the downstream market d. All of the above
d. All of the above
30. Internationalization opens: a. Borders for foreign workers b. Doors for commercial spies c. Domestic markets to foreign competitors d. Answers a and c
d. Answers a and c
1. A cut in spending by the French government can have an effect on automakers in the USA and African cotton farmers. a. T b. F
*a. T
64. If a rival uses cash flows from one country to finance aggressive pricing in another: a. This is illegal under World Trade Organization rules b. Now is the time to attack his high-price markets and grow your market share there c. You must retaliate in the price war - or drop all your strategic goals in this country d. Stay out of this price war
b. Now is the time to attack his high-price markets and grow your market share there
23. Regarding change, a firm really needs to: a. Understand and predict change b. Understand, predict, and manage change c. Understand, predict, manage change, and adapt its strategy to it d. Predict and manage change
c. Understand, predict, manage change, and adapt its strategy to it
63. Large transaction-specific investments tend to lead to: a. The firms failing, when an inevitable dispute occurs, and one holds the other to ransom b. The customer having to accept a higher price to pay for the investment c. Vertical integration of the processes involved d. Suppliers refusing to get involved with such unreasonable demands
c. Vertical integration of the processes involved
40. Hairdressing is traditionally an example of: a. A domestic industry b. A multi-domestic industry c. A declining industry d. A sheltered industry
d. A sheltered industry
36. The main concepts to determine the scope of a firm's activities are: a. Economies of scope b. Transaction costs c. Corporate complexity d. All of the above
d. All of the above
75. A major limitation of the BCG Growth-Share Matrix is: a. It's only based on one variable to judge market attractiveness b. It's only based on one variable to assess competitive strength c. It presumes a portfolio of businesses which have little synergy or mutual dependence d. All of the above
d. All of the above
8. An "economy of scope" is where a firm can spread the fixed cost of a common resource or a shared service across multiple products or activities. a. T b. F
*a. T
12. There are 3 types of diversification; related, unrelated and concentric. a. T b. F
*b. F
13. Firms try to locate production of each stage of the value chain in those countries where transport costs to the next stage are the lowest. a. T b. F
*b. F
19. So there is no point in making minor changes to a standard product just for the local market. a. T b. F
*b. F
2. The two main mechanisms for expanding internationalization are cultural collaboration and military rivalry. a. T b. F
*b. F
20. In scenario planning, the scenarios constructed are often somewhat unrealistic. a. T b. F
*b. F
7. A country has a comparative advantage in those products that make the least use of those resources which it has in abundance. a. T b. F
*b. F
7. The industry life cycle consists of four stages: 1) Introductory, 2) Growth, 3) Plateau, and 4) Rejuvenation. a. T b. F
*b. F
39. "Psychic distance" is the least between: a. The USA and Canada b. The USA and the UK c. The USA and the UAE d. Guinea-Bissau and Papua New Guinea
a. The USA and Canada
44. To succeed as a leading player in the Growth phase a firm should: a. Offer a product or service which is designed to be "scaled up" in volume b. Obtain sufficient resources and build capabilities to support effective scaling-up of operations c. Have sufficient market access or commercial muscle to sell scaled-up volume d. All of the above
d. All of the above
47. One common argument against diversification strategies is: a. Managers do not have sufficient understanding of other industries b. Diversification is simply a poor strategy c. Shareholders can invest in other industries themselves, achieving risk-reduction more efficiently d. All of the above
d. All of the above
28. Two mechanisms promote internationalization: a. Inter-governmental bond borrowing, and inter-bank capital flows b. Inter-bank capital flows and trade c. Inter-bank capital flows and direct investment d. Direct investment and trade
d. Direct investment and trade
39. Although economies of scope refer to spreading cost, this is not the case for brand extension: a. Because a brand doesn't cost anything - it's an asset b. Because although the brand costs money, this does not appear in the accounts c. Because the brand is to do with the marketing department, not production cost d. It IS still true for brand extension, since creating and maintaining a brand does cost a lot e.g. in advertising
d. It IS still true for brand extension, since creating and maintaining a brand does cost a lot e.g. in advertising
74. Which of these is NOT a factor to be included in "industry attractiveness" in the GE/McKinsey Matrix: a. Stage of industry life-cycle b. International or globalisation potential c. Entry and exit barriers d. Relative market share
d. Relative market share
1. Change in industries is driven chiefly by the forces of technology, market demand and economics. a. T b. F
*a. T
1. Corporate strategy is concerned with 'where' a firm competes (in which industries it competes), while business strategy is concerned with 'how' a firm competes in a specific industry. a. T b. F
*a. T
13. Technical standards have the most dramatic effect in markets exhibiting network effects - that is users not adopting the standard risk isolation. a. T b. F
*a. T
13. Whether a proposed diversification is related or not depends to some extent on judgement and context. a. T b. F
*a. T
14. Emphasis often shifts from product innovation to process innovation, once a dominant design emerges. a. T b. F
*a. T
14. Long term agreements between gas producers and gas pipeline companies are an example of a strategic alliance. a. T b. F
*a. T
14. The usual justification for a diversification strategy is a combination of growth, spreading risk and creating extra value. a. T b. F
*a. T
16. A major argument against diversification is that it's more efficient for shareholders to hold diversified share portfolios, than to invest in diversified companies a. T b. F
*a. T
16. Being international can be a source of competitive advantage. a. T b. F
*a. T
17. An argument in favour of diversified companies with a balance of cash-generating and cash-devouring businesses is that it is cheaper and easier to balance capital requirements internally than to source capital in the financial markets. a. T b. F
*a. T
17. The primary source of scale economies nowadays is the cost of developing new products. a. T b. F
*a. T
18. Some public sector organizations provide services which the private sector could not possibly provide. a. T b. F
*a. T
2. Product scope, international scope, and vertical scope are part of corporate level strategy decisions. a. T b. F
*a. T
20. National cultural differences matter when the industry or product is close to the consumer - such as in retailing a. T b. F
*a. T
21. Highly diversified "conglomerate" firms have gone out of fashion in the past 30 years - except in emerging economies where they tend to dominate. a. T b. F
*a. T
21. Most MNCs today are trying to reconcile the advantages of national differentiation of products with those of global economies of scale or other gains from global integration. a. T b. F
*a. T
22. Developing new products that truly foster and exploit innovation to the maximum possible within the firm is the toughest challenge facing top managers of large multinationals today. a. T b. F
*a. T
22. Vertical integration secures a higher ratio of added-value to input-costs for a company. a. T b. F
*a. T
23. An international firm's competitive advantage depends not only on its resources and capabilities but also on the national environments in which it operates. a. T b. F
*a. T
23. In the past 25 years, there has been a huge trend away from vertical integration towards de-integration, outsourcing, and focusing on core competences. a. T b. F
*a. T
24. High transaction-specific investment between two industrial process stages is more likely to lead to vertical integration of these processes. a. T b. F
*a. T
27. A major problem with vertical integration is that a downturn in the end-market affects the entire integrated value-chain, representing possible unacceptably high risk. a. T b. F
*a. T
3. Firms are continually trying to erode the competitive advantage of rivals, and to build and maintain their own competitive advantage. a. T b. F
*a. T
3. The growth of world trade has exceeded growth in the world's economies. a. T b. F
*a. T
5. Two main factors drive industry evolution: demand growth and the production and diffusion of knowledge. a. T b. F
*a. T
6. The introduction to maturity phases of the industry life cycle curve are characteristically S-shaped. a. T b. F
*a. T
6. The scope of which activities a firm chooses to conduct is largely a matter of transaction costs, economies of scope and the cost of corporate complexity. a. T b. F
*a. T
9. By factor conditions in his 'national diamond' Porter means either the growth of local resources or their unusually strong absence which can lead to the development of innovative substitutes. a. T b. F
*a. T
9. The duration of the industry life cycle varies greatly from one industry to another. a. T b. F
*a. T
10. If the transaction costs associated with buying in a product or service from the market costs more than the firm providing this internally, then the firm will outsource. a. T b. F
*b. F
10. Over time, industry life cycles become longer and longer. a. T b. F
*b. F
11. "The cost of corporate complexity" refers to the fact that firms have to pay managers of complex businesses more money. a. T b. F
*b. F
12. A dominant design is one which is the most noticeable, or receives the most publicity. a. T b. F
*b. F
12. It is becoming more common for firms to separate decisions on where to produce from decisions on where to invest. a. T b. F
*b. F
24. Most companies that are outstandingly successful in their home markets eventually manage to achieve a lot of international success. a. T b. F
*b. F
25. Backward vertical integration gives a company far more power over the supplier. This is a type of high-powered incentive. a. T b. F
*b. F
4. Internationalization occurs through trade and indirect investment. a. T b. F
*b. F
4. The industry life cycle comprises 4 stages: introduction, growth, maturity, decline - so is indistinguishable from the product life cycle. a. T b. F
*b. F
4. The most sensible corporate strategy is to expand the scope of activities the company is involved in over time. a. T b. F
*b. F
5. The internet has stopped companies going global from inception. a. T b. F
*b. F
6. The theory of comparative advantage is an older name for the theory of competitive advantage. a. T b. F
*b. F
7. "Economies of scope" is a more modern expression to replace the old-fashioned term "economies of scale" a. T b. F
*b. F
8. Porter's national diamond identifies four factors that determine a company's competitive advantage within a sector. a. T b. F
*b. F
The PC industry clearly began in the 1970's because: a. It did not exist at all prior to this time b. The introduction phase was typical: no mass market, many product variants, small firms C. By the 1980's, the growth phase had begun, with a design standard emerging D. All of the above
D. All of the above
54. The diagram illustrating the optimal location of value chain activities shows that: a. At least five factors need to be considered b. Having the lowest costs is the main factor c. Each stage can be looked at on its own d. Answers b and c
a. At least five factors need to be considered
72. A hybrid vertical relationship is one which: a. Attempts to secure optimum benefits from close collaboration whilst preserving some form of market transaction b. Attempts a relationship where for some products the supplier is integrated, whereas for others it is a competitor c. Is similar to a virtual vertical relationship d. Is a combination of two or more vertical relationships
a. Attempts to secure optimum benefits from close collaboration whilst preserving some form of market transaction
52. A major problem associated with internal capital markets is: a. Despite the cost-savings, poor investment decisions tend to be made b. They deny banks much-needed business c. They are illegal in some countries d. The money should have been given to shareholders as dividends
a. Despite the cost-savings, poor investment decisions tend to be made
41. The basis of entering a new industry at the Introduction phase is: a. Effective product innovation b. Effective process innovation c. Effective promotional material d. Effective sales people
a. Effective product innovation
52. The key success factor in the Introduction phase of the industry is: a. Effective product innovation i.e. getting new products launched and in front of customers b. Making sure the workforce is multi-skilled c. Having a committed workforce, e.g. prepared to work weekends for no extra wages d. Just being creative
a. Effective product innovation i.e. getting new products launched and in front of customers
43. In international industries competitive advantage often means a firm will: a. Emerge from a strong national environment in this industry b. Overcome natural disadvantages in this industry, so that only the very strongest firms emerge internationally c. Use Porter's diamond as a strategic roadmap d. Pawn Porter's diamond and trade on the margin (but close out before margin call)
a. Emerge from a strong national environment in this industry
65. High powered-incentives and low-powered incentives respectively generally apply to: a. Externally and internally sourced inputs b. Internally and externally sourced inputs c. Market and alliance sourced inputs d. Joint venture and alliance sourced inputs
a. Externally and internally sourced inputs
45. The most often cited benefits of diversification are: a. Growth, risk reduction and value creation b. Risk reduction and economies of scope c. Value creation and cost reduction d. Cash balancing and risk reduction
a. Growth, risk reduction and value creation
62. Stakeholder analysis in the public sector is about: a. Identifying, understanding and prioritizing the needs of stakeholders b. Identifying stakeholders, and prioritizing which ones to explain the needs of the organisation to c. Understanding the power and interest of each stakeholder d. Answers a and c
a. Identifying, understanding and prioritizing the needs of stakeholders
42. A "born global" company is one which: a. Interacts across the world from the outset - especially regarding selling b. Is a "virtual" company c. Is spun out of an existing global company d. Has an international cultural appreciation
a. Interacts across the world from the outset - especially regarding selling
70. To make a choice between vertical integration or external sourcing, which statement is true? a. It depends on the specific factors prevailing b. Vertical integration is preferable in a technology-intensive industry c. Market sourcing is preferable when the industry is very fragmented d. Is simply a matter of managerial preference
a. It depends on the specific factors prevailing
53. The key success factor for leading firms in the Growth phase is: a. Knowing what competitors are doing - even resorting to espionage b. Taking business away from rivals c. A commission-oriented sales force d. Being able to scale up volume production and operations effectively and efficiently
a. Knowing what competitors are doing - even resorting to espionage
56. In some cases, public sector organisations provide: a. Services which cannot be provided by the private sector e.g. an army for defence b. Services which the private sector would be incompetent at providing c. Services at very low or zero price to stop the private sector providing them d. Services which the private sector does not require because no-one wants them
a. Services which cannot be provided by the private sector e.g. an army for defence
26. The decline phase of the industry life cycle is caused by: a. The emergence of a radically better substitute product, representing a new industry b. Tired old firms running out of new ideas c. Existing firms leaving the industry to move to a more profitable one d. Excessive market saturation
a. The emergence of a radically better substitute product, representing a new industry
30. The different stages of the industry life cycles are characterised by: a. The evolution of the industry growth rate over time b. The evolution of the competition in the industry c. The evolution of a firm's market share d. None of the above
a. The evolution of the industry growth rate over time
33. What is the difference between a firm's geographical scope and its vertical scope? a. The first describes the regions of the world where the firm is present and the second the stages of the industry value chain which the firm performs itself b. The first describes the number of countries and the second the number of horizontal businesses where the firm is present c. The two are highly inter-related d. It's not always clear what the difference is
a. The first describes the regions of the world where the firm is present and the second the stages of the industry value chain which the firm performs itself
64. Once a firm buys its supplier in order to vertically integrate a process: a. The lack of a market removes the high-powered incentive of market forces to keep costs low b. Costs are certainly lower because the firm now knows what profit the supplier was making c. The supplier will now offer a better service, since it's owned by its customer d. It can close the purchasing department and save costs
a. The lack of a market removes the high-powered incentive of market forces to keep costs low
49. The primary source of value creation from diversification is likely to be: a. The linkages or synergies between the businesses concerned b. Risk reduction through balancing of counter-cyclical businesses c. Getting a price reduction when purchasing common resource inputs d. Balancing of cash generation, reducing the need to obtain investment finance externally
a. The linkages or synergies between the businesses concerned
25. The text claims that two factors are fundamental to the industry life cycle. One of these is: a. The production and diffusion of knowledge b. Industrial production and the diffusion of knowledge c. Demand during the growth phase d. Demand for growth in the diffusion of knowledge
a. The production and diffusion of knowledge
51. The determining factors of how calamitous the Decline phase turns out to be are: a. The way capacity is dismantled as demand declines, and how dramatic is the decline in demand b. Whether a price war breaks out, and how many firms remain c. The actions of foreign competition, and how fast workers can be fired d. How quickly the new industry can ramp up production, and what prices they sell at
a. The way capacity is dismantled as demand declines, and how dramatic is the decline in demand
35. Trading industries are distinguished by: a. The widespread practice of importing and exporting b. The widespread practice of moving capital investments from one country to another c. The tendency for employees to move from one country to another d. All of the above
a. The widespread practice of importing and exporting
62. An advantage of internationalizing can be: a. To learn from the fiercest competition or most demanding customers in the world b. To drive the fiercest competitors in the world into bankruptcy c. To teach the most demanding customers in the world a lesson d. Answers a and b
a. To learn from the fiercest competition or most demanding customers in the world
37. In global industries: a. Trade and direct investment are both important b. Firms trade commodities globally c. Capital is traded globally d. Employees move globally
a. Trade and direct investment are both important
34. The starting point for strategy is usually: a. What business(es) are we in? b. How much profit do we want to make? c. Who are the customers? d. Should we be doing something else?
a. What business(es) are we in?
31. Corporate strategy is concerned with: a. Where a firm chooses to compete i.e. in which industries b. How a firm chooses to compete in a specific industry c. Why a firm chooses to compete or not d. Answers a and b
a. Where a firm chooses to compete i.e. in which industries
55. That Tata Motors should stay in India and export its cars round the world shows that: a. Where a firm's competitive advantage is based on national resource advantages it should not move production abroad b. If a firm's advantage is based on a strong local market it should keep production there c. Exporting is the optimal strategy for Tata d. Most companies should follow the cost leader's example
a. Where a firm's competitive advantage is based on national resource advantages it should not move production abroad
42. A significant determining factor on whether a firm conducts an activity internally is: a. Whether the transaction costs of buying in the activity in the market exceed the administrative cost of doing it themselves b. Whether transaction costs in the market of buying in the activity exceed the administrative cost buying it in c. How reliable their workforce is, compared with an external supplier's reliability d. None of the above
a. Whether the transaction costs of buying in the activity in the market exceed the administrative cost of doing it themselves
61. A "technical economy" is: a. A saving which is only theoretically feasible b. A cost-saving arising from the technicalities of performing integrated processes c. An economy based on technology d. One which is not worth the effort of gaining
b. A cost-saving arising from the technicalities of performing integrated processes
45. Comparative advantage refers to: a. A country's absolute efficiency in producing goods or services b. A country's relative efficiency in producing goods or services c. A country's total efficiency in producing goods or services d. A country's inefficiency in producing goods or services
b. A country's relative efficiency in producing goods or services
38. Consumer electronics (laptops, personal devices etc.) are an example of: a. A multi-domestic industry b. A global industry c. A trading industry d. The phishing industry
b. A global industry
57. Over the past 30 years, the tendency in the USA and Europe has been: a. A trend for highly diversified groups to dominate industries b. A trend for diversified firms to refocus and reduce their diversification c. Reduced opportunity for firms to further diversify d. A deliberate move to avoid copying the strategy of firms in emerging economies
b. A trend for diversified firms to refocus and reduce their diversification
28. A dominant design is: a. One which has won the most industrial design awards b. An emergent de facto industry standard broad product format c. The one advertised most strongly by the market leader d. The latest new product which gains the most media attention
b. An emergent de facto industry standard broad product format
54. Michael Porter's "attractiveness test" means that a firm considering diversifying into another industry should: a. See that the barriers to entry to that industry are low b. Be able to see a way to make superior profits in that industry c. Also consider how unattractive their existing industry is, by comparison d. See that some firms in that industry have left, leaving space for newcomers
b. Be able to see a way to make superior profits in that industry
60. The move over the past 25 years to refocus and de-integrate has not been universal; some industries have further vertically integrated: a. Because those industries are old-fashioned and behind-the-times b. Because in some industries the conditions favouring further vertical integration outweigh the benefits of focusing and outsourcing c. Because those industries have probably sought no advice from academics, or taken no notice of the advice d. Answers a and c
b. Because in some industries the conditions favouring further vertical integration outweigh the benefits of focusing and outsourcing
22. Change in an industry is the result of: a. The forces of technology, consumer preferences, and economic growth b. Both external forces and the incumbents' competitive strategies c. The effect of the "5 forces" model of competition d. Economic and psychological factors
b. Both external forces and the incumbents' competitive strategies
38. As the industry life cycle progresses, overall strategies need to: a. Stay steady and not waver; don't change anything b. Change in every major aspect e.g. product evolution, the nature of competition c. Primarily focus on cost-cutting d. None of the above
b. Change in every major aspect e.g. product evolution, the nature of competition
51. An internal capital market occurs when: a. A diversified company sets up a finance firm as one of its businesses b. Enough cash generated by one set of internal firms is used by other internal firms in need of cash c. A subsidiary starts a money-lending business, offering loans to other subsidiaries d. External sources of capital become too expensive
b. Enough cash generated by one set of internal firms is used by other internal firms in need of cash
38. The existence of economies of scope are likely to lead a company to: a. Reduce the number of industries and/or products it's directly involved in b. Expand the scope of its activities in some relevant way c. Create a brand d. Not worry too much about fixed costs
b. Expand the scope of its activities in some relevant way
29. Underlying both of these are the quests to: a. Exploit foreign resources, capabilities, and competitive advantage b. Exploit foreign resources, capabilities and markets c. Limit foreign competitive advantages d. Limit foreign companies' ambitions
b. Exploit foreign resources, capabilities and markets
57. Public sector organisations: a. Do not have stakeholders b. Have stakeholders some of whom are obliged by law to act in the national or public interest c. Do not have shareholders d. Never make as much profit as they could as private sector firms doing the same thing
b. Have stakeholders some of whom are obliged by law to act in the national or public interest
56. "Appropriating the returns to a resource" means: a. Having some of the resources and capabilities needed to able to earn a higher potential profitability from your unique resources b. Having all of the resources and capabilities needed to earn a higher potential profitability c. Obtaining workers for the lowest wage possible d. Ensuring that capital earns the full cost of capital
b. Having all of the resources and capabilities needed to earn a higher potential profitability
33. IBM initially ignored the PC market because: a. IBM did not recognise the PC market as a separate industry b. IBM had seen the PC as a tiny, hobbyist's niche within the computer industry, not worth IBM's attention c. IBM knew they weren't innovative enough to compete against Apple d. IBM are not good at spotting new opportunities
b. IBM had seen the PC as a tiny, hobbyist's niche within the computer industry, not worth IBM's attention
76. A key message for corporate bosses is to recognise that diversification is: a. Always very risky, so should only be attempted when there's no other option b. Inherently risky, but at some stage necessary - so should be based on sound analysis c. Well-known to be primarily about empire building - so is to be discouraged d. Only works in emerging economies nowadays
b. Inherently risky, but at some stage necessary - so should be based on sound analysis
46. The managers of firms in low-growth, cash-generative industries often opt for diversification because: a. Shareholders expect managers to go for growth b. Low growth does not look good for managers with an eye on their next job c. Managers must do something positive d. They are often advised to do so by business consultants
b. Low growth does not look good for managers with an eye on their next job
31. In its first, largely European, phase of internationalization IKEA: a. Kept its markets and products unchanged b. Made minimal changes to its products and processes c. Consciously changed its culture but not its products d. Changed its products but not its culture
b. Made minimal changes to its products and processes
32. On expanding into the USA, IKEA changed: a. Kept its markets and products unchanged b. Made minimal changes to its products and processes c. Consciously changed its culture but not its products d. Changed its products but not its culture
b. Made minimal changes to its products and processes
54. The key success factor for firms surviving in the Maturity phase is: a. Buying as many competitors as you can b. Maintaining cost efficiency as good as competitors c. "Two for One" deals and other special offers d. All of the above
b. Maintaining cost efficiency as good as competitors
42. Competitive advantage is achieved when a firm: a. Achieves higher profit margins than its rivals b. Matches its strongest resources & capabilities to the key success factors of the industry c. Achieves the highest asset turnover ratio in the industry d. Answers b and c
b. Matches its strongest resources & capabilities to the key success factors of the industry
31. An industry life cycle: a. Always follows the theoretical pattern b. May never enter the decline phase, in some industries supplying basic essential products or services c. Must be the same everywhere, due to globalisation d. Can never really experience a resurgence
b. May never enter the decline phase, in some industries supplying basic essential products or services
43. Often, to succeed in the evolution from Introduction to Growth a firm: a. Needs to acquire an injection of cash from a venture capital company b. Needs to be closely associated with the dominant design which emerges c. Needs to buy a major competitor d. Needs to pull back on product innovation
b. Needs to be closely associated with the dominant design which emerges
45. To survive the Growth phase profitably a firm NOT having all the attributes of a leading player could: a. Sell the company to a more well-prepared rival b. Operate as a specialist, niche player, thus avoiding the necessity to fully "scale up" c. Find another industry to move into d. None of the above; without the ability to dramatically scale up, the firm will fail
b. Operate as a specialist, niche player, thus avoiding the necessity to fully "scale up"
40. A company in a mature industry which is good at cost-reduction is exhibiting: a. Economy of scale through better use of fixed assets b. Potential for economy of scope based on organisational or managerial capability c. Potential for economy of scope based on intangible resources d. No potential for economy of scope
b. Potential for economy of scope based on organisational or managerial capability
47. With the onset of the maturity stage, the number of firms in most industries: a. Remains relatively stable b. Tends to decrease significantly c. Increases significantly d. Decreases or increases, depending on the industry
b. Tends to decrease significantly
67. One huge problem with vertical integration of activities with only one major sellable output is: a. The company will be too large to manage efficiently b. The entire integrated value-chain is subject to the same single market risk c. Upstream stages are isolated from market forces d. It's no longer possible to use external suppliers
b. The entire integrated value-chain is subject to the same single market risk
48. With maturity, the type of firms who fail to survive are typically: a. The smallest companies b. The middle-sized companies c. The largest companies d. None of the above; there is no typical pattern
b. The middle-sized companies
32. Corporate strategy is concerned with: a. The scope of a firm's products b. The scope of a firm's activities c. The scope of a firm's structure and corporate governance system d. The firm's geographical scope
b. The scope of a firm's activities
60. Being international can be a source of competitive advantage if: a. Your product or service is tradable b. There are significant economies of scale in your industry c. Your customers only consider local conditions d. Answers a and b
b. There are significant economies of scale in your industry
53. Firms can use a value chain analysis of their industry: a. As the basis of their customer segmentation b. To divide and locate production between countries with different natural resources that suits each stage of production c. To identify the profitability of production at each stage of the firm value chain d. To definitively categorize their suppliers
b. To divide and locate production between countries with different natural resources that suits each stage of production
39. Start-up firms in a new industry are also sometimes known as: a. dallaglio entrants b. de novo entrants c. de bono entrants d. de facto entrants
b. de novo entrants
71. Which of these choices is NOT an example of a vertical relationship? a. A franchise agreement b. An exclusive single-supplier agreement c. A long-term agreement with competitors to fix the market price for a commodity product d. A joint development group between a supplier and a customer
c. A long-term agreement with competitors to fix the market price for a commodity product
63. Competing strategically means: a. Defeating the Gauls, Goths and Barbarians b. Using profits from one country to subsidize a price war in another country c. Answer b and subtler versions of the same principle d. Using tactics drawn from military manuals
c. Answer b and subtler versions of the same principle
37. Economies of scope and economies of scale both relate to lower average cost but: a. Economies of scale refer to cost-advantage from higher volume of a single product b. Economies of scope refer to cost-advantage from spreading a common cost over multiple products c. Answers a and b d. None of the above
c. Answers a and b
58. The advantage of alliances is that they: a. Allow firms to economize on resources b. Allow firms access to specialized resources or capabilities c. Answers a and b d. Keep all strategic options open
c. Answers a and b
52. Tradability refers to the idea that: a. Some products or services are almost impossible to export or import b. Some goods have to be produced where they are consumed: eating a meal in a restaurant would be a good example c. Answers a and b both illustrate the idea of tradability d. All other answers are wrong; tradability simply means the shipping cost as a percentage of the sales price
c. Answers a and b both illustrate the idea of tradability
46. For the theory of comparative advantage a country's innate national endowments include its: a. Climate, labour and exports b. Climate, labour and its steel industry c. Climate, minerals, history and culture d. Climate, labour, and its financial wealth
c. Climate, minerals, history and culture
21. Change in the industry environment faced by a firm is: a. Massive and unpredictable b. Gradual and predictable c. Could be either answer a or b, depending on the industry and the prevailing conditions d. Easier for large firms to cope with
c. Could be either answer a or b, depending on the industry and the prevailing conditions
59. Outsourcing is a form of: a. Increased vertical integration b. Decreased horizontal integration c. De-integration or disaggregation d. Answers b and c
c. De-integration or disaggregation
46. To survive going into the Maturity phase of the industry life cycle a firm needs to: a. Outsource all production b. Get rid of all research and development staff c. Emphasise cost efficiency d. Cut wages
c. Emphasise cost efficiency
53. An advantage of diversification is a better internal labour market because: a. There's a saving on advertising costs b. There's no commission payable to the internal Human Resources department c. Employees can be transferred rather than hired / fired, and the firm knows these people well d. The firm does not need to invest so much in training new recruits
c. Employees can be transferred rather than hired / fired, and the firm knows these people well
51. When considering where to locate production globally: a. Exporting firm-specific competitive capabilities from home territory is easy b. Exporting firm-specific competitive capabilities from home territory is practically impossible c. Exporting firm-specific competitive capabilities from home territory requires close attention and may not even be possible d. None of the above
c. Exporting firm-specific competitive capabilities from home territory requires close attention and may not even be possible
44. A country has a comparative advantage: a. In producing milk if its cows are heavy milk producers b. In producing mobile phones if it has a big timber industry c. In producing those products or services that make intense use of those resources in which it has a relative abundance d. In producing those products or services that make intense use of those resources for which it has the lowest domestic demand
c. In producing those products or services that make intense use of those resources in which it has a relative abundance
26. Internationalization has: a. Increased global efficiency but reduced consumer choice b. Increased global efficiency and growth options for large and small firms c. Increased global efficiency and growth options, and widened consumer choice d. Increased global efficiency and growth options but reduced consumer choice
c. Increased global efficiency and growth options, and widened consumer choice
33. Sheltered industries are protected from: a. Imports b. Imports and Exports c. Inward direct investment and imports d. Direct and Indirect inward investment
c. Inward direct investment and imports
58. A firm becomes more vertically integrated when: a. It buys a direct competitor b. Its management and staff are better aligned c. It moves to own more stages of the value chain, either upstream or downstream of its core activity d. It owns only some activities on the upstream or supply-side of its foremost activity
c. It moves to own more stages of the value chain, either upstream or downstream of its core activity
27. A new industry life cycle begins when: a. A very large gap in the market emerges b. Another industry dies c. New knowledge manifests itself in the guise of a sufficiently radical product innovation d. There are sufficient entrepreneurs
c. New knowledge manifests itself in the guise of a sufficiently radical product innovation
44. A strategy of unrelated diversification is: a. Always a mistake b. Likely to be less risky than related diversification c. Not always as unrelated as it may seem e.g. the businesses may share some common attributes which can be exploited d. Always the last resort
c. Not always as unrelated as it may seem e.g. the businesses may share some common attributes which can be exploited
58. Not-for-profit organisations: a. Are required by law not to make any profit b. Avoid making profits as far as possible c. Often do make profits (called a surplus), but these are re-invested in the organisation d. Must explain any profit they inadvertently make to the government
c. Often do make profits (called a surplus), but these are re-invested in the organisation
61. Stakeholder analysis for public sector organisations is particularly important because: a. In the absence of making a profit, it's difficult to know what the stakeholders actually want b. There is a legal obligation to conduct stakeholder analysis c. Public sector organisations are often legally obliged to take a wide spectrum of stakeholders' views into account d. The set of stakeholders changes more rapidly than in the private sector
c. Public sector organisations are often legally obliged to take a wide spectrum of stakeholders' views into account
68. Transnational corporations (TNCs) differ from multinational corporations (MNCs) in that: a. They have different kinds of internal financial reconciliation processes b. TNCs are a globally integrated network of independent profit centres c. TNCs are a globally integrated network of independent resources and capabilities d. There is no real difference
c. TNCs are a globally integrated network of independent resources and capabilities
70. The Philips example of developing TVs around the world shows: a. How a good TNC can exploit its unique global resources b. The scale and scope of resources needed to compete in this industry nowadays c. The dangers of failing to integrate development properly d. The problems of decentralized European TNCs
c. The dangers of failing to integrate development properly
65. The "triad doctrine" no longer works because: a. The triads were wiped out in the 1990s b. Linking to organized crime doesn't work because it is actually not well organized c. The world now has more than three major economic centres d. In reality there is no such thing as an economic centre of activity
c. The world now has more than three major economic centres
27. For most of the last sixty years internationalization has been: a. A source of increased tension between countries b. A source of innovative ideas for firms and individuals c. A source of higher earnings for firms and individuals d. A source of opportunity for firms and individuals
d. A source of opportunity for firms and individuals
24. The industry life cycle: a. Is an extension of the concept of the product life cycle b. Uses the same stages as the product life cycle c. Nearly always lasts much longer than a typical product life cycle in that industry d. All of the above
d. All of the above
43. Increased corporate complexity because of expanded scope is caused by: a. The need for managers to understand a wider range of businesses b. The need for managers to operate differently to succeed in different businesses c. The extent of the linkages between the various businesses d. All of the above
d. All of the above
49. Besides demand conditions the other factors in Porter's national diamond are: a. Strategy, structure and rivalry, such as intense domestic competition b. Factor conditions, such as the scarcity or abundance of certain resources c. Related and supporting industries, such as clusters of complementary or supporting industries d. All of the above
d. All of the above
50. The decline phase of the industry life cycle is characterised by: a. Ceasing of product and process innovation b. Incumbents going out of business c. Remnant niche-sized players may survive profitably d. All of the above
d. All of the above
50. The people who might profitably use a Porter's national diamond analysis are: a. Policymakers, such as politicians and civil servants b. The Boards of companies when deciding where to locate their major resource centers (Corporate HQ, R&D labs, Marketing etc.) c. Venture Capitalists when influencing where a start-up company should locate itself d. All of the above
d. All of the above
55. Public sector firms differ from private sector firms in that: a. They are owned by the government b. They are wholly or partly government-funded c. They often provide a service at price well below that of an equivalent private sector firm d. All of the above
d. All of the above
59. The aims, goals and objectives of public sector firms are characteristically: a. Shaped by political considerations b. Multiple, often conflicting and shifting c. Lacking the overriding obligation to return a profit to shareholders d. All of the above
d. All of the above
68. Vertical integration may afford flexibility in responding to uncertain demand when: a. The firm has built a capability to respond speedily in a coordinated fashion b. The firm maintains spare capacity, and can bear spare capacity c. The market cannot respond as quickly, or capacity is unavailable d. All of the above
d. All of the above
The essence of IBM's success in the PC industry in the 1980's was: a. IBM established a dominant design b. IBM had an established access to the business market, which Apple et al did not have c. IBM opted to encourage 3rd parties to write software and provide additional hardware, unlike Apple d. All of the above
d. All of the above
37. Is the PC industry in the maturity stage of the life cycle? a. Yes - growth has started to decline, and shakeout occurred years ago b. Yes - emphasis is on production efficiency, and the PC is being commoditised c. No - there is still huge growth potential in China, India, Brazil and so on d. Answers a and b
d. Answers a and b
47. For a modern country innate resources include: a. Management, developed capital markets and an efficient legal system b. A large home market, and good transport and communication facilities c. Large military forces and a space capability d. Answers a and b
d. Answers a and b
60. Further characteristics of -some not all - public sector organisations include: a. The absence of a market e.g. the police b. A legally enforced monopoly c. Heavily unionised workforces d. Answers a and b
d. Answers a and b
67. Many MNCs are 'captives of their history' because: a. Structure follows strategy, and their original strategies may now be irrelevant b. Once you have established them successfully, it is hard to change both international structures and strategies c. Strategy follows structure, so they have to adapt their global strategies to the reality of global political structures d. Answers a and b
d. Answers a and b
When IBM did enter the PC market, they: a. Did so with a maverick offshoot, and by buying in sub-systems, which went against the IBM usual methods b. Suffered slow growth since they were late to market c. Relied on business users recognising the established IBM reputation d. Answers a and c
d. Answers a and c
29. A technical standard: a. Only occurs in computing when there is a network effect b. Emerges when there are interconnectivity and interface compatibility issues c. Can emerge for safety and other reasons from standards bodies eg ISO d. Answers b and c
d. Answers b and c
36. IBM sold its PC division to a Chinese company because: a. IBM realised that labour costs are lower in China b. The PC market in the developed world was saturated, so was no longer attractive to IBM c. The PC was increasingly becoming a multimedia consumer product, whereas IBM is a business-oriented firm d. Answers b and c
d. Answers b and c
69. Full vertical integration compounds risk because: a. Top managers have a complete knowledge of the entire value chain b. The capital invested and the fixed costs are often much higher for a vertically integrated firm c. A decline in sales and profits in the end market affects all stages simultaneously d. Answers b and c
d. Answers b and c
73. There was a fashionable trend towards "virtual companies" in recent years, who make the largest profits in a value chain by co-ordinating all the other aspects. The risk with this plan is: a. A virtual company has little control, so suppliers may collude to drive prices up b. Such a company may find it loses the ability to understand the industry it is in c. A group of suppliers and/or customers may decide to co-ordinate themselves, and isolate the virtual company d. Answers b and c
d. Answers b and c
34. Sheltered industries are protected by their: a. Perishability b. Transport difficulties and high transport costs c. Very small size of operation and lack of scale economies d. Any of the above
d. Any of the above
49. The typical cause of the Decline phase in an industry is: a. Technological substitution e.g. the horse and cart replaced by the car b. Local regional decline due to low-cost foreign competition c. Changing consumer tastes e.g. tobacco d. Any of the above
d. Any of the above
63. Scenario planning is a tool for: a. Planning for how a firm wants the world to look in the future b. Mainly governments to envisage downstream consequences of their actions c. Analysing the most certain or likeliest future d. Easily constructing alternative plausible views of how the world may look, often in the more distant future eg 25 years
d. Easily constructing alternative plausible views of how the world may look, often in the more distant future eg 25 years
59. Alliances usually go wrong if: a. Firms squabble over the contributions and returns from the alliance b. Each firm really wants to acquire the other's core capabilities c. The firms are Customer and Supplier d. Either answers a or b
d. Either answers a or b
57. International strategic alliances allow: a. Governments to share national resources b. Retailers to control their suppliers c. Strong firms to dominate weak ones without having to buy them d. Firms to share resources and capabilities
d. Firms to share resources and capabilities
36. Multi-domestic industries: a. Are distinguished by their focus on products for the domestic sector b. Have very high transport costs c. Supply standard products around the world with instructions in the local language d. Internationalize though direct investment
d. Internationalize though direct investment
66. When increased flexibility is required: a. It is always best to source inputs from the open market b. It is always best to integrate key inputs, to maintain full control c. It is best to operate with a mix of both options d. It depends very much on the circumstances whether it's best to source from the market or vertically integrate
d. It depends very much on the circumstances whether it's best to source from the market or vertically integrate
55. Of Michael Porter's 3 tests of whether a proposed diversification will create value, the most important one is usually: a. None. They are all equally important b. The "attractiveness" test c. The "cost of entry" test d. The "better-off" test
d. The "better-off" test
48. A major reason why managers are attracted to diversification is: a. They believe that shareholders expect it of them, to show dynamism b. It sharpens their managerial skills c. Many managers are attracted to the extra complexity of diversification d. The experience may reduce risk, and secure their job; and if not it looks dynamic for securing their next job
d. The experience may reduce risk, and secure their job; and if not it looks dynamic for securing their next job
50. Gaining the advantage from economies of scope requires that: a. A company must internally expand its scope b. A company must usually enter into a licence arrangement c. A company must usually acquire a company who is expert in an additional business d. The firm is be able to spread common cost somehow, either by performing the additional activity internally, or by licensing the resource
d. The firm is be able to spread common cost somehow, either by performing the additional activity internally, or by licensing the resource
35. As a firm progresses, it is invariably the case that it expands its scope: a. In terms of its product, geographic and vertical scope b. In terms of its geographic and vertical scope c. In terms of its geographic and product scope d. This is not true. Some firms narrow some aspects of their scope, or voluntarily even break up
d. This is not true. Some firms narrow some aspects of their scope, or voluntarily even break up