Most Asked Questions- GB

Which of the following strategy-structure combinations are most likely paired? a. International division and localization strategy b. International division and global standards strategy. c. Geographic area structure and transnational strategy. d. Global product division and global standards strategy

Global product division and global standards strategy

Which of the following statements is NOT TRUE: a. The crucial principle of the WTO is nondiscrimination, ensuring that countries do not discriminate among its trading partners. b. The original objective of the IMF was to help countries maintain fixed exchange rates. c. The objective of the IMF is to help countries experiencing severe balance of payments problems. d. The IMF is responsible for the stability of the global banking system.

NOT TRUE: The IMF is responsible for the stability of the global banking system.

In an alliance, the success of an integrative equality agreement requires a. the delegation of authority to individuals chosen by both partners. b. the dispersal of decision-making on select issues to at least one of the partners. c. the development of a code of conduct for conflict resolution. d. the selection of individuals that report to both alliance partners.

Answer: a; Even if the responsibilities for specific aspects of alliance management in an integrative agreement are divided between the partners, it is important for them to reach a common agreement on the important decisions of the alliance. This includes the choice of the individuals in position of authority, since these individuals are often the key to the success of the partnership.

An industry that is characterized by moderate national responsiveness and moderate global integration is a(n) a. international industry. b. global industry. c. transnational industry. d. multinational industry.

Answer: a Difficulty: Easy

_________ suggests that in the first stage innovations are produced in the home developed country; in the second stage they are exported to other similarly developed countries; in the third stage, they start being produced in these developed countries; in the fourth stage they start being produced in low-wage developing countries. a. Vernon's product cycle theory b. Johanson and Vahlne's stages theory c. Dunning's eclectic theory d. Levitt's globalization theory

Answer: a Difficulty: Moderate

The pressures that drive book publishers such as McGraw-Hill to integrate and coordinate their activities across national boundaries are primarily _________. a. Economic b. political c. social d. organizational

Answer: a (Forces for global integration and coordination are primarily economic rather than political, social, or organizational.) Difficulty: Moderate

In the geographic (country) manager's role as an information broker, the individual must engage in all of the following activities, except a. formulate and implement cross-border transfer policies to be used when coordinating the flow of materials, components and finished products from the host country to related business units situated in other host countries. b. interpret the environmental and cultural differences of the host country, using this information to predict feasible outcomes to the headquarters. c. translate corporate goals, strategies and values into meaningful objectives for employees situated in the host country. d. communicate the corporation's goals, strategies and values to the employees situated in the foreign country.

Answer: a (Formulating and implementing cross-border transfer policies to be used when coordinating the flow of materials, components and finished products from the host country to related business units situated in other host countries is not typically the responsibility of the geographic (country) manager. Instead, it is the responsibility of the global business manager).

In developing differentiated coordination processes in a transnational organization, which of the following factors would be most important for an MNC manager to consider? a. How the company sources its raw materials, transfers technologies, and manages scarce resources. b. How the company is structured and how decision-making authority is assigned. c. The environment in which the firm operates and the nature of competition in that environment. d. The portfolio of products that the MNE offers and the markets in which it offers them.

Answer: a (In analyzing how managers might develop a coordination system that best fits the needs of various functions and tasks, it is helpful to think about the various flows among the organizational units involved in the execution of each task. Three flows are the lifeblood of any organization, but are of particular importance in a transnational company - the flow of goods, the flow of resources and the flow of valuable information and knowledge that the company must diffuse throughout the worldwide network of national units).

Which of the following do not constitute part of the strategic tension facing the geographic (country) manager a. initiating the worldwide diffusion of best practices and innovations developed within the host country. b. presenting the "face" of the entire organization at the country level. c. responding to the needs and demands of the host country government. d. leveraging the MNE's local resources and capabilities to strengthen the firm's worldwide competitive position.

Answer: a (Initiating the worldwide diffusion of best practices and innovations developed within the host country is not typically the responsibility of the geographic (country) manager. Instead, it is the responsibility of the worldwide functional manager).

Which of the following constitutes a list of foreign entry modes that involve the MNE to make a foreign investment? a. Wholly owned, joint venture b. Wholly owned, license c. Franchising, joint venture d. Franchising, license

Answer: a (Licensing, franchising, and many forms of cooperation may not entail an MNE making an investment.) Difficulty: Easy

Robert is an operating manager for a large organization. Robert's organization will be engaging in a joint venture. He has been assigned the responsibility of overseeing his firm's participation in the joint venture. As such, Robert's supervisor has asked him to participate in the negotiation process. Even if Robert is not familiar with the negotiations, his presence at this stage is essential to a. ensure that the definition and understanding of the alliance's goals are clear and consistent b. give the joint venture partner an opportunity to accept or reject Robert's leadership of his firm's participation in the partnership. c. communicate Robert's extensive familiarity with his own firm to the joint venture partner. d. make him feel important and test his capacity to operate in a stressful situation.

Answer: a; Involving the interface manager in the negotiation process is important since he need to fully understand the goals of the alliance, its mechanisms and the scope of the partnership to be effective in his task. This also ensures that the definition and understanding of the alliance's goals are clear, consistent, and well understood.

Worldwide Consulting Limited is an Italian-based service company with activities in 23 countries. The company operates by embedding a large number of expatriates in foreign subsidiaries, even though the expatriates are not always familiar with the host country to which they are assigned. What is the most important benefit Worldwide Consulting is most likely to achieve through this practice? a. An exchange of information and knowledge across subsidiaries facilitated by the expatriates. b. The presence of expatriate employees enhances the prestige of the foreign subsidiaries and increases client satisfaction. c. The presence of a large number of expatriates improves employee motivation and reduces employee turnover. d. Having ex-pat employees allows the parent company to keep tighter control of its offshore subsidiaries.

Answer: a (One of the most difficult tasks facing a transnational organization is the coordinating the huge flow of strategic information and proprietary knowledge required to operate a transnational organization. The diversity and changeability of the flow make it impossible to coordinate through formal systems and the sheer volume and complexity of the information would overload headquarters if coordination were centralized. The most effective way to ensure that worldwide organizational units analyze their diverse environments appropriately is to sensitize local managers to broader corporate objectives and priorities. One of the best ways to achieve this goal is to transfer personnel with the relevant knowledge. In fact, this socialization process is the classic solution for the coordination of information and knowledge flows across subsidiaries).

Which of the following describes the preferred sequencing of changes associated with implementing the typically more effective emerging change process model? a. Change in individual attitudes and mentalities; then, change in interpersonal relationships and processes; and finally, change in the formal structure and responsibilities b. Change in the formal structure and responsibilities; then, change in interpersonal relationships and processes; and finally, change in individual attitudes and mentalities c. Change in interpersonal relationships and processes; then, change in the formal structure and responsibilities; and finally, change in individual attitudes and mentalities. d. Change in individual attitudes and mentalities; then, change in the formal structure and responsibilities; and finally, change in interpersonal relationships and processes

Answer: a (The emerging change process model commences with efforts to change individual attitudes and mentalities, and is followed by efforts to modify interpersonal relationships and processes before pursuing changes in formal structure and responsibilities). Difficulty: Easy

TechInnovation is a large MNE operating in an environment characterized by rapid changes. During the past 50 years, its subsidiaries have operated independently. Which of the following actions will be least helpful to increase the interdependence across its widely dispersed national organizations? a. TechInnovation could centralize more decision-making to counter-balance the decentralization that has taken place during the past 50 years. b. TechInnovation could create regular cross subsidiary meetings to coordinate activities and resolve differences. c. TechInnovation could break up its value-chain to ensure that subsidiaries perform interrelated activities. d. TechInnovation could develop career paths to routinely transfer managers across subsidiaries.

Answer: a (To create an effective interdependent organization, an MNE must both: (i) develop a configuration of resources that is neither centralized, nor decentralized, but is both dispersed and specialized. Such a configuration lies at the heart of the transnational company's integrated mode of operations; and, (ii) build inter-unit integration mechanisms (ie., holding regular cross-subsidiary meetings; ensuring that subsidiaries perform interrelated activities; routinely transferring managers across subsidiaries) to ensure that task interdependencies lead to the benefits of synergy rather than the paralysis of conflict).

Kentucky Fried Chicken (KFC) suffered a major chicken sales decrease in Hong Kong immediately after running the Chinese version of their successful worldwide advertising campaign "Finger lickin' good" that supposedly highlights the tastiness of their chicken. This is most likely an issue of: a. Cultural differences and localization pressures b. Government demands and factor costs c. Localization pressures and economies of scale d. Cultural differences and global competition

Answer: a (Very similar to the Pepsi and Chevrolet's examples in the text book; the Chinese translation came out as 'eat your fingers off', needless to say, most customers opted for the fries instead of the chicken!)

In light of the dramatic changes in the organizational form of MNEs, which of the following do not receive enough attention from those who manage modern MNEs a. a review of the new roles and responsibilities of the firm's managers. b. the analysis of new international environmental forces. c. the refinement of global strategy. d. the study of characteristics that contribute to effective transnational organizations.

Answer: a (While consultants and managers spend an enormous amount of time and energy analyzing environmental forces, refining global strategy and understanding the characteristics of an effective transnational organization, too little time is devoted to understanding the implications associated with the changes in the roles and responsibilities of those who manage MNEs. These changes in roles and responsibilities have emerged as a consequence of traditional hierarchical structures evolving into the transnational organizational form).

Which of the following strategy-structure pairs cannot be associated? a. Coordinated federation and multinational strategy. b. Decentralized federation and international strategy. c. Centralized hub and global strategy. d. Integrated network and transnational strategy.

Answer: a and b (Companies that adopt a coordinated federation structure are most likely to pursue an international strategy. Further, companies that adopt a decentralized federation structure are most likely to pursue a multinational strategy).

A car manufacturer and a multinational computer technology corporation intend to combine their strengths to develop intelligent sound systems for cars. Assuming that both companies will have a moderate to high level of interaction, what would be the most suitable form of alliance to adopt? a. The firms should develop an R&D consortium, combining teams from both companies. b. The firms should create an equity joint venture, combining assets from both companies. c. The firms should create a licensing agreement to exploit the new application. d. The firms should develop production facilities to be shared between the partners.

Answer: a; An R&D consortium would combine teams from both companies to develop new technologies or applications of technologies. In this case, the objective of the collaboration is to develop a new application for a technology that could be used in a car. Because of the short product life cycle, and the limited market window for the application, an R&D partnership can help resolve the different challenges both companies would independently encounter in developing this new product and introducing it in cars.

Which of the following can inhibit a firm's ability to learn from the alliance? a. The interface manager is not the target user of the knowledge. b. The firm does not have an information system to diffuse the knowledge acquired. c. The firm does not share its knowledge with the other partner. d. The alliance knowledge is not codified.

Answer: a; Irrespective of the specific objectives of any alliance, the very process of collaboration creates flows of information across the boundaries of the participating companies and creates the potential for learning from each other. One task related to knowledge flows in the alliance is to ensure full exploitation of the created learning potential. Relative to this task, the key problem is that the individuals managing the interface may not be the target users of such knowledge. To maximize its learning from a partnership, a company must effectively integrate its interface managers into the rest of its organization.

Lindux Co., intends to enhance its competitive advantage by exploiting the national differences that prevail in the countries that host its subsidiaries. Which of the following is consistent with this intention? a. moving the manufacture of labor-intensive components to Vietnam in order to capitalize on the lower cost labor found in Vietnam. b. hiring local managers for its foreign subsidiaries rather than employing expatriates. c. centralizing the company's R&D activities in the home country for reasons of strategic security. d. using a common distribution channel for multiple products.

Answer: a; Locating manufacture of labor-intensive components in Vietnam, a country well-known for its low labor-cost provides Lindux Co. with competitive advantage which is the result of inter-country differences in factor costs. The difference between a local and expatriate manager is valid for every home and host country regardless of the differences (or similarities) they may have. Therefore, choice b cannot be the right answer. Also, centralizing the company's R&D activities in the home country for reasons of strategic security (choice c) is not relevant to inter-country differences. Finally, a common distribution channel is a means of achieving scope economies which is independent of inter-country differences.

Which of the following best describes a global company's asset and capability configuration? a. assets and capabilities are centralized and globally scaled. b. core competences are centralized, while other assets and capabilities are decentralized. c. assets and capabilities are dispersed, interdependent and specialized. d. assets and capabilities are decentralized and nationally self-sufficient.

Answer: a; The strategic orientation of a global company is based on building cost advantages through centralized and global-scale operations. This will require the company to configure it assets and capabilities to be centralized and globally scaled. Choices b, c, and d describe the configuration of assets and capabilities of international, transnational, and multinational companies respectively.

An industry that is characterized by low national responsiveness and high global integration is a(n) a. multinational industry. b. global industry. c. international industry. d. transnational industry.

Answer: b Difficulty: Easy Page: 113; ppt slides 2-34 to 2-38

In a transnational industry, MNEs are expected to a. collaborate with their competitors to increase the prices of their products. b. build the capability to learn from the many environments in which they operate. c. acquire their competitors to increase their pool of resources. d. decentralize decisions to better respond to local demands.

Answer: b Difficulty: Moderate

To overcome the not-invented-here (NIH) syndrome that often prevails in international firms, which of the following techniques are not employed by the worldwide functional manager when facilitating the transfer of new ideas and innovations throughout the MNE a. identifying best practices through informal contacts and formal evaluations. b. replacing geographic (country) managers that resist the adoption of best practices. c. arranging cross-unit visits and transfers. d. hosting conferences and forming task forces.

Answer: b (As a cross-pollinator of "best practices", the worldwide functional manager plays a vital role in facilitating the transfer of new ideas, developments and innovations throughout the MNE. As such, the worldwide functional manager concentrates on activities that expose individuals in the MNE to new ideas. This responsibility does not contemplate replacing geographic (country) managers that initially resist the adoption of best practices). Difficulty: Moderate

Which of the following is not a core characteristic of the coordinated federation structure? a. Most assets and resources are decentralized but well controlled by the headquarters. b. Subsidiaries are regarded as key sources of knowledge and expertise. c. Subsidiary control exercised by the headquarters is usually quite formal and rigorous. d. Corporate managers tend to regard offshore subsidiaries as extensions of domestic operations.

Answer: b (Companies that adopt the coordinated federation model permit foreign subsidiaries to adapt products or strategies to reflect market differences, but their dependence on the parent company for new products, processes and ideas results in a significant degree of coordination and control being exercised by headquarters. In fact, these companies often view foreign operations as appendages whose principal purpose is to leverage the capabilities and resources developed in the home market).

Responsive MNEs contribute to the development of the poorest nations by engaging in all of the following activities, except: a. creating jobs and wealth. b. focusing on maximizing profitability. c. catering underserved customers. d. investing in developing markets.

Answer: b (Efforts by MNEs to invest in developing markets and to create jobs and wealth in these markets have been argued to both: (i) contribute to the development of the world's poorest nations; and, (ii) provide MNEs with the opportunity to bring millions of new consumers into the marketplace).

Excessive pressure from all of the following groups has caused exploitive MNEs to close down manufacturing operations and move to a new location, except: a. governments. b. non-unionized employee interest groups. c. nongovernmental organizations (NGOs). d. supranational agencies.

Answer: b (Exploitive MNEs have been widely documented as having taken steps to close down and move factories to alternate jurisdictions when the pressure from governments, nongovernmental organizations (NGOs) and supranational agencies becomes too great).

MNEs that internationalize in developing countries have encountered all of the following differences pertaining to the labor force, except: a. lower wages and fewer restrictions on living standards. b. greater number of hours worked per week. c. higher standards with respect to working conditions. d. lower standards for human rights.

Answer: c (Higher standards with respect to working conditions are rarely, if ever, encountered by MNEs that internationalize in developing countries). Difficulty: Moderate

What is the primary advantage of operating interdependent subsidiaries? a. It reduces the need to control subsidiaries and to coordinate their activities. . b. It allows the company to integrate scale-efficient operations and to cross-subsidize subsidiaries when necessary. c. It provides an opportunity to balance the interests of subsidiaries with the needs of the headquarters. . d. It prevents subsidiaries from becoming too independent or uncontrolled.

Answer: b (Firms that foster interdependence among their subsidiaries enjoy two important strategic advantages over firms that do not employ a coordinated global approach: (i) the ability to integrate scale-efficient operations; and (ii) the opportunity to cross-subsidize the losses in one market with the funds generated by profitable operations in other markets).

What are the main forces that motivate MNEs such as Dell Computers to disaggregate their operations and activities to respond to national, regional and local needs and demands? a. Social and economic forces. b. Social and political forces. c. Political and economic forces. d. Economic and psychological forces.

Answer: b (Forces for local differentiation and responsiveness are mainly social and political. They are not always economic because many times they make MNEs less efficient.)

Which of the following does not enhance the efficiency of a local-for-local innovation process? a. Dispersing assets and resources to the subsidiaries and delegating decision-making authority regarding innovations to them. b. Assigning competent headquarter managers to lead development projects within a subsidiary. c. Improving linkages between headquarters and subsidiaries through the use of expatriates. d. Promoting cross-functional integration at the subsidiary level.

Answer: b (Given that organizational assets and resources are typically dispersed, assigning competent headquarter managers to lead development projects within the subsidiary can detract from the efficiency of a local-for-local innovation process. Instead, the efficiency of local-for-local innovation is enhanced by empowering local managers to manage local development, manufacturing and other functional tasks related to the innovation process).

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, except: a. focusing only on the interests of shareholders. b. avoiding pollution. c. maximizing profits. d. leveraging cross-country differences in wages.

Answer: b (In addition to advocating companies' efforts to maximize profits and to focus solely on the interests of shareholders, economist Milton Friedman once argued that "[those who believe that] business....takes seriously its responsibilities for.....avoiding pollution....are preaching pure and unadulterated socialism").

To buttress the arguments of activists who have demonstrated against increasing globalization, a former chief economist at the World Bank has argued that the actions and policies of all the following groups have often damaged developing countries' economies more than they have helped them, except: a. the International Monetary Fund (IMF). b. the United Nations Global Compact (UNGC). c. the World Trade Organization (WTO). d. the World Bank.

Answer: b (In his book Globalization and Its Discontents, Nobel Laureate Joseph Stiglitz suggests that the previous actions of the WTO, IMF and the World Bank had often damaged developing countries' economies more than they had helped them). Difficulty: Moderate

Which of the following is not an appropriate coordination mechanism to be employed by a transnational corporation with worldwide activities? a. The coordination of information flows through the socialization of employees. b. The coordination of asset flows through a process of rationalization. c. The coordination of product flows through formalized management processes. d. The coordination of resource flows through centralized decision-making.

Answer: b (The flow of goods is best achieved through the formalization of management processes. Managing the flow of resources is a prime example of the need for coordination by centralization. Finally, the classic solution for the coordination of information flows is the socialization process).

The challenges facing a geographic (country) manager's who must convert corporate strategy into actionable plans for the subsidiary do not include a. the multiplicity and diversity of constituents whose demands and pressures compete for the geographic (country) manager's attention. b. failure of the country manager to identify and communicate worldwide best practices. c. the expectations of headquarters that the country manager will translate broad corporate goals and strategies into specific actions which are responsive to the needs of the subsidiary's national environment. d. the need to garner commitment and enthusiasm for the among constituents of the subsidiary with respect to the corporate strategy and the associated actionable plans.

Answer: b (The implementation of corporate strategy by the geographic (country) manager does not contemplate efforts to identify and communicate worldwide best practices. Instead, the identification and communication of worldwide best practices is typically the responsibility of the worldwide functional manager).

1. Top-level management teams strive to pursue continual renewal within the transnational by engaging in all of the following activities, except a. questioning and challenging all business groups. b. devoting considerable time and effort to reviewing below-budget financial results. c. reducing internal bureaucracy and constantly orienting the organization to its customers. d. forcing adaptation and learning.

Answer: b (Top-level managers who permit successful strategies to become elevated to the status of unquestioned wisdom and who watch effective organizational processes become institutionalized as routines risk ossification- management loses its flexibility and eventually the organization sees its role as protecting its past heritage. Questioning and challenging all business groups, forcing adaptation and learning and reducing internal bureaucracy are three means by which top-level managers can pursue continual renewal with respect to its strategies and processes).

Which of the following accusations is least likely to be levied against exploitive MNEs a. they may collude with political elites. b. they may be willing to ignore the welfare of employees. c. they may subvert the interests of their shareholders. d. they may violate environmental norms.

Answer: c (In fact, exploitive MNEs would be more inclined to argue that efforts to avoid collusion with political elites, to maximize the welfare of their employees and to ensure that environmental norms are not violated would run counter to their efforts to focus on the rights of their shareholders).

With responsibility for his company's largely centralized R&D activities, Frank worries that the center may not understand local market needs, while the subsidiaries may not be committed to innovations developed at the center. To respond to these concerns, Frank's priority should be to: a. adopt a single point of contact between headquarters and the subsidiaries to focus the flow of information. b. ensure that several key people in the foreign subsidiaries are linked to individuals at the headquarters who can represent and defend their views. c. carefully select the people he interacts with in the subsidiaries in order to reduce conflicting perspectives regarding innovation management. d. listen to the different national perspectives and priorities, but minimize differences in views from multiple subsidiaries' input.

Answer: b (Two key problems face a company with highly centralized R&D activities; firstly, those at the center may not understand local market needs; and, secondly, those in the subsidiaries required to implement the central innovation may not be committed to it. Building multiple linkages between headquarters and overseas subsidiaries gives headquarters managers a better understanding of country-level needs and opportunities, as well as giving subsidiary managers greater access to and involvement in centralized decisions and tasks). Difficulty: Moderate

Exploitive MNEs are often able to extract substantial concessions from host country governments because host countries are eager to secure which of the following in connection with new investments made by MNEs: a. access to the MNEs' sources of international commercial credit. b. employment and increased tax bases. c. business intelligence pertaining to the nature of concessions being offered by other host countries. d. complex financial instruments developed in first-world financial markets.

Answer: b (Understanding that because most countries are actively working to develop employment, increase their tax base and capture spin-off benefits from new investments, the exploitive MNE will not hesitate to play countries against one another, demanding more and more concessions to guarantee their investment).

Which global integration and coordination forces would MNEs, such as Mercedes-Benz, encounter? a. Economies of scale, increasingly liberalized trade environments and government demands b. Economies of scope, factor costs and increasingly liberalized trade environments c. Economies of scale, expanding spiral of globalization and local competitors d. Economies of scale, economies of scope and government demands

Answer: b (a, c, and d are incorrect because government demands and local competitors are part of 'forces for local differentiation and responsiveness'.) Difficulty: Moderate

Three prerequisites that must be satisfied before a national firm can transform itself into a multinational firm include: a. scale-based advantages, ownership-specific advantages, and contractual capabilities. b. location-specific advantages, ownership-specific advantages, and organizational capabilities. c. scale-based advantages, ownership-specific advantages, and organizational capabilities. d. location-specific advantages, knowledge advantages, and organizational capabilities.

Answer: b (a, c, and d are incorrect because scale-based advantages, knowledge-based advantages, and contractual capabilities are, by themselves, insufficient to justify the internationalization of operations. With much less effort a company often can sell or license its technology to foreign producers, franchise its brand name internationally, or sell its products abroad through local distributors, without having to set up its own offshore operations.)

A franchise, such as McDonald's, is a _________ mode of foreign entry. a. low commitment, low control b. low commitment, moderate control c. low commitment, high control d. moderate commitment, moderate control

Answer: b (a, c, and d would describe indirect export, contract manufacturing, and joint venture foreign modes of entry respectively.) Difficulty: Moderate

The demand for the Italy-based Sparkly Fashion Manufacturing's unisex pants has been continually increasing. Sparkos, the CEO of the company, intends to take his company international by producing these unisex pants mainly in Italy and selling them in the same way all over the world. Sparkos is operating with a(n): a. multinational mentality b. global mentality c. international mentality d. transnational mentality

Answer: b (it is the only mentality that supports "make and sell the same thing, the same way, everywhere") Difficulty: Moderate

Which of the following statements regarding knowledge diffusion is correct? a. In a decentralized federation, knowledge is developed in national subsidiaries and diffused throughout the organization b. In a centralized hub, knowledge is developed and retained at the center. c. In a coordinated federation, knowledge is developed at the center and transferred to overseas units for local adaptation. d. Knowledge diffusion is independent of structure, such that knowledge diffuses in a quite similar manner in all organizational structures.

Answer: b and c (Contrary to the wording offered in answer choice "a", in the context of a decentralized federation, knowledge is developed and retained in the company's national subsidiaries. Furthermore, knowledge diffusion and organizational structure are not independent of each other, as suggested in answer choice "d". However, in the context of the centralized hub model, knowledge is developed and retained at the headquarters. Further, in the case of coordinated federations, management typically views foreign operations as appendages whose principal purpose is to leverage the capabilities and resources developed in the home market in order to adapt products or strategies to reflect market differences).

Which of the following is not a source of environmental volatility? a. macroeconomic risks. b. risk ratings attributed to the MNE. c. political risks. d. resource risks.

Answer: b; A, c, and d are attributes of the environment and they are all sources of its volatility and diversity. The MNE's risk rating, however, is a firm-specific attribute. Difficulty: Easy

HomeAppliances Co. is a new manufacturer of home appliances. HomeAppliances wants to go international. Some of its traditional motivations for pursuing internationalization include: a. securing key supplies, seeking new markets, and raising global scanning and learning capabilities b. securing key supplies, seeking new markets, and improving competitive positioning c. securing key supplies, seeking new markets and accessing low-cost factors of production d. securing key supplies, improving competitive positioning, and accessing low-cost factors of production

Answer: c (a, b, and d are incorrect because 'raising global scanning and learning capabilities' and 'improving competitive positioning' are not traditional motivations for pursuing internationalization, they are emerging motivations.) Difficulty: Moderate

Oil & Gas Limited and Small Tech Inc. announced an agreement to develop a new technology for the extraction of gas. Oil & Gas Limited will contribute financial resources and its expertise in gas extraction, while Small Tech will provide its expertise in R&D. To ensure the success of the collaboration, prior to the alliance, both companies should a. approach prospective clients to get their perspective on the agreement and ensure that there is a market for the new technology they want to develop. b. verify the prospective partner's capabilities and assess its strengths and weaknesses. c. adopt a code of conduct that will clarify the responsibilities of each partner and the ethical behavior that will be expected of each partner. d. agree on the expected revenues and profit sharing.

Answer: b; At the very early stage of an alliance, it is essential for both partners to do a pre-alliance analysis. This step includes the assessment of the partner's strengths and weaknesses, and discussions to determine if there is a fit in terms of goals and expectations. If b is successfully resolved, they could then move to d.

Which of the following is NOT a benefit associated with higher production volumes? a. exploiting scale economies. b. enhancing innovation. c. accumulating learning. d. taking advantage of the learning curve effect to further reduce production costs.

Answer: b; Higher production volume will not only result in scale economies (choice a) through the reduction of fixed cost of each unit produced, but it will result in learning-by-experience (choice c). The accumulated learning will benefit the firm by progressive cost reduction as the firm moves down its learning curve (choice d). Therefore, among the choices, innovation (choice b) is the only one that will not be enhanced through higher production volumes.

Which of the following is NOT considered a source of global competitive advantage? a. scale economies. b. market leadership. c. national differences in input or output markets. d. scope economies.

Answer: b; Scale economies, inter-country input and output markets, and scope economies (choices a, c, and d) are the three sources of competitive advantage. Market leadership may or may not be the result of having a global competitive advantage.

Most stable alliances often involve a. two partners that are both motivated to acquire each other's knowledge. b. two partners that are each satisfied with access to, rather than the acquisition of, each other's knowledge. c. two partners providing resources that are significantly different. d. one partner that is strong enough to dominate the other partner.

Answer: b; Stable alliances involve partners that are each satisfied with access to (rather than acquisition of) each other's knowledge. It is not a race to try and steal the other partner's knowledge. It is recognizing that each partner is bringing unique contributions to the alliance, contributions which are likely of a long term and significant nature.

Which of the following describes the strategic orientation of a transnational company? a. focused on building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations. b. focused on developing global efficiency, flexibility and worldwide learning capability simultaneously. c. focused on building cost advantages through centralized, global scale operations. d. focused on exploiting parent company knowledge and capabilities through worldwide diffusion and adaptation.

Answer: b; The transnational company pursues efficiency, flexibility, and worldwide learning capability simultaneously. Choices a, c, and d explain the strategic orientation of multinational, global, and international companies respectively.

Which of the following is not a benefit of a strategic alliance? a. Firms can transfer their technologies to new markets and increase their revenues from licensing fees. b. Firms can transfer employees to other organizations to reduce operating costs and acquire new knowledge through the employees they transfer. c. Firms can gain access to new markets for existing products and learn important new skills from the partner. d. Firms can share costs and develop new technologies together without being fully integrated.

Answer: b; There are many benefits to strategic alliances, such as risk sharing, transfer of technologies, access to new markets, acquisition of knowledge, etc. However, transferring employees to reduce operating costs is not one of these benefits.

A multinational industry is characterized by ____________. a. low national responsiveness and low global integration b. low national responsiveness and high global integration c. high national responsiveness and low global integration d. high national responsiveness and high global integration

Answer: c Difficulty: Easy

In their role as worldwide intelligence scanners, worldwide functional managers lead efforts to diffuse innovations throughout the MNE by engaging in all of the following activities, except a. sensing strategically important changes or information in the environments of foreign subsidiaries. b. acting as repositories for specialist information. c. leading disruptive innovations. d. facilitating the communication and transmission of strategically important information to specialists in the business groups or geographic groups.

Answer: c (As worldwide intelligence scanners, worldwide functional managers are tasked with the role of capturing and transmitting information across national boundaries to enhance the communication of strategically important information among subsidiaries in different countries. This strategically important information is not always transmitted effectively by geographic (country) managers and global business managers primarily because the information is usually of a specialist nature. After sensing the existence of strategically important information within the MNE, worldwide functional managers leverage informal networks and global contacts to rapidly transmit information throughout the MNE).

Isatis Co. has successfully transitioned from a global strategy to a transnational strategy. Which of the following describes the likely configuration of assets and capabilities that now most likely prevails at Isatis? a. Decentralized and nationally self-sufficient. b. Centralized and globally scaled. c. Dispersed, specialized, and interdependent. d. Core competencies are centralized; other assets and capabilities are decentralized.

Answer: c (Companies that pursue a transnational strategy are characterized by dispersed, specialized and interdependent assets and capabilities. Incorrect answer choices a, b and d describe the configurations of assets and capabilities that are characteristic of companies that adopt the decentralized federation model (to pursue a multinational strategy), the centralized hub model (to pursue a global strategy), and the coordinated federation model (to pursue an international strategy), respectively.

Which of the following management assumptions is most likely to support transnational innovation in MNEs? a. The roles of different organizational units should be uniform and symmetrical. b. The headquarter-subsidiary relationship should be based on clear and unambiguous patterns of dependence or independence. c. Career paths should be structured to give managers cross-border and cross-functional experience. d. Headquarters should be responsible for exercising decision-making and control uniformly.

Answer: c (In many MNEs, three simplifying assumptions (that were employed to reduce organizational and strategic complexity) have effectively blocked the organizational capabilities necessary for supporting and managing transnational innovation processes: (i) the assumption that the roles of different organizational units should be uniform and symmetrical; (ii) the assumption that headquarters-subsidiary relationships should be based on clear and unambiguous patterns of dependence or independence; and, (iii) the assumption that corporate management has a responsibility to exercise decision making and control uniformly).

Frank is director of technology in an MNE in which most of the R&D activities are performed in the parent company's home country, but then, foreign subsidiaries are responsible for introducing the resulting innovations to their local customers. a. The innovation process adopted by Frank's MNE is globally linked. b. The innovation process adopted by Frank's MNE is local-for-local. c. The innovation process adopted by Frank's MNE is center-for-global. d. The innovation process adopted by Frank's MNE is locally leveraged.

Answer: c (In the center-for-global innovation model, new opportunities are sensed in the home country; the centralized resources and capabilities of the parent company are brought in to create the new product or process, usually in the main R&D center; and implementation involves driving the innovation through subsidiaries whose role it is to introduce the innovation to their local market).

Which of the following is not a characteristic of the centralized hub structure? a. Most of the key assets and resources are concentrated in the home country. b. Tight strategic and operational controls are maintained over the subsidiaries. c. Most of the manufacturing and product development is executed by the subsidiaries. d. Corporate management regards its subsidiaries as delivery pipelines to the global market.

Answer: c (The centralized hub model is adopted by companies that pursue a centrally controlled, export-based internationalization strategy. These MNEs strive to secure competitive advantage at the upstream end of the value-added chain. As such, their competitive strategy emphasizes cost advantages and quality assurance which demands tight control over product development, procurement and manufacturing. Consequently, these MNEs keep many of these major value-adding and strategic activities at home).

The characteristics that distinguish an effective and energizing global strategic vision do not include a. shared by all in the transnational organization. b. simple, relevant and continuously reinforced. c. tailored to meet the unique needs of each individual group in the MNE. d. provides direction and purpose.

Answer: c (The global strategic visions must be consistent across organizational units in order to ensure that the vision is shared by all. This requirement precludes efforts to tailor the strategic vision to meet the unique needs of each individual group in the MNE. The cost of inconsistency can be horrendous. At a minimum, it can result in confusion and inefficiency; at the extreme, it can lead individuals and organizational units to pursue agendas that are mutually debilitating).

Which of the following expressions is used to describe one class of transnational innovation developed by worldwide functional managers a. internally initiated innovations. b. nationally integrated innovations. c. globally linked innovations. d. internationally targeted innovations.

Answer: c (The two types of transnational innovation developed by worldwide functional manager include locally leveraged innovations and globally linked innovations). Difficulty: Moderate

Which of the following are not characteristic of the attitudes of transactional MNEs in the context of their relationships with stakeholders a. obeys local laws and regulations but uses country differences to gain competitive advantage b. makes product adaptations if they are economically viable and can increase market share c. defers responsibility for its social or environmental impact d. focuses on shareholder returns.

Answer: c (Unlike exploitive MNEs which accept no community responsibility for their social or environmental impact, transactional MNEs tend to adopt a Hippocratic Oath approach towards communities (e.g., "First, do no harm.")).

In overseeing the worldwide distribution of key assets and resources, the global business manager is responsible for all of the following, except: a. linking the assets and resources in a configuration that resembles the integrated network form. b. seeking the input of geographic and functional managers. c. complying with the wishes of local municipal governments responsible for governing the regions within which the assets and resources are situated. d. leveraging existing resources and capabilities.

Answer: c (While seeking the input of geographic and functional managers, leveraging existing resources and capabilities, and linking assets and resources are most often the responsibilities of the global business manager, efforts to comply with the wishes of local municipal governments falls outside the domain of activities assigned to global business managers and are more often the responsibility of geographic (country) managers).

In executing responsibilities for cross-border coordination, the global business manager will not typically a. decide on sourcing patterns. b. manage cross-border transfer policies. c. enforce fair market value transaction pricing between all global business units. d. employ coordination mechanisms ranging from direct control over pricing and quantities shipped to the establishment of rules that create an internal market.

Answer: c (While the global business manager does make decisions with respect to sourcing patterns and cross-border transfer policies, pricing between global business units is established through a variety of mechanisms (e.g., direct control versus internal market mechanisms) which typically vary with the nature of the product (e.g., commodity-like versus products of high strategic importance), rather than strictly enforcing fair market value transaction pricing between global business units).

Which of the following is not considered a key management category in the modern transnational company a. the top-level corporate executives / managers. b. the country subsidiary manager. c. the integrated services manager. d. the global business manager.

Answer: c (While top-level corporate executives / managers, country subsidiary managers and global business managers are key management categories in the modern transnational company, the "integrated services manager" role is not a management category discussed in Chapter 7). Difficulty: Easy

One motivation behind internationalization is to sustain the firm's competitive position. To pursue a sustainable competitive position relative to its rivals in the athletic clothing industry, Nike attempts to: a. preempt markets, capture global scale, and secure raw materials b. capture global scale, access scarce knowledge, and match competitors c. match competitors, capture global scale, and preempt markets d. exploit factor cost differences, preempt markets, and match competitors

Answer: c (a, b, and d are incorrect because 'securing raw materials', 'accessing scarce knowledge', and 'exploiting factor cost differences' may give a company a temporary competitive advantage but not a sustainable competitive advantage.) Difficulty: Hard

Philips, a multinational electronics corporation based in the Netherlands and diversified in the consumer electronics, domestic appliance, lighting, medical systems and medical technology industries would encounter the following forces of local responsiveness: a. Cultural differences, government demands, and economies of scope b. Cultural differences, government demands and factor costs c. Cultural differences, government demands, and local competitors d. Cultural differences, government demands, and increasingly liberalized trade environments

Answer: c (a, b, and d are incorrect because economies of scope, factor costs, and increasingly liberalized trade environments are part of 'global integration and coordination forces'.) Difficulty: Moderate

OfficeWare Corp. is an MNE that produces and sells office equipment. If the company's CEO employs a 'global mentality' toward the strategic role of the company's foreign operations, then we would expect that OfficeWare: a. regards its overseas markets as a portfolio of local opportunities. b. leverages its domestic capabilities worldwide. c. regards the world as a single unit of analysis. d. simultaneously responds to local needs, global demands and cross-border learning opportunities.

Answer: c (a, b, and d would represent multinational, international, and transnational mentalities respectively.) Difficulty: Moderate

At the annual meeting of the board of directors of LabZaws Co., James Wilson, the CEO of the company, was directed to focus primarily on enhancing the firm's efficiency. How could he achieve this objective? a. focus on cost reduction alone. b. focus on revenue enhancement alone. c. focus on both cost reduction and revenue enhancement. d. downsize and outsource many of the firm's activities.

Answer: c; Efficiency of a company can be described as the ratio of the value of its outputs to the value of its inputs. Therefore, in order to enhance its efficiency, the firm should try to cut costs and increase revenues at the same time. Difficulty: Moderate

Which of the following best describes scope economies? a. cost advantage resulting from production, development or distribution in more than one country. b. cost advantage resulting from large volume production, development or distribution. c. cost advantage resulting from the joint production, development or distribution of more than one product. d. cost advantage resulting from the production, development or distribution of very high quality products.

Answer: c; Scope economies is based on the notion that certain economies arise from the fact that the cost of joint production (or development or distribution) of two or more products can be less than the cost of producing them separately.

The negotiation of an integrative equality agreement implies that a. each committee in the alliance is structured with clear, co-shared leadership, but each company takes responsibility for different tasks. b. each committee in the alliance is structured with clear, single-handed leadership, but tasks are developed internally within the joint venture. c. each committee in the alliance is structured with clear, single-handed leadership, but each company takes responsibility for different tasks. d. each committee in the alliance is structured with clear, co-shared leadership, but tasks are developed internally within the joint venture.

Answer: c; The negotiation of an integrative equality agreement should lead to the creation of different committees where each committee is structured with clear, single-handed leadership, but each company takes the responsibility for different tasks. However, such deliberately balanced arrangements can work only if the partners can agree on specific individuals, and protect their ability to work in the best interests of the alliance itself rather than those of the parents.

Which of the following best describes a transnational company's asset and capability configuration? a. assets and capabilities are centralized and globally scaled. b. core competences are centralized, while other assets and capabilities are decentralized. c. assets and capabilities are dispersed, interdependent and specialized. d. assets and capabilities are decentralized and nationally self-sufficient.

Answer: c; The strategic orientation of a transnational company is based on developing global efficiency, flexibility, and worldwide learning capability simultaneously. This will require the company to configure it assets and capabilities to be dispersed, interdependent and specialized. Choices a, b, and d describe the configuration of assets and capabilities of global, international, and multinational companies respectively.

Which of the following principles are not consistent with the behavioral standards advocated by the United Nations' Global Compact a. businesses should uphold the freedom of association and the legal right of collective bargaining. b. businesses should support a precautionary approach to environmental challenges. c. businesses should work against all forms of corruption, including bribery and extortion. d. businesses should comply with their legal duty to act in the best interests of their shareholders and maximize profitability.

Answer: d

1. A transnational industry is characterized by _____________. a. low national responsiveness and low global integration b. low national responsiveness and high global integration c. high national responsiveness and low global integration d. high national responsiveness and high global integration

Answer: d Difficulty: Easy

An MNE is a(n): a. import-export company that actively trades in foreign markets. b. company that passively manages its substantial foreign direct investment. c. import-export company that actively manages its foreign investment portfolio. d. company that actively manages substantial foreign direct investment.

Answer: d (A true MNE is a company that has substantial direct investment in foreign countries, and that actively manages and regards its foreign operations as integral parts of the company, both strategically and organizationally. Companies that either do not hold equity positions or hold minor equity positions in overseas ventures without or with very low management involvement may be viewed as "international" companies but would not be regarded as multinational enterprises.) Difficulty: Moderate Page: 2; ppt slide 1-3 Topic: MNE definition

Which of the following is not a core characteristic of the decentralized federation structure? a. Most key assets and resources are decentralized. b. Subsidiaries are highly autonomous. c. Corporate management regards subsidiaries as largely independent national operations. d. Reporting and oversight conflicts prevail.

Answer: d (Companies that adopt the decentralized federation model develop an internal culture that emphasizes personal relationships rather than formal structures and financial controls more than operational controls. This management style tends to reinforce the willingness of these companies to delegate more operating independence and strategic freedom to foreign subsidiaries. As a result, highly autonomous national companies are characterized by loose, personal controls, rather than formal reporting and oversight).

Which of the following is not characteristic of a transnational strategy? a. Multiple diverse perspectives are developed and legitimized. b. Physical assets and management capabilities are internationally distributed, yet interdependent. c. Integrative processes are flexible and robust. d. Knowledge is developed centrally and adapted locally.

Answer: d (Firms engaged in a transnational strategy do not typically centralize the development of knowledge and then adapt this knowledge to the local environs of their foreign subsidiaries. Instead, companies that pursue an international strategy and adopt a coordinated federation model are more likely to develop knowledge centrally and pursue local adaptation of this knowledge).

All of the following forces are contributing to the complexity and diversity encountered by MNEs in the 21st century, except: a. the acceleration of product and technology life cycles. b. the globalization of markets. c. the assertion of national government demands. d. the devaluation of some national currencies.

Answer: d (Fluctuating international exchange rates constitute an omnipresent force in international business operations. Most MNEs task their finance departments to monitor international exchange rates and take appropriate positions in foreign currencies in order to facilitate anticipated international business transactions).

To succeed in the modern international operating environment, managers must be able to do all of the following, except: a. build and manage complicated yet subtle new organizations that deliver coordinated worldwide action. b. sense and interpret complex and dynamic environmental changes. c. develop and integrate multiple strategic capabilities. d. respond aggressively to below-budget financial results.

Answer: d (Top managers in transnational companies must abandon old notions of control that are based primarily on responding to below-budget financial results and, instead, strive to rely more on control mechanisms that are personal and proactive. These control mechanisms include clearly identifying and agreeing upon strategic and operational priorities, setting demanding standards and engaging in frequent informal visits to discuss operations and to identify new problems or opportunities quickly).

Which of the following four adjectives are not typically used to describe the manner in which MNEs might respond to developing world needs: a. transformative. b. transactional. c. exploitive. d. compensatory.

Answer: d (While "compensatory" is not typically an adjective used to describe the manner in which MNEs might respond to developing world needs, responsive is more commonly used, along with transformative, transactional and exploitive).

Which of the following characteristics are not typically associated with transactional MNEs a. they are generally sensitive not to promote socially or economically unsuitable products towards emerging market consumers. b. they tend to conform to labor laws and workplace regulations but avoid sweatshop-like conditions. c. they strive to employ non-exploitive attitudes towards the local communities in which they operate. d. they acknowledge the need to restrain their profit-maximizing behaviour when engaged in negotiations with indigenous suppliers.

Answer: d (While both exploitive MNEs and transactional MNEs tend to ultimately focus on the goal of maximizing profits, in comparison to exploitive MNEs, transactional MNEs adopt approaches that are legally compliant in their pursuit of profits in emerging markets. The transactional MNE approach would not typically involve employing efforts to restrain profit-maximizing behaviour when engaging in negotiations with indigenous suppliers). Difficulty: Moderate

Which of the following are not characteristic of the attitudes of transformative MNEs in the context of their relationships with stakeholders a) develops products or services specifically to meet local needs. b) persuades investors of the need for the corporation to be part of the solution to problems in the host country. c) committed to upgrading the lives of its employees inside and outside the workplace. d) willing to unilaterally make decisions against the best interests of the shareholder where they conflict with the interests of other stakeholders.

Answer: d (While transformative MNEs are unique in that they are committed to leading initiatives to bring life-enhancing changes to broader society, it would be rare (and a violation of the basic principles of corporate law) for the executives of a MNE to unilaterally make decisions against the best interests of the shareholder where they conflict with the interests of other stakeholders).

Worldwide functional managers would not occupy the following executive role in the MNE a. Vice-President, Research and Development. b. President, Marketing. c. Chief Financial Officer. d. Vice-President, South America.

Answer: d (Worldwide functional management refers to individuals with the specialist responsibility for activities such as R&D, manufacturing and marketing, as well as support activities such as the CFO. Geographic (country) managers typically assume executive roles associated with countries or geographic regions).

What are the main forces that drive MNEs such as Nokia, the mobile communications company, to innovate and learn on a global scale? a. Economic and political forces. b. Political and social forces. c. Social and informational forces. d. Technological and informational forces.

Answer: d (a, b, and c are incorrect because political forces and social forces are forces for local differentiation and responsiveness.) Difficulty: Easy

Which of the following correctly describes the sequential evolution in management thinking with respect to the strategic role of foreign operations in emerging MNEs? a. global mentality, multinational mentality, international mentality, transnational mentality. b. international mentality, global mentality, transnational mentality, multinational mentality. c. multinational mentality, global mentality, international mentality, transnational mentality. d. international mentality, multinational mentality, global mentality, transnational mentality.

Answer: d (a, b, and c are incorrect because, although they describe the different ways of management thinking regarding the strategic role of foreign operations in emerging MNEs, they do not describe the evolution of this thinking in the correct sequence.) Difficulty: Moderate

A joint venture is a _________ mode of foreign entry. a. low commitment, low control b. low commitment, moderate control c. low commitment, high control d. moderate commitment, moderate control

Answer: d (a, b, and c would describe indirect export, franchise, and contract manufacturing foreign modes of entry respectively.) Difficulty: Moderate

Which of the following describes the strategic orientation of a multinational company? a. focused on developing global efficiency, flexibility and worldwide learning capability simultaneously. b. focused on exploiting parent company knowledge and capabilities through worldwide diffusion and adaptation. c. focused on building cost advantages through centralized, global scale operations. d. focused on building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations.

Answer: d; A multinational company's strategic orientation may be described as focusing on building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations. Therefore, the national subsidiaries of a multinational company are highly autonomous. Choices a, b, and c explain the strategic orientation of a transnational, international, and global companies respectively. Difficulty: Moderate

In order to secure worldwide competitive advantage, a multinational firm should pursue all of the following objectives, except: a. the development of global-scale efficiencies. b. the development of multinational flexibility. c. the ability to develop innovation. d. maximizing market share in all subsidiaries simultaneously.

Answer: d; Developing scale efficiencies, multinational flexibility, and learning and innovation are the three strategic objectives a company must achieve to have worldwide advantage (Choices a, b, and c respectively). It may not be realistic to try and achieve maximum market share in all subsidiaries simultaneously. Difficulty: Easy

An effective interface manager is someone who a. is very competent in the dominant functional area of the venture. b. has a good understanding of the strategy of the firm and can advise the other partner of this strategy. c. can influence the goals and objectives of the alliance for the benefit of his/her organization. d. is the best user of the information / knowledge and can diffuse it to the right people within the organization.

Answer: d; Interface managers should have at least three key attributes: they must be well versed in the company's internal organizational process; they must have the personal credibility and status necessary to access key managers in different parts of the organization; and they must have a sufficiently broad understanding of the company's business and strategies to be able to recognize useful information and knowledge that might cross their path.

Which of the following strategies can be employed to enhance the efficiency of an MNE? a. pursue scale and scope economies. b. pursue scope economies alone. c. benefit from inter-country differences in factor costs. d. pursue both scale and scope economies, as well as benefit from inter-country differences in factor costs.

Answer: d; The ratio of the value of a firm's outputs to the value of its inputs explains its efficiency. All three initiatives of scale and scope economies as well as benefiting from inter-country differences in factor costs will help the MNE in cost reduction. Therefore they all enhance the MNE's efficiency.

Which of the following best describes an international company's asset and capability configuration? a. assets and capabilities are decentralized and nationally self-sufficient. b. assets and capabilities are centralized and globally scaled. c. assets and capabilities are dispersed, interdependent and specialized. d. sources of core competences are centralized, while other assets and capabilities are decentralized.

Answer: d; The strategic orientation of an international company is based on exploiting parent company knowledge and capabilities. This will require the company to configure it assets and capabilities so that the sources of core competencies remain centralized, while other assets and capabilities may be decentralized. Choices a, b, and c describe the configuration of assets and capabilities of multinational, global, and transnational companies respectively.

Which of the following explain why cost reduction occurs in the context of scope economies? a. high production volumes. b. high production volumes and similarities in the resource requirements for different products. c. high production volumes and the tendency of the firm to fully exploit its existing resources. d. similarities in resource requirements for different products, as well as the tendency of the firm to fully exploit its existing resources.

Answer: d; When a company has resources and capabilities that are not fully exploited through current products/services, it may diversify by introducing products that require similar resources with the aim of fully exploiting its resources. This is explained by scope economies (choice d). While choice a explains scale economies, choices b and c are a combination of scale and scope economies. Difficulty: Moderate

When the alliance's tasks are characterized by extensive functional interdependencies a. it is preferable to have a dominant partner that can assume the functional tasks. b. it is preferable to merge both companies. c. the development of clear operating rules is the only way to maintain boundaries between the functions. d. the creation of a separate entity is the most effective way to manage the linkages between the various functions.

Answer: d; When the alliance's tasks are characterized by extensive functional interdependencies, there is a need for a high level of integration in the decision-making process related to those shared tasks. In such circumstances, the creation of a separate entity is often the only effective way to manage such dense interlinkages. In contrast, an alliance between two companies with the objective of marketing each other's existing products may need only a few simple rules and a single joint committee to review the outcomes periodically.

Which of the following statements is not a misperception about the bottom of the pyramid (BOP) markets according to Prahalad and Hammond (2002): a. The poor have no buying power b. Goods sold in developing markets are incredibility cheap c. BOP markets are low-margin markets d. People in BOP markets cannot use advanced technologies

BOP markets are low-margin markets

Which of the following statements is NOT TRUE: a. A hotel welcoming visitors from other countries is engaged in a form of international business that is reflected in transactions on the balance of payment b. Major international construction projects, such as airports or bridges, often include 'consortia' signing 'build-operate-transfer' contracts with the government of the host country. c. The Uppsala model suggests that internationalization is an iterative process between commitment decisions and enhancement of resources and capabilities. d. International entrepreneurial firms are born global firms.

NOT TRUE: International entrepreneurial firms are born global firms.

The acquisition premium is: a. the difference between the value of the acquiring firm before and after the acquisition. b. the difference between the value of the acquiring firm and the target firm c. the difference between the (prior) market value of the acquired firm, and its independent fair value assessment. d. the difference between the acquisition price and the (prior) market value of the acquired firm.

The difference between the acquisition price and the (prior) market value of the acquired firm.