Questions Chapters 7-12 E-Connect PDF

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CHAPTERS 7 - 12 1. Which of the following is NOT a factor that makes competing across national borders more difficult than competing domestically? 

country-to-country differences in consumer buying habits and buyer tastes and preferences

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the difficulty in achieving strategic fit in sales and marketing activities

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variations in government policies, tax rates, inflation rates, and other economic conditions from country to country

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the potential for location-based advantages in some countries

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vulnerability to adverse shifts in currency exchange rates

Explanation Crafting a strategy to compete in one or more countries of the world is inherently more complex for five reasons. First, different countries have different home-country advantages in different industries; competing effectively requires an understanding of these differences. Second, there are location-based advantages to conducting particular value chain activities in different parts of the world. Third, different political and economic conditions make the general business climate more favorable in some countries than in others. Fourth, companies face risk due to adverse shifts in currency exchange rates when operating in foreign markets. And fifth, differences in buyer tastes and preferences present a challenge for companies concerning customizing versus standardizing their products and services.

2. How do economic risks differ from political risks? 

Political risks stem from foreign businesses' hostilities to government, while economic risks stem from the instability of the monetary system.

   

Political risks stem from stability in foreign business, and economic risks stem from an excess of property right protections. Political risks stem from instability in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies. Political risks stem from hostility to foreign currencies, while economic risks stem from the instability of the monetary system. Political risks stem from the stability of a country's monetary system, and economic risks stem from instability in national business.

Explanation Political risks stem from instability or weakness in national governments and hostility to foreign business. Economic risks stem from the stability of a country's monetary system, economic and regulatory policies, and the lack of property rights protections.

3. Which of the following is NOT among the hazards and difficulties associated with strategic alliances with foreign partners? 

dealing with diverse operating practices, conflicting objectives, and strategies

   

overcoming cultural and language barriers getting alliance partners to reach decisions fast enough to stay abreast of rapid advances making it harder to pursue a multidomestic strategy as compared to a global strategy reaching mutual agreements to deal with key issues and resolve differences

Explanation Sometimes a local partner's knowledge and expertise turns out to be less valuable than expected (because its knowledge is rendered obsolete by fast-changing market conditions or because its operating practices are archaic). Cross-border allies typically must overcome language and cultural barriers and figure out how to deal with diverse (or conflicting) operating practices. Often, partners soon discover they have conflicting objectives and strategies, deep differences of opinion about how to proceed, or important differences in corporate values and ethical standards. And even if allies are able to develop productive personal relationships, they can still have trouble reaching mutually agreeable ways to deal with key issues or launching new initiatives fast enough to stay abreast of rapid advances in technology or shifting market conditions.

4. Which of the following is an example of demand conditions of home-country advantage? 

Nokia invested in cellular phones in developing nations based on the increased demand for the product in Finland.

   

Switzerland's technical dye industry largely contributes to the success of its pharmaceutical industry. Italy's ceramic industry boomed after World War II owing to low barriers to entry in the market. The construction of national highways in the United States paved the way for the increase in the use of automobiles in the country. The Korean government supports educational institutions related to IT skills.

Explanation The demand conditions in an industry's home market include the relative size of the market, its growth potential, and the nature of domestic buyers' needs and wants. Differing population sizes, income levels, and other demographic factors give rise to considerable differences in market size and growth rates from country to country.

5. The global strategy that emphasizes a "think-global, act-global" strategic theme focuses on 

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

   

selling different products under the same brand names everywhere and expanding into most, if not all, nations where there is significant buyer demand. varying its product offering and competitive approach from country to country. utilizing the different competitive capabilities, distribution channels, and marketing approaches available in a company's international markets. incorporating elements of both multidomestic and transnational strategies.

Explanation Companies employing a global strategy sell the same products under the same brand names everywhere, utilize much the same distribution channels in all countries, and compete on the basis of the same capabilities and marketing approaches worldwide. Although the company's strategy or product offering may be adapted in minor ways to accommodate specific situations in a few host countries, the company's fundamental competitive approach (low cost, differentiation, best cost, or focused) remains very much intact worldwide and local managers stick close to the global strategy.

6. Which of the following is an example of a multidomestic strategy?     

Mattel's black Barbie is popular in Africa. Microsoft offers the same software programs around the world. Red Bull products are packaged differently for the Chinese market. BMW designed its 3 Series cars for multiple markets. Heinz ketchup in India does not have garlic and onion.

Explanation A multidomestic strategy is one in which a company varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions. It is a think-local, act-local type of international strategy, facilitated by decision making decentralized to the local level. 7.

Regulations, government policies, and requirements in host countries have a major effect on the operations of foreign companies. Which of the following does NOT reflect a typical regulation?

 

providing low-interest loans to foreign companies implementing rules and policies that protect and prefer local companies over foreign firms placing restrictions on imports to support domestic production establishing local content requirement on goods sold inside their borders by foreign companies imposing tariffs on imported goods

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Explanation Some governments provide subsidies and low-interest loans to domestic companies to enable them to better compete against foreign companies.

8. Using domestic plants as a production base for exporting goods to selected foreign country markets   

can be an excellent initial strategy to pursue international sales. can be a successful strategy when a company is focusing on vacant market niches in each market. works well when exchange rate fluctuations prevent the adoption of a transnational strategy.

 

is usually a weak strategy when competitors are pursuing multi-domestic strategies. can be a powerful strategy because the company is not vulnerable to fluctuating exchange rates.

Explanation Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is a conservative way to test the international waters. The amount of capital needed to begin exporting is often minimal; existing production capacity may well be sufficient to make goods for export.

9. Regulations, government policies, and requirements in host countries have a major effect on the operations of foreign companies. Which of the following does NOT reflect a typical regulation?     

providing low-interest loans to foreign companies implementing rules and policies that protect and prefer local companies over foreign firms placing restrictions on imports to support domestic production establishing local content requirement on goods sold inside their borders by foreign companies imposing tariffs on imported goods

Explanation Some governments provide subsidies and low-interest loans to domestic companies to enable them to better compete against foreign companies.

10. Which of the following is an advantage of an export strategy?     

Export strategies are used to avoid tariffs and curb the effects of fluctuating exchange rates. Export strategies are the best method to overcome high entry barriers. Export strategies minimize risks and capital requirements. Export strategies are the most efficient and flexible method to discover and accommodate changes in local demand. Export strategies are less costly and the most efficient compared to the other options for entering and competing in international markets.

Explanation Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is a conservative way to test the international waters. The amount of capital needed to begin exporting is often minimal; existing production capacity may well be sufficient to make goods for export.

11. Combination related-unrelated diversification strategies have particular appeal for companies 

looking to reduce risk by spreading the company's investments over a set of truly diverse industries.



focusing on growth for growth's sake to maximize shareholder value.

  

desiring high compensation and reduced employment risk. operating in niche markets where specialized resources and capabilities are needed. having a mix of valuable competitive assets, covering the spectrum from generalized to special resources and capabilities.

Explanation Combination related-unrelated diversification strategies have particular appeal for companies with a mix of valuable competitive assets, covering the spectrum from general to specialized resources and capabilities.

12. Which of the following are key indicators of industry attractiveness?     

social and political factors, barriers to entry, and the intensity of competition barriers to entry, overall profitability of the industry, and whether there are only a few major players in the market emerging opportunities and threats, industry profitability, and market size and projected growth rate the existence of economies of scope and whether an industry has significant social, political, regulatory, and environmental problems strategic-fit, existence of economies of scope, and social and political factors

Explanation Key indicators of industry attractiveness are: market size and projected growth rate; the intensity of competition; emerging opportunities and threats; the presence of cross-industry strategic fit; resource requirements; social, political, regulatory, and environmental factors; industry profitability.

13. Which of the following is NOT a strategic option for a company that is already diversified? 

sticking closely with the existing business line when the current business line offers attractive growth opportunities

   

divesting weak-performing businesses and retrenching to a narrower base of business operations broadening the diversification base by adding and acquiring more businesses repurchasing shares of the company's common stock and building cash reserves by investing in short-term securities restructuring the company's business lineup through a mix of divestitures and new acquisitions

Explanation Corporate strategic options for diversified companies include sticking closely with the existing business lineup and pursuing the opportunities these businesses present, broadening the company's business scope by making new acquisitions in new industries, divesting certain businesses and retrenching to a narrower base of business operations, and restructuring the company's business lineup and putting a whole new face on the company's business makeup.

14.A "cash hog" type of business



generates cash flows that are too small to fully fund its operations and growth.

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has good resource fit with a cash cow business and is essential to a diversified company's lineup of businesses.

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generates cash flows exactly matching the demand for operations and growth.

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is always a candidate for divestiture.

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generates cash flows over and above its internal requirements.

Explanation A cash hog business generates cash flows that are too small to fully fund its growth; it thereby requires cash infusions to provide additional working capital and finance new capital investment.

15. The financial options for allocating a diversified company's financial resources do NOT include  investing in ways to strengthen or grow existing businesses. 

making acquisitions to establish positions in new industries or to complement existing businesses.

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funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses.

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purchasing competitively weak businesses or businesses in unattractive industries.

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repurchasing shares of the company's common stock.

Explanation Ideally, a diversified company will have sufficient financial resources to strengthen or grow its existing businesses, make any new acquisitions that are desirable, fund other promising business opportunities, pay off existing debt, and periodically increase dividend payments to shareholders and/or repurchase shares of stock. Divesting businesses with the weakest future prospects and businesses that lack adequate strategic fit and/or resource fit is one of the best ways of generating additional funds for redeployment to businesses with better opportunities and better strategic and resource fit.

16. The drawbacks of an unrelated diversification strategy include 

minimal potential for shareholder value creation and financial stability.

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limited competitive advantage potential.

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financial instability and very demanding managerial requirements.

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very demanding managerial requirements and limited competitive advantage potential.

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cultural conflicts and very demanding financial requirements.

Explanation Demanding managerial requirements and limited competitive advantage potential are drawbacks of an unrelated diversification strategy.

17. Which of the following makes acquisition an attractive approach to diversifying into another industry? 

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

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It is not time-consuming and allows the firm to realize great profits in the end.

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It is less expensive, less risky, and more effective than launching a new startup operation.

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Due diligence and integration can be done easily and at low cost.

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It satisfies all three diversity tests (industry attractiveness test, cost-of-entry-test, better-off test) to grow shareholder value over the long term.

Explanation Not only is acquisition quicker than trying to launch a new operation, but it also offers an effective way to hurdle such entry barriers as acquiring technological know-how, establishing supplier relationships, achieving scale economies, building brand awareness, and securing adequate distribution. Acquisitions are also commonly employed to access resources and capabilities that are complementary to those of the acquiring firm and that cannot be developed readily internally.

18. Corporate restructuring strategies 

radically alter the business lineup by divesting poor performers and acquiring new promising businesses.



entail reducing the scope of diversification to a smaller number of businesses.



entail selling off marginal businesses to free resources for redeployment to the remaining businesses.

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focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability.



focus on broadening the scope of diversification to include a larger number of businesses.

Explanation Corporate restructuring involves making major changes in a diversified company's business lineup, divesting some businesses and/or acquiring others, so as to put a whole new face on the company's business lineup.

19. Related diversification strategies are strong when built upon sharing 

competitively valuable resources.



generalized resources and capabilities.



general management capabilities.



human resource management capabilities.

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resources that have a broad utility and application outside a diversified company's core industry.

Explanation Related diversification strategies are strong when built upon sharing competitively valuable resources and capabilities.

20. Which of the following generates operating cash flows over and above internal requirements, thereby providing financial resources that may be used to finance new acquisitions, fund share buyback programs, or pay dividends? 

cash hogs



cash cows



star businesses



stars



cash dogs

Explanation A cash cow business generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends.

21. Which of the following statements best describes the core concept of corporate social responsibility (CSR)?

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CSR is the responsibility that top management has for ensuring that the company's actions and decisions are in the best interest of society at large.

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CSR consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against endangering the planet.

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A CSR strategy is defined by the specific combination of financially beneficial activitie...