Q&A Hero

Q: In which of the following is a firm most likely to lose direct control over value-creation activities? a) Merger b) Outsourcing c) Vertical integration d) Strategic alliance e) Acquisition

Q: Which of the following activities should notbe outsourced by a virtual corporation? a) Contract management b) R&D c) Materials management d) Manufacturing e) Marketing

Q: Which of the following is not a potential benefit of outsourcing? a) Concentrating scarce human, financial, and physical resources to strengthen core competencies b) Gaining the benefit of the specialist companies expertise in a specialized skill c) Reducing the need for horizontal integration d) Reducing costs, because the supplier may be more efficient e) Enhancing differentiation

Q: Outsourcing a) eliminates the need for a value chain. b) moves some value chain activities outside the firm. c) reorders the steps in a firm's value chain. d) reduces the firm's dependence on its value chain. e) strengthens the firm's capabilities in each value chain function.

Q: Which of the following is not a true statement? a) A firm should consider outsourcing only its core activities. b) Outsourcing can encompass an entire function. c) A firm should consider outsourcing when the supplier can perform the activity more effectively than the firm itself. d) A firm should consider outsourcing if the costs will be less than the firm's cost to perform that activity. e) A firm should consider outsourcing if the supplier has a distinctive competency in that activity.

Q: Horizontal integration supports the achievement of a __________ strategy. a) cost leadership b) cost leadership and differentiation c) focus d) differentiation e) stuck in the middle

Q: Outsourcing occurs when a firm a) buys one of its rivals. b) merges with one of its suppliers. c) enters into a joint venture with a rival. d) hires another firm to perform value-creation activities on its behalf. e) enters into contracts with two suppliers simultaneously.

Q: Antitrust regulation a) favors large companies. b) reduces industry competition. c) is concerned with companies' abuse of their market power to raise prices for consumers above the level that would exist in more competitive situations. d) tends to raise prices for consumers. e) enables the achievement of market power.

Q: A merger is an agreement between _________________ companies to pool their operations and create a new business entity. a) three b) four c) five d) two e) none of the above

Q: Concentrating on a single business allows a company to _____________________. a) increase profits. b) lower operating costs. c) stick to the knitting. d) increase its competitive advantage. e) decrease its human resource turnover.

Q: Which of the following is a benefit that firms should expect to gain from the use of horizontal integration? a) Expanded control over stages of the supply chain b) Lower operating costs as a result of economies of scale c) Shared risk with another firm d) Reduced risk of holdup e) Reduced investments in noncore activities

Q: Horizontal integration does not help firms a) lower operating costs. b) schedule supply chain processes. c) reduce rivalry within an industry. d) increase bargaining power over suppliers and buyers. e) increase product differentiation.

Q: Observing the pattern of consolidation in U.S. industries over time, one will notice that a) horizontal integration has never been a very popular strategy. b) firms that horizontally integrate tend to divest later. c) horizontal integration has been very popular in the last two decades. d) while a few industries have consolidated since 1970, most remain fragmented. e) mergers were very common and acquisitions were rare from 1900 to 1999.

Q: Adam's boss tells him that their company is pursuing a strategy of horizontal integration. Which of the following should Adam expect? a) His company will acquire one of its suppliers. b) His company will reorganize into fewer business units. c) His company will begin to distribute its own products. d) His company will buy one of its rivals e) His company will centralize all of its support functions.

Q: Managers who pursue _______________ have decided the best way to increase company profits is to purchase the resources and assets of industry competitors. a) horizontal integration b) vertical integration. c) strategic alliances d) franchising. e) diversification.

Q: Which of the following is not an example of horizontal integration? a) America Online and Time Warner merge to become AOL Time Warner. b) Coca Cola buys most of its previously independent bottling firms. c) Microsoft acquires Rare, Ltd., maker of video games such as Donkey Kong. d) Georgia Pacific, a wood products firm, is combining operations with another wood products firm, Louisiana Pacific. e) Citicorp Bank and Travelers Insurance merge to form Citigroup, a diversified provider of financial services.

Q: Selling off a business unit to independent investors is referred to as a spin-off.

Q: Related diversification is the strategy of operating a business unit in a new industry that is related to a company's existing business units through some commonality in their value chains.

Q: Procter & Gamble's disposable diaper and paper towel businesses offer one of the best examples of the successful realization of economies of scope.

Q: Economies of scope arise when two or more of a diversified company's business units are able to share resources.

Q: Transferring competencies across industries involves taking a distinctive competence developed in one industry and implanting it in an existing business unit in another industry.

Q: The performance of an acquired company can be improved by replacing the top management team of the acquired company with a more aggressive top management team.

Q: Research suggests that the top managers of companies who are successful at creating value through superior governance seem to make a number of similar kinds of strategic decisions.

Q: Superior governance revolves around how well top managers can develop strategies that improve the competitive positioning of its business units in the industries in which they compete.

Q: Most companies first consider diversification when they are generating financial resources in excess of those necessary to maintain a competitive advantage in their original business or industry.

Q: Whirlpool, a leading U.S. maker of household appliances, has a wholly owned subsidiary that is responsible for R&D, manufacturing, and sales in over two dozen European countries, from Norway to Greece. What are some of the potential advantages that Whirlpool may gain from its use of a wholly owned subsidiary for global expansion? What are some of the potential disadvantages?

Q: Consider the case of a family-owned furniture making business, headquartered in the U.S., with fewer than 50 employees, that is contemplating exporting its products for the first time. What market do you recommend it enter, and when and how should it enter? Explain your answers.

Q: Identify and discuss the general ways in which companies can increase their profitability and profit growth through global expansion.

Q: Which of the following entry modes is generally the most costly method of serving a foreign market? a) Exporting b) Wholly owned subsidiaries c) Joint ventures d) Licensing e) Joint ventures and wholly owned subsidiaries are equally costly.

Q: Which entry mode gives a multinational the tightest control over foreign operations? a) Exporting from the home country and letting a foreign agent organize local marketing b) Licensing c) Franchising d) Entering into a joint venture with a foreign company to set up overseas operations e) Setting up a wholly owned subsidiary

Q: For a hotel company whose competitive advantage is based on high brand name recognition, which of the following ways of serving an overseas market makes the most sense? a) Exporting b) Licensing c) Franchising d) Entering into a joint venture with a foreign company e) Setting up a wholly owned subsidiary

Q: A company that enters a foreign market by entering into a licensing agreement with a local company a) will realize location economies. b) must engage in global strategic coordination. c) will realize experience curve effects. d) risks losing control over its technology to the venture partner. e) must engage in global strategic coordination andwill realize experience curve effects.

Q: If a company lacks the capital to develop operations overseas and/or they are unwilling to commit resources to an unfamiliar or politically volatile foreign market, which of the following entry options is the most viable? a) International licensing b) Setting up a wholly owned subsidiary c) Joint venture d) Franchising e) Global standardization

Q: Which of the following is not a drawback to licensing? a) A company does not have tight control over operations in foreign countries. b) Licensing limits a company's ability to coordinate strategy. c) A company may lose control of technological know-how. d) A company's brand could become damaged if the licensee does not perform up to established standards. e) All of these are drawbacks to licensing.

Q: A telecommunications firm develops new wireless cellular phones, a technology in which foreign competition is low and the need for local responsiveness is low. What is the most appropriate short-term strategy for this firm? a) Global standardization b) International c) Localization d) Transnational e) Forming a joint venture

Q: Pursuing an international strategy includes all of the following except a) centralize product development at home. b) establish manufacturing functions in each major country. c) international licensing d) establish marketing functions in each major country. e) All of the above

Q: All of the following are consistent for a company pursuing a transnational strategy except a) achieve low costs. b) differentiate the product offering across geographic markets. c) increasing profitability. d) foster a flow of skills. e) focus on leveraging subsidiary skills.

Q: If a company wishes to achieve high local customization and it can charge higher prices for this customization, a company should pursue a(n) __________ strategy. a) transnational b) global standardization c) international d) localization e) simple

Q: A localization strategy is based on which of the following ideas? a) There is a convergence in the tastes of consumers in different nations of the world. b) There are substantial economies of scale to be realized from centralizing global production. c) Consumer tastes and preferences differ among national markets. d) There are cost advantages associated with manufacturing a standard product for global consumption. e) Competitive strategy should be centralized at the world head office.

Q: A localization strategy is most appropriate in an industry in which pressures for cost reductions are _________ and pressures for local responsiveness are _________. a) high; high b) high; low c) low; low d) low; high e) variable; high

Q: A commodity oil producer would probably achieve the highest level of profitability with a(n) ___________ strategy. a) global standardization b) international c) localization d) transnational e) focus

Q: A company with a business-level strategy of cost leadership should pursue which of the following global expansion strategies? a) Localization b) Global standardization c) International d) Transnational e) Simple

Q: A global standardization strategy is mostappropriate in an industry in which pressures for cost reductions are ____________ and pressures for local responsiveness are ___________. a) low; high b) high; high c) low; low d) high; low e) variable; high

Q: In which of the following circumstances does a global standardization strategy make the most sense? a) Global market standardization is not possible, and there are no significant economies of scale to be realized from centralizing global manufacturing. b) Global market standardization is possible, but there are no significant economies of scale to be realized. c) Global market standardization is not possible, but there are significant economies of scale to be realized from centralizing global manufacturing. d) Consumer tastes and preferences differ among national markets, and economies of scale are insubstantial. e) Global market standardization is possible, and there are significant economies of scale and location economies to be realized.

Q:

Q: Differences in tastes and preferences a) increase pressures for cost reductions. b) reduce profit potential. c) prevent a company from pursuing a licensing strategy d) reduce pressures from the host government. e) increase pressures for local responsiveness.

Q: When toy maker Mattel sells Barbie dolls in the Middle East, it changes the doll's shape to one that is a more accurate portrayal of a female body. Mattel does this in order to a) create a commodity-type product. b) transfer technological know-how. c) respond to differences in local tastes. d) realize experience curve effects. e) increase product standardization

Q: Which of the following factors increases pressures for local responsiveness? a) Differences in customer tastes and preferences b) Persistent excess capacity c) Low-cost competitors d) Powerful buyers e) High international trade barriers

Q: Which of the following factors increases pressures for cost reductions? a) Differences in distribution channels between home and foreign markets are modest. b) Increasing national wealth is expanding the market. c) The product has great transportation needs. d) The product has high switching costs. e) Differentiation on nonprice factors is difficult, and price is the main competitive weapon in a market.

Q: Which of the following does not allow a company to reduce unit costs? a) Outsourcing some functions to low-cost foreign suppliers b) Customizing the product to meet local requirements c) Realizing location economies d) Pushing its suppliers to outsource some functions to low-cost foreign suppliers e) Performing an activity at the lowest-cost location

Q: Responding to pressures for cost reductions requires that a company try to minimize its ____________. a) overhead costs. b) tangible asset costs. c) unit costs. d) intangible asset costs. e) none of the above.

Q: When Dell opened a service call center in India to take advantage of an educated, English-speaking workforce and lower its costs, it was realizing which of the following benefits of global expansion? a) Economies of scale b) Leveraging organizational skills c) Leveraging competencies d) Location economies e) None of these

Q: When a company performs a value creation activity in the optimal location for that activity, wherever in the world that might be, they are trying to capitalize on a) location economies b) economies of scope. c) the transnational strategy. d) economies of scale. e) their localization strategy.

Q: When a company expands its sales volume through international expansion it can realize cost savings from economies of scale through all of the following except a) spreading fixed costs over its global sales volume. b) utilizing its production facilities more intensely. c) increased bargaining power with its suppliers. d) improved customer responsiveness. e) all of these are ways that a company can realize cost savings from economies of scale.

Q: When a company increases its growth rate by taking goods or services developed at home and selling them internationally it is a) leveraging its existing products. b) taking the path of least resistance. c) engaging in product positioning. d) realizing cost economies from global expansion. e) realizing location economies.

Q: Which of the following is not one of the ways in which expanding globally can enable companies to increase their profitability and grow their profits more rapidly? a) Leveraging existing products in new markets. b) Realizing economies of scale. c) Locating in foreign countries with significant trade barriers. d) Realizing location economies. e) Leveraging skills created within subsidiaries applying them to other operations.

Q: Global expansion a) is feasible only for large companies. b) can enable companies to increase their profitability and grow their profits more rapidly. c) allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase them. d) requires locating facilities in foreign countries. e) makes sense for manufacturing firms, but not for service firms.

Q: Which of the following is not an implication of the globalization of production and markets for competition within an industry? a) Industry boundaries do not stop at national borders so managers must understand what is happening globally. b) Increasing competitive rivalry in numerous industries c) Creation of significant opportunities d) Profit potential of any company rests on their international strategy. e) All of these are implications of the globalization of production and markets.

Q: The globalization of production has allowed firms to a) increase their market share. b) lower their cost structure. c) respond to individual market segments. d) avoid international competition. e) meet all of these goals.

Q: The greater the pressures for cost reduction are, the more likely it is that a company will want to pursue some combination of exporting and wholly owned subsidiaries.

Q: Many of the issues that arise in the case of technological know-how do not arise in the case of management know-how.

Q: Franchising is a specialized form of licensing in which the franchiser sells the franchisee intangible property (normally a trademark) and insists that the franchisee agree to abide by strict rules about how it does business.

Q: Establishing a wholly owned subsidiary is generally the least costly method of serving a foreign market.

Q: One advantage of joint ventures is that a company may benefit from a local partner's knowledge of the many dimensions of a host country.

Q: When a company licenses its technology, it can quickly lose control over it.

Q: International licensing is an arrangement whereby a foreign licensee buys the rights to produce a company's product in the licensee's country for a negotiated fee.

Q: Sony came to dominate the global television market via franchising.

Q: One advantage of exporting is that it avoids the cost of establishing manufacturing operations in the host country.

Q: Most manufacturing companies begin their global expansion via international licensing.

Q: MTV is a good example of a company that has had to pursue a localization strategy by varying its programming to match the demands of viewers in different nations.

Q: A problem with the international strategy is that over time, competitors inevitably emerge, and if managers do not take pro-active steps to reduce their cost structure, their company may be rapidly out-flanked by efficient global competitors.

Q: Companies following an international strategy avoid any attempt at local customization of product offering.

Q: Companies pursuing an international strategy tend to centralize product development functions, such as R&D at home.

Q: An international strategy is appropriate when firms face high cost pressures and low pressures for local responsiveness.

Q: An international strategy may not be viable in the long term, and to survive, companies that are able to pursue it might ultimately need to shift towards a global standardization strategy.

Q: Through transnational strategy a firm tries to achieve low costs, product differentiation across geographic markets, and foster skills among different subsidiaries.

Q: Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously achieves low costs and differentiates the product offering across geographic markets.

Q: In companies following a transnational strategy, the flow of skills and product offerings moves in one directionfrom the home company to foreign subsidiaries.

Q: A localization strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.

Q: A localization strategy involves manufacturing global output in a limited number of centralized locations to realize scale economies.