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125 Cards in this Set

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How has the global environment changed over the last fifty years?
Companies from different nations are entering each other's markets much more frequently and rapidly.
Tariff rates on manufactured goods traded between advanced nations have…
fallen from around 40 to under 4
Which of the following is NOT one of the four national or country- specific attributes Porter identified as having an important impact on the global competitiveness of firms in that nation?
timing of market entry
Global scale economies refer to…
a company's ability to realize cost savings by increasing its global volume of production.
When companies competing in a global marketplace face high pressure for cost reductions and low pressure for local responsiveness, they are likely to choose…
a global standardization strategy .
When companies competing in a global marketplace face high pressure for cost reductions and high pressure for local responsiveness, they are likely to choose…
a transnational strategy.
When companies competing in a global marketplace face low pressure for cost reductions and low pressure for local responsiveness, they are likely to choose…
an international strategy.
When companies competing in a global marketplace face low pressure for cost reductions and high pressure for local responsiveness, they are likely to choose…
a localization strategy.
To respond to both competitive pressure on costs and the varying construction practices in different countries, Caterpillar redesigned its products so that they could use many identical components, but also be tailored to local markets with different product features. Caterpillar is pursing…
a transnational strategy.
MTV had to adapt its programming to the demands of viewers in different nations in order to avoid losing market share to local competitors. MTV thus employed…
a localization strategy.
As the worldwide market for a product becomes more competitive, which two strategies tend to be the most viable?
a global standardization strategy and a transnational strategy
If a company is unwilling or unable to bear the costs and risks of establishing or operating manufacturing facilities in a host country, which of the following entry modes is LEAST likely to be considered?
a wholly owned subsidiary
If a company wishes to retain some control over its technology, manufacturing operations, and/or service, but has insufficient capital to build manufacturing facilities alone and lacks local market knowledge, which of the following strategies is likely to provide the MOST benefits?
a joint venture
One serious drawback of entering a foreign country by licensing out a technology is that…
the company can lose control over its technological know-how.
Which of the following is NOT a likely advantage from entering into strategic alliances?
Alliances can help firms increase their control over their technology and services.
A company that does business in two or more national markets is considered a multinational company. T/F?
True
Companies usually set up manufacturing facilities in a foreign country before they start selling products there. T/F?
False
The competitive advantage possessed by Japanese camera manufacturers is due in part to the fact that their local customers demand high quality and innovative products. T/F?
True
A company can benefit from location economies by manufacturing in a country where it can obtain its inputs less expensively. T/F?
True
During the 1960s, Xerox faced high pressure to both reduce its costs and increase its customization for each market it served. T/F?
False
A strategic commitment is a decision that involves a short-term commitment and is easy to reverse. T/F?
False
Most manufacturing companies begin entry into a new national market by exporting. T/F?
True
A company that licenses a product to a foreign licensee runs the risk of losing control over how its technological know-how is being used. T/F?
True
A company that enters a new foreign market by establishing a joint venture with a local company can benefit from local knowledge. T/F?
True
A wholly owned subsidiary is one in which the parent company owns at least 307230410f the subsidiary's stock. T/F?
False
With respect to corporate-level strategy, horizontal integration refers to…
when a firm acquires or merges with competitors in its industry.
A merger is
when two firms agree to pool their operations to create a new entity.
Cross-selling occurs when…
a company acquires extra product lines to sell to its existing customers.
Backward vertical integration occurs when…
a firm expands into an industry that produces inputs for the firm's products.
Which of the following is a good reason to backward vertically integrate?
The firm needs greater control over the quality or timing of inputs.
Coors operates its own energy production facilities to provide energy for its brewery. This is an example of …
backward vertical integration.
If Coors opened up its own brewpubs where they served sandwiches and Coors beer, this would be an example of…
forward vertical integration.
The Internet has enabled many manufacturing companies that used to sell to retailers to now sell direct to consumers via the web. This indicates that the Internet has enabled…
forward vertical integration.
Wamco Widgets used to manufacture its own widgets, but now it contracts with Flextronics to manufacture its widgets. This is an example of…
strategic outsourcing.
When technology is changing rapidly,…
backward vertical integration can be harmful because it increases the firm's investment in rapidly obsolescing technology.
When a firm makes a substantial and irreversible investment in support of a particular strategic alliance, this is…
a credible commitment.
A parallel sourcing policy refers to…
when firms enter into a long-term contract with two suppliers for the same part.
When a firm has one or more of its internal functions performed by independent companies, this is known as…
strategic outsourcing.
Which of the following is a typical benefit of outsourcing a firm's manufacturing?
-It enables the firm to focus more on its core activities.

-The specialist manufacturer may have a lower cost structure than the focal firm.

-The specialist manufacturer may have greater quality than the focal firm.
Which of the following is a typical risk of outsourcing a firm's technical support function?
The firm may lose valuable customer information.
A company that "sticks to the knitting" operates exclusively in textile manufacturing. T/F?
False
Coca-Cola's expansion into the movie and wine business dissipated value and lowered profitability. T/F?
True
An acquisition is when a company uses its capital resources to purchase another company. T/F?
True
Horizontal integration is the process of acquiring or merging with industry competitors in an effort to achieve scale and scope economies. T/F?
True
Product bundling involves offering customers the opportunity to buy a complete range of products they need at a single combined price. T/F?
True
Market power is the degree to which a company utilizes effective marketing. T/F?
False
Vertical integration is when a company expands its operations backward, to provide its own inputs, or forward, to provide its own distribution. T/F?
True
The risk of "holdup" refers to the bargaining power held by consumers when competition is high. T/F?
False
Hostage taking is a means of guaranteeing that a partner keeps its side of the bargain. T/F?
True
A credible commitment is a believable promise or pledge to support the development of a business relationship. T/F?
True
In Hamel and Prahalad's model of how the company can create an agenda based on its portfolio of competencies, ____________________ refers to the activities a company does to develop new competencies that are crucial to remaining competitive in its existing businesses.
Premier Plus 10
In Hamel and Prahalad's model of how the company can create an agenda based on its portfolio of competencies, ____________________ refers to the activities the company does to leverage existing competencies across its existing businesses.
Fill-in-the-blanks
In Hamel and Prahalad's model of how the company can create an agenda based on its portfolio of competencies, ____________________ refers to the activities a company does to develop entirely new competencies for entirely new businesses.
Mega-Opportunities
In Hamel and Prahalad's model of how the company can create an agenda based on its portfolio of competencies, ____________________ refers to the activities a company does to leverage existing competencies into new businesses.
White Spaces
HP used its competencies in developing printers to create a new product line of home photo printers for digital cameras. Which quadrant of Hamel and Prahalad's model of a competency agenda would this fall into?
White Spaces
In the 1990s, it became clear that most major retailers would need to have an attractive and functional website in order to remain competitive with other retailers. Therefore many of them began investing in developing competencies in information technology and website design. Which quadrant of Hamel and Prahalad's model of a competency agenda would this fall into?
Premier Plus 10
Which of the following is NOT typically considered to be a valid justification for diversification?
reducing the risk of the company by holding a portfolio of businesses
Direct TV offers both satellite television broadcasting and digital video recording (like "Tivo") so that its customers can watch television programs via satellite as well as record and watch favorite shows at their leisure. This is referred to as…
product bundling.
Multipoint competition refers to when…
a company competes against another company in multiple industries.
AOL pursued a merger with Time Warner because it believed that having access to cable resources would be crucial as more and more customers began accessing the Internet via cable. This would be considered…
related diversification.
Which of the following is true regarding a company's strategy to diversify to pool risk?
Risk pooling rarely (if ever) creates value for shareholders; they can pool their risk more effectively and at lower cost.
The costs associated with handling transactions between a firm's business units or between business units and the corporate headquarters are termed…
bureaucratic costs.
When a company has key technological resources that would permit it to help create a new (embryonic) product market, it will typically be best served by entering
an internal new venture.
Which of the following is a reason that acquisitions often fail to create value?
-It is often difficult to integrate the organizational structure and culture of the acquired company within the firm's own company.

-Managers often overestimate the potential economic benefits of an acquisition.

-Acquisitions tend to be very expensive.

-Managers often do not adequately screen their acquisition targets.
Which of the following is true regarding the stock price of highly diversified firms?
It tends to be valued lower, relative to earnings, than the stock of less diversified firms.
Hamel and Prahalad suggest thinking of a company as a portfolio of products to identify new product market opportunities. T/F?
False
Diversification is the process of entering new businesses that are distinctive from the firm's core business. T/F?
True
Free cash flow refers to cash in excess of that required to fund investments in the company's existing industry and to meet any debt commitments. T/F?
True
A commonality is an attribute shared by two or more business units that allows them to create more value when they operate together. T/F?
True
In the late 1990s, Microsoft saw Sony PlayStation II's web- browsing potential as a potential "Trojan horse" that could take customers away from the PC market. T/F?
True
Corporate diversification is an effective way to pool risks. T/F?
False
Dupont, a company with a business model based on using its own technology, would likely favor internal new venturing as a strategy for diversification. T/F?
True
Acquisition is an uncommon way to enter an industry with high entry barriers. T/F?
False
The four components for a successful acquisition are target identification and screening, bidding strategy, integration, and learning from the experience. T/F?
True
Joint ventures are used more than acquisitions and internal new ventures to establish business units in another industry. T/F?
False
Which of the following are stakeholders of a company?
-stockholders

-creditors

-employees

-customers
Agency theory is the study of…
the problems that can arise in business when one person delegates decision-making authority to another.
Which of the following is a classic example of an agency relationship?
the relationship between stockholders and senior managers
Over the last fifty years…
CEO pay has increased much faster than the pay of average workers.
Which of the following is NOT a governance mechanism designed to align the interests of principals and agents?
information asymmetry
Inside directors on the board of directors are…
senior employees of the firm.
One drawback of giving stock options to CEOs is that…
stock options dilute the equity of stockholders.
The term "takeover constraint" refers to…
the risk of the firm being acquired if its stock is worth less than the book value of its assets.
The term "greenmail" refers to…
when managers buy back the stock of their own company for a hefty premium to prevent the company from being acquired.
Which of the following is NOT typically measured in a "balanced scorecard" approach?
the firm's philanthropic contributions
"Self-dealing" refers to…
when a manager finds a way to increase his or her own personal wealth with corporate funds.
Which of the following statements best exemplifies justice theories?
"All goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage."
Which of the following statements best exemplifies utilitarian ethics?
"An action can only be judged by its consequences; if it leads to the best possible balance of good consequences versus bad consequences, it is moral."
Which of the following statements best exemplifies the Friedman doctrine?
"The social responsibility of a firm is to increase its profits."
Which of the following statements best exemplifies rights theories?
C. "An individual is fundamentally entitled to particular standards of treatment, such as freedom and the opportunity to pursue happiness."
Internal stakeholders are stockholders and employees, including executive officers, managers, and board members. T/F?
True
Risk capital, the money that stockholders provide to a company, can be recouped if the venture fails. T/F?
False
Attaining future profit growth may require strategies that reduce the current rate of profitability. T/F?
True
The principal is the individual that owns the residual rights to an enterprise. T/F?
True
A CEO always plays the role of principal. T/F?
False
Information asymmetry may occur if principals are too well informed by agents. T/F?
False
Agency theory looks at the problems that can arise in a business relationship when one person delegates decision-making authority to another. T/F?
True
Governance mechanisms are mechanisms that the SEC puts in place to limit CEO annual earnings. T/F?
False
Executive jets, lavish offices, and expense-paid trips to exotic locations are examples of what economists call on-the-job consumption. T/F?
True
The Friedman doctrine states that a business should engage in open and free competition without deception or fraud. T/F?
True
In a multidivisional structure, divisional management has responsibility for…
day-to-day operations of the divisions.
Which of the following is true about a multidivisional structure?
Each division may have a different structure.
Which of the following is typically considered to be an advantage of a multidivisional structure?
It frees corporate managers from business-level responsibilities.
If a firm practices unrelated diversification, it will need…
great use of financial controls and little use of organizational culture.
Firms that have a localization strategy will need…
decentralization, few integrating mechanisms, and little (or no) emphasis on organizational culture.
Firms that have a global standardization strategy will need…
high centralization, extensive integrating mechanisms, and high emphasis on organizational culture.
Firms that have a transnational strategy will need…
simultaneous centralization and decentralization, very extensive integrating mechanisms, and high emphasis on organizational culture.
Many companies utilize a global matrix structure when they pursue…
a transnational strategy.
Which of the following is a characteristic of a virtual organization?
Employees rarely meet face-to-face.
A company that has invested in related diversification because it believes it has technology and resources that can be shared across its multiple businesses will benefit most from…
tying employee bonuses to overall company performance.
The main requirement of the structure and control system for a firm practicing unrelated diversification is…
that it allows corporate managers to evaluate divisional performance easily and accurately.
Transfer pricing refers to…
the amount of money one division within a firm charges another division for a resource.
Under which strategy is it hardest for managers to assess the performance of individual divisions?
-related diversification
Exxon sells a standardized product worldwide and faces great pressure to reduce costs. Its structure is likely to be…
highly centralized.
Under which strategy is a company likely to bear the fewest bureaucratic costs?
localization
Each division with the full set of all the value-chain functions is called a self-contained division. T/F?
True
In a multidivisional structure, operating responsibility is the responsibility of divisional management. T/F?
True
Divisions in different industries never share value-chain functions. T/F?
False
Amoco was able to vastly improve its performance by adopting a multidivisional structure. T/F?
True
Although related diversification offers many advantages, it is the most challenging and most expensive way to manage. T/F?
True
Transfer pricing may lead to battles over establishing the fair price of a resource developed in one division that is to be sold to other divisions that require it. T/F?
True
Vertical integration always entails entering businesses highly related to the firm's core business. T/F?
False
Vertical integration always entails entering businesses highly related to the firm's core business. T/F?
True
The related diversification strategy affords many gains from transferring and sharing resources, but managers have a difficult time measuring the performance of each individual division. T/F?
True
The increasing use of IT is disadvantageous when it comes to implementing a multibusiness model effectively. T/F?
False