Formulating Strategy Ch.6 Test Questions & Answers

International Management, 10e, (Deresky/Miller)

Chapter 6 Formulating Strategy

1) ________ is the process of developing a particular international strategy.

A) Strategic planning

B) Global management

C) Multinational flexibility

D) International strategic management

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

2) ________ is the framework that managers apply to determine the competitive moves and business approaches that run the company.

A) Competition

B) Growth

C) Strategy

D) Vision

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

3) When developing strategies, managers start by ________.

A) configuring and coordinating the firm's activities around the world

B) deciding which customers to target

C) analyzing the particular opportunities and challenges that confront the firm

D) examining the firm's specific strengths and weaknesses

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

4) Which of the following activities would be considered last by a manager while developing strategies?

A) analyzing the particular challenges that confront the firm

B) deciding how best to contend with competitors

C) examining the firm's specific strengths and weaknesses

D) analyzing the particular opportunities for the firm

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

5) Which of the following would be considered an international business transaction?

A) purchasing products in one country and assembling them in the same country

B) recruiting employees internationally

C) borrowing money from a major bank to finance capital improvements

D) shipping finished products from one country to another for retail sale

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

6) Which of the following is a reactive reason for a firm to extend its operations overseas?

A) tax incentives

B) economies of scale

C) regulations and restrictions

D) resource access and cost savings

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

7) Trade barriers often provide a reactive reason for companies to switch from exporting to overseas manufacturing. Which of the following is not an example of a trade barrier?

A) tariffs

B) quotas

C) import licensing requirements

D) buy-local policies

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

8) Restrictive trade barriers most likely influence the globalization of businesses by encouraging firms to ________.

A) develop joint ventures with local firms

B) import supplies from foreign vendors

C) expand the exportation of raw materials

D) switch from exporting to overseas manufacturing

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

9) Toyota has manufacturing plants in the United States to circumvent ________.

A) by local policies

B) import quotas

C) high import tariffs

D) fluctuating exchange rates

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Analytical thinking

10) Which of the following is the most likely result of regulations and restrictions enforced by a firm's home government that prove to be expensive for the firm's operations?

A) the firm searches for less restrictive operating environments overseas

B) the firm responds to customers' demands more promptly

C) the firm becomes entangled in lengthy litigation

D) the firm expands its domestic operations

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

11) Due to the high demand for its handmade soaps in Canada, Fragrance Exotica, an Indian Soap manufacturer, has decided to open a new manufacturing unit in Canada, thereby expanding overseas. In this scenario, which of the following reasons prompted Fragrance Exotica to set up a manufacturing unit overseas?

A) trade barriers

B) manufacturer demands

C) customer demands

D) tax incentives

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Analytical thinking

12) Which of the following is the proactive reason that prompts firms to expand overseas?

A) avoiding restrictive trade barriers

B) solving logistics-related problems

C) responding to foreign competition

D) seeking growth opportunities

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

13) Which of the following is a reactive reason that prompts a firm to expand overseas?

A) globalization of competitors

B) seeking economies of scale

C) growth opportunities

D) seeking incentives

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

14) Poland is seeking new infusions of capital, technology, and know-how. It announces that it shall exempt taxes, provide subsidies, loans and grant concessions for foreign investors. Which of the following measures is the country employing?

A) providing incentives

B) imposing regulations

C) establishing trade barriers

D) ensuring economies of scale

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Analytical thinking

15) In 2014, the Cuban government passed a law offering tax breaks for foreign companies planning joint ventures with Cuban companies or the Cuban state. This is most likely an example of a firm expanding overseas due to ________.

A) globalization of competitors

B) restrictive trade barriers

C) home country regulations

D) provision of incentives

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Analytical thinking

16) Which of the following are NOT costs associated with the liability of foreignness?

A) home-country costs

B) host-country costs

C) unfamiliarity costs

D) coordination costs

Difficulty: 1: Easy

Chapter: 6

Skill: Application

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

17) Which of the following is true about liability of foreignness?

A) It reflects all additional costs a local firm operating in a market overseas incurs that a foreign

firm would not incur.

B) It arises mainly from the foreign firm not being sufficiently embedded in the information

networks in the country of location.

C) It affects new local firms as well as foreign firms.

D) It reflects the worldwide competitiveness of a firm.

Difficulty: 1: Easy

Chapter: 6

Skill: Application

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

18) Which of the following statements is true of the strategic formulation process?

A) The global strategic formulation process is completely independent of the process followed in domestic companies.

B) The strategic formulation process is part of the strategic management process in which most firms engage, either formally or informally.

C) Strategic formulation consists of four defined stages that occur in a consecutive order.

D) Most firms operate on planning cycles of one or two years with periodic strategy reviews.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-2: To become familiar with the strategic formulation process

AACSB: Application of knowledge

19) Which of the following is the first stage of the strategic management process?

A) identification of value-creating activities

B) formulation of strategies

C) define/clarify mission and objectives

D) identification of core competency

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-2: To become familiar with the strategic formulation process

AACSB: Application of knowledge

20) Jamie decides to plan his strategies for starting an electric equipment manufacturing company. His main aim is to ensure that it runs efficiently. He decides to do this in two phases: the planning phase and the implementation phase. Which of the following processes is Jamie employing?

A) retrenchment

B) organizational restructuring

C) strategic management

D) globalization

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

21) Which of the following is the first step of the planning phase of a strategic management process?

A) assessment of the external environment that the firm will face in the future

B) establish the company's mission and objectives

C) analysis of the firm's relative capabilities to deal successfully with the external environment

D) seeking alternative strategies using competitive analysis

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

22) The second part of the strategic management process involves the ________.

A) implementation phase

B) assessment stage

C) planning phase

D) analysis stage

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

23) Which of the following would be categorized as a global production objective of an international firm?

A) foreign-exchange management

B) long-term profit growth

C) quality and cost control

D) company market share

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

24) Which of the following would most likely be categorized as a global financial objective of an international firm?

A) effective financing of overseas subsidiaries

B) long-term profit growth

C) quality and cost control

D) company market share

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

25) Which of the following would most likely be categorized as a global marketing objective of an international firm?

A) effective financing of overseas subsidiaries

B) long-term profit growth

C) quality and cost control

D) coordination of regional markets for economies of scale

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

26) Which of the following is NOT one of the five elements of the strategy diamond?

A) Vehicles

B) Areas

C) Staging

D) Economic logic

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

27) Microtech Corporation has three business divisions. Each one of them customizes its products for each national market. This company uses a(n) ________.

A) global strategy

B) transnational strategy

C) international strategy

D) multidomestic strategy

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

28) Which of the following charts the direction of the company and provides a basis for strategic decision making?

A) environmental assessment

B) corporate structure

C) organizational mission

D) SWOT analysis

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

29) Which of the following clarifies the organization's purpose, values, and direction?

A) a code of ethics

B) a SWOT analysis

C) a strategic plan

D) a mission statement

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

30) Which of the following statements is true of objectives?

A) Objectives of individual business units in a company tend to be stated in the most general terms.

B) Objectives become more precise at the level of individual departments.

C) Objectives at the highest level in an organization tend to be more specific.

D) Objectives at the highest level in an organization are more concrete as they contain numerical targets.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

31) Goals for market volume and profitability are usually set higher for international than domestic operations due to the ________.

A) fluctuating exchange rates

B) presence of unstable market conditions

C) involvement of greater risks

D) presence of stable exchange rates

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

32) ________ includes the process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest.

A) Environmental mitigation

B) Internal analysis

C) Competitive analysis

D) Environmental scanning

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

33) According to the CAGE Model, which of the following refers to the physical, communications, and transportation links between countries?

A) cultural distance

B) administrative distance

C) geographic distance

D) economic distance

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

34) Which strategy combines the benefits of global scale efficiencies and local responsiveness?

A) multidomestic strategy

B) home replication strategy

C) transnational strategy

D) global strategy

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

35) Which of the following terms refers to a firm's capabilities relative to those of its competitors?

A) business process reengineering

B) SWOT analysis

C) environmental assessment

D) fundamental analysis

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

36) Which of the following is a global risk with regard to strategic entry scanning?

A) economic and fiscal policies

B) corruption

C) political and economic risk

D) trade restrictions

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

37) Which of the following is a regional risk with regard to strategic entry scanning?

A) economic and fiscal policies

B) varying fiscal strategies

C) repatriation policies

D) shifting production and consumption

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

38) Which of the following is a national risk with regard to strategic entry scanning?

A) energy availability and prices

B) trade restrictions

C) nationalism

D) currency wars

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

39) ________ includes environmental scanning and continuous monitoring to keep abreast of variables around the world that are pertinent to the firm.

A) Internal analysis

B) Sustainable development

C) Cultural analysis

D) Environmental assessment

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

40) At which three levels should firms ideally perform global environmental analysis?

A) product, domestic market, and consumer

B) global, regional and national

C) operational, tactical, and top management

D) innovation, production, and local distribution

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

41) The first broad scan of all potential world markets should result in the firm being able to ________.

A) identify the strengths and weaknesses of its competitors

B) eliminate markets with unreasonable entry conditions

C) determine the best sources for raw materials

D) eliminate countries with high cultural risk

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

42) Which of the following is a way in which formal institutions affect international competition?

A) decreasing trade restrictions

B) enforcing organizational laws

C) creation of trade barriers

D) enforcing strict exit barriers

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

43) Which of the following is the most preferred source of environmental information for environmental scanning purposes in a firm?

A) computer database

B) corporate clipping service

C) internal sources

D) information packages

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

44) A(n) ________ determines which areas of a firm's operations represent strengths or weaknesses (currently or potentially) compared to competitors.

A) transactional analysis

B) internal analysis

C) structural analysis

D) break-even analysis

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

45) An internal analysis focuses on the company's ________.

A) resources and operations

B) market share

C) competitors

D) foreign opportunities

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

46) ________ may reveal an inefficient use of assets that restricts profitability.

A) Financial ratios

B) Concentration ratios

C) An internal resource audit

D) Competitive analyses

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

47) ________ are usually difficult for competitors to imitate and represent a major focus for strategic development at the corporate level.

A) Break-even points

B) Comparative advantages

C) Absolute advantages

D) Core competencies

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

48) Futura-Core Technologies, an electronics manufacturing firm, has advantages in financial capability and sustainability, but a disadvantage in speed of innovation. It is also at a disadvantage relative to Core-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions. Which of the following terms best describes Futura-Core's abilities in comparison to Core-Dynamix?

A) comparative advantage

B) collective bargaining

C) competitive advantage

D) absolute advantage

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

49) ________ refers to the establishment of worldwide operations and the development of standardized products and marketing.

A) Customization

B) Globalization

C) Nationalization

D) Regionalization

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

50) As market globalization intensifies, ________.

A) the gap between the rich and the poor shrinks rapidly

B) the distance between consumers worldwide expands

C) individual firms respond to the challenges and new advantages that it brings

D) firms internationalize solely as a reaction to it

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

51) Which of the following global strategy entails the greatest degree of risk for a company?

A) fully owned subsidiaries

B) greenfield investments

C) strategic alliances

D) acquisitions

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

52) Regional strategies are more appropriate than global strategies for firms that operate in ________.

A) multidomestic industries

B) high-tech industries

C) newly emerging industries

D) mature industries

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

53) Columbia Cosmetics Manufacturing Inc. is a cosmetics manufacturer based in California, United States. The firm varies its products to suit the different conditions abroad. Columbia Cosmetics is an example of a ________.

A) multidomestic industry

B) regional industry

C) global industry

D) globally integrated industry

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

54) Which of the following most likely encourages firms to localize?

A) increasing tariffs at the host country

B) economies of scale

C) demand for undifferentiated, standardized products

D) providing domestic subsidies

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

55) Apple is an American corporation that deals with computer technology. With its worldwide sourcing and fully merged production and marketing system, Apple is considered to be a ________.

A) greenfield investment

B) turnkey operation

C) shell corporation

D) globally integrated company

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

56) According to Ghemawat, which of the following offers room for cross-border strategy to have content distinct from single-country strategy?

A) regional integration

B) nationalization

C) semi-globalization

D) privatization

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

57) Which of the following terms best describes a company that has operations in various countries, follows policies to develop local R&D to tailor products to markets, lets plants set their own rules, and aims at being a good corporate citizen in every country?

A) global company

B) global elite

C) counter trade

D) global commons

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

58) ________ are companies that start out with a global reach, typically by using their Internet capabilities and also through hiring people with international experience and contacts around the world.

A) GLOCALS

B) Global civics

C) Born globals

D) Global commons

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

59) Which of the following is a relatively low risk way for a company to begin international expansion?

A) exporting

B) licensing

C) contract manufacturing

D) franchising

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

60) Which of the following is a contractual entry mode grants the rights to a firm in the host country to either produce or sell a product, or both?

A) franchising

B) licensing

C) management contract

D) strategic alliance

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

61) Which of the following can be regarded as a pressure to globalize?

A) decreasing competitive clout

B) information technology expansion

C) increasing tariffs

D) spread of economic nationalism

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

62) Licensing is especially suitable for ________.

A) firms with a single product line and a constant technological environment

B) large firms with huge financial and managerial resources for direct investment abroad

C) when competition is intense and profit margins are declining

D) firms that want to control all of the licensee's activities and performances

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

63) Which of the following statements is true of licensing?

A) Licensing restricts finances needed for international expansion.

B) Cross licensing grants a company the right to use a property but does not grant it sole access to a market.

C) It can avoid the tariffs and quotas usually imposed on exports.

D) Licensing increases the likelihood that a licensor's product will appear on the black market.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

64) ________ is an ideal strategy for small businesses because outlets require little investment in capital or human resources.

A) A joint venture

B) Franchising

C) Offshoring

D) A turnkey operation

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

65) The primary motive in using an outsourcing strategy is ________.

A) utilizing inexpensive overseas labor

B) obtaining rights to patented technology

C) sharing managerial expertise

D) sharing financial resources

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

66) Panera Bread is a chain of cafes serving sandwiches, soups, and freshly baked breads. The company began in 1981 with stores primarily located along the east coast of the United States. Since then, the firm has expanded to over 1,300 locations throughout the United States and Canada. The firm has strong earnings and has been designated by Business Week as a "Significant Growth Company." Panera Bread executives are considering the idea of expanding globally by opening cafes in Asia through a franchising strategy. Which of the following, if true, supports the argument that Panera Bread should expand into Asia through franchising?

A) Panera Bread executives want to test the Asian market with a short-term commitment that allows them to make quick profits.

B) Panera Bread executives want fast access to the Asian market without a significant investment of capital.

C) The Panera Bread menu changes rapidly, and each cafe's artisan bread bakers receive regular training on new recipes.

D) The Panera Bread mission is to make excellent bread available to customers around the world.

Difficulty: 3: Challenging

Chapter: 6

Skill: Critical Thinking

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Reflective thinking

67) Panera Bread is a chain of cafes serving sandwiches, soups, and freshly baked breads. The company began in 1981 with stores primarily located along the east coast of the United States. Since then, the firm has expanded to over 1,300 locations throughout the United States and Canada. The firm has strong earnings and has been designated by Business Week as a "Significant Growth Company." Panera Bread executives are considering the idea of expanding globally by opening cafes in Asia through a franchising strategy. Which of the following, if true, undermines the argument that Panera Bread should expand into Asia through franchising?

A) Quality control is a high priority for Panera Bread.

B) Panera Bread wants to access the Asian market quickly.

C) Panera Bread's primary competitor has already expanded to Asia.

D) Many Panera Bread managers have expressed interest in relocating to Asia.

Difficulty: 3: Challenging

Chapter: 6

Skill: Critical Thinking

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Reflective thinking

68) Offshoring provides the company with access to foreign markets while avoiding ________.

A) relocation of the company to other countries

B) competition between companies in the global market

C) trade risks

D) trade barriers

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

69) Which of the following terms refers to operating in concentrations of related, interdependent companies within an industry that uses the same suppliers, specialized labor, and distribution channels?

A) outsourcing

B) dumping

C) franchising

D) clustering

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

70) Which of the following statements is true of clustering?

A) It uses different suppliers and distribution channels for interdependent companies within an industry.

B) It helps a firm gain an increase in efficiencies.

C) It seldom uses specialized labor.

D) It typically increases the costs of production and distribution.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

71) The use of professional or skilled workers located in countries other than that of the home country is referred to as ________.

A) franchising

B) licensing

C) outsourcing

D) importing

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

72) Which of the following involves a company designing and constructing a facility abroad, trains local personnel, and then transfers ownership over to local management?

A) wholly owned subsidies

B) turnkey projects

C) joint ventures

D) strategic alliances

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

73) Which of the following is a relatively low risk entry strategy, but is likely to be short term and provide limited income to the company?

A) licensing agreement

B) management contract

C) turnkey operation

D) lease

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

74) A(n) ________ gives a foreign company the rights to oversee the daily operations of a business but does not make decisions regarding ownership, financing, or strategic policy changes?

A) joint venture

B) management contract

C) offshoring

D) fully owned subsidiary

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

75) Which of the following strategy would involve sharing ownership with a local partner, through agreed on proportions of equity?

A) international joint venture

B) greenfield investment

C) turnkey operation

D) offshoring

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Analytical thinking

76) Which of the following is an advantage of establishing a new, fully owned foreign manufacturing?

A) absence of expropriation risks

B) currency stability

C) realize all revenues and control

D) repatriation

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

77) Which of the following is generally viewed as an advantage of a service sector outsourcing strategy?

A) limited cost and risk

B) lower employment costs

C) share costs and risks

D) realize all revenues and control

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

78) Which of the following environmental factors would most likely increase the risk for a firm that has established a fully owned subsidiary in a country?

A) expropriation threats

B) unreliable distributors

C) infrastructure weaknesses

D) quality control issues

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

79) Which of the following statements best differentiates between franchising and licensing?

A) Licensing gives a company greater control than franchising over the sale of its product in a target market.

B) Franchising is common in manufacturing industries while licensing is primarily used in service industries.

C) Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property.

D) Licensees must often meet strict guidelines on product quality, day-to-day management duties, and marketing promotions unlike franchisees.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

80) Which of the following is the primary advantage of using exporting as an entry strategy?

A) shared costs and risks

B) access to highly skilled workers

C) low risk

D) avoidance of tariffs and regulations

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

81) Which of the following is an internal factor that affects the choice of international entry mode for a company?

A) potential of local market

B) knowledge of local market

C) industrial globalization

D) global experience of firm and managers

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

82) Which of the following is an external factor that affects the choice of international entry mode for a company?

A) industry growth rate

B) long-term strategy

C) costs of making or enforcing contracts with local partners

D) intent to conduct research and development with local partners

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

83) According to Gupta and Govindarajan, an alliance-based entry strategy is most suitable when ________.

A) firms have a significant amount of capital

B) the risk of asymmetric learning by the partner is low

C) cultural distance between home and host countries is extremely low

D) the subsidiary would be highly integrated with the rest of the global operations

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

84) Black and Decker produces tools at a plant in North Carolina and ships the tools to retailers in England. This is an example of which type of international business activity?

A) merchandising

B) importing

C) exporting

D) trading

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

85) ________ are investments made for the purpose of actively controlling property, assets, or companies located in host countries.

A) Licensing investments

B) Portfolio investments

C) Fully owned subsidiaries

D) Indirect global investments

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

86) ________ is a contractual arrangement in which a firm in one country allows the use of its intellectual property by a firm in a second country in return for a royalty payment.

A) Leasing

B) Franchising

C) Licensing

D) Merchandising

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

87) Walt Disney permits a German clothing manufacturer to market children's pajamas embroidered with Mickey Mouse in return for a percentage of company sales. This is an example of ________.

A) franchising

B) licensing

C) leasing

D) piracy

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

88) A(n) ________ involves a firm in one country agreeing to operate facilities for a firm in another country for an agreed fee.

A) franchising agreement

B) licensing agreement

C) management contract

D) indirect investment

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

89) Using Rivoli and Salorio's framework, assume there is high uncertainty in a country and that the company's proposed investment is highly irreversible investment. Identify the conditions in which a firm will "Get toes wet or investigate alternative mode."

A) Monopolistic advantages, Low country early mover advantages

B) Monopolistic advantages, High country early mover advantages

C) Non-monopolistic advantages, Low country early mover advantages

D) Non-monopolistic advantages, High country early mover advantages

Difficulty: 3: Challenging

Chapter: 6

Skill: Application

LO: 6-4: To understand the need for strategic planning for emerging markets

AACSB: Application of knowledge

90) Using Rivoli and Salorio's framework, assume there is high uncertainty in a country and that the company's proposed investment is highly irreversible investment. Identify the conditions in which a firm will "Wait for competitors' moves and follow if they invest."

A) Monopolistic advantages; Low country early mover advantages

B) Monopolistic advantages; High country early mover advantages

C) Non-monopolistic advantages; Low country early mover advantages

D) Non-monopolistic advantages; High country early mover advantages

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-4: To understand the need for strategic planning for emerging markets

AACSB: Application of knowledge

91) The process by which a firm's managers evaluate the future prospects of the firm and set long term objectives and then identify the appropriate courses of action need to accomplish those objectives is called strategic planning.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

92) The imposition of trade barriers is one of the reactive reasons that prompt a company to operate overseas.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

93) A firm's home government regulations and restrictions can become so expensive that companies will seek out more restrictive foreign operating environments.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

94) A company will often consider establishing operations in a foreign country as a response to increased customer demand.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

95) One pressing reason for many large firms to expand overseas is to pursue growth opportunities.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

96) Trade barriers, such as tariffs and quotas, increase risk and decreases profits. Hence, they are attractive to foreign companies.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

97) The first phase of the strategic management process is the planning phase, which requires structure, systems and processes to make the strategy work.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-2: To become familiar with the strategic formulation process

AACSB: Application of knowledge

98) Production, one of the five global corporate objectives, deals with development of new products with global patents.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

99) After clarifying the corporate mission and objectives, the first major step in weighing international strategic options is the environmental assessment.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

100) Environmental scanning should be conducted only on the local level exclusively.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

101) An environmental assessment, includes environmental scanning and continuous monitoring to keep abreast of variables around the world that are pertinent to the firm.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

102) Companies of all sizes are increasingly looking to the Internet as a means of expanding their global operations.

Difficulty: 1: Easy

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

103) Political and economic risk in a particular country introduces a high degree of uncertainty and, in turn, raises concerns about the foreign direct investment decision by managers of multinational enterprises.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-4: To understand the need for strategic planning for emerging markets

AACSB: Application of knowledge

104) What is strategy? What is strategic planning?

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

105) List the reasons a company would have if it wants to operate internationally.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-1: To understand the reasons companies engage in international business

AACSB: Application of knowledge

106) Briefly describe the strategy formulation process of international organizations.

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-2: To become familiar with the strategic formulation process

AACSB: Application of knowledge

107) What is environmental scanning? What areas are most commonly focused in environmental scanning?

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

108) What is the difference between environmental scanning at the multinational level and the regional level?

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

109) What are the five forces identified in Michael Porter's industry based model, that examines the dynamics within an industry?

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

110) What are the five elements of strategy based on the "Strategy Diamond," which was developed by Donald Hambrick and James Frederickson?

Difficulty: 2: Moderate

Chapter: 6

Skill: Application

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

111) Describe the various sources of information that are available to managers.

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

112) What is a SWOT analysis? How is it used in strategic planning?

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

113) Describe the strategies of globalization and regionalization. When can each strategy be used most effectively?

Difficulty: 2: Moderate

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

114) What are the two levels of strategic alternatives that a firm must consider when competing internationally?

Difficulty: 1: Easy

Chapter: 6

Skill: Concept

LO: 6-3: To learn the steps in global strategic planning, including assessing entry strategies for different markets

AACSB: Application of knowledge

115) What strategic management challenges are faced by international businesses that have business units scattered around the world? How can a business strategy help improve a firm's ability to compete?

Difficulty: 3: Challenging

Chapter: 6

Skill: Synthesis

LO: 6-4: To understand the need for strategic planning for emerging markets

AACSB: Application of knowledge