Deck 6: Formulating Strategy

Question 1

The availability of raw materials and other resources offers both greater control over inputs and lower transportation costs.

Answer 1

True

Question 2

It is impossible for small businesses, such as those with fewer than 500 workers, to do business overseas.

Answer 2

False

Question 3

Globalization of competitors is one of the reactive reasons that prompt a company to operate overseas.

Answer 3

True

Question 4

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

Question 5

One pressing reason for many large firms to expand overseas is to seek economies of scale.

Question 6

Companies seek out less restrictive foreign operating environments when the regulations and restrictions enforced by the firm's home government become expensive.

Question 7

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

A)tax incentives
B)economies of scale
C)globalization of competitors
D)resource access and cost savings

Question 8

________ 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

Question 9

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

Question 10

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

Question 11

A company's choice to operate in a business or businesses and the ways in which it differentiates itself from its competitors is called its ________.

A)strategy
B)procedure
C)mission
D)process

Question 12

Customer demands have no impact on a company international business strategy.

Question 13

When Disney decided to build a park in Paris, the French government gave Disney prime farmland just outside the city limits.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

Question 14

The process by which a firm's managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called strategic planning.

Question 15

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

A)customer demands
B)seeking economies of scale
C)growth opportunities
D)seeking incentives

Question 16

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

Question 17

The process by which a firm's managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called ________.

A)strategic planning
B)strategic delegation
C)organizational design
D)product planning

Question 18

Roch, a Swiss chocolate company, recently opened a manufacturing unit in Spain.The purpose of this move was that Roch wanted to avoid Spain's high import tariffs.Which of the following reasons prompted Roch to open the manufacturing unit in Spain?

A)customer demands
B)trade barriers
C)globalization of competitors
D)growth opportunities

Question 19

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 economies of scale

Question 20

A country seeks new infusions of capital, technology, and know-how.It announces that it shall exempt taxes 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

Question 21

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

A)foreign-exchange management
B)long-term profit growth
C)quality and cost control
D)company market share

Question 22

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

A)implementation phase
B)assessment stage
C)planning phase
D)analysis stage

Question 23

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

Question 24

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

A)product, domestic market, and consumer
B)multinational, regional, and local
C)operational, tactical, and top management
D)innovation, production, and local distribution

Question 25

Which of the following terms refers to the continuous process of gathering and evaluating information about variables and events around the world that may pose threats or opportunities to the firm?

A)business process reengineering
B)PEST analysis
C)environmental assessment
D)fundamental analysis

Question 26

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

A)involvement of greater risks
B)presence of stable market conditions
C)enforcement of government controls
D)presence of stable exchange rates

Question 27

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

Question 28

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

A)Environmental mitigation
B)Internal analysis
C)Competitive analysis
D)Environmental assessment

Question 29

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

A)financial and currency instability
B)varying fiscal strategies
C)repatriation policies
D)shifting production and consumption

Question 30

What is strategy? What is strategic planning?

Question 31

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)establishment of the company's mission
C)analysis of the firm's relative capabilities to deal successfully with the external environment
D)seeking alternative strategies using competitive analysis

Question 32

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

A)economic and fiscal policies
B)corruption
C)economic and financial risk
D)trade restrictions

Question 33

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

A)decreasing trade restrictions
B)enforcing organizational laws
C)enforcing antidumping laws
D)enforcing strict exit barriers

Question 34

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

Question 35

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

Question 36

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

Question 37

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.

Question 38

The process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest is called ________.

A)internal analysis
B)sustainable development
C)cultural analysis
D)environmental scanning

Question 39

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

A)energy availability and prices
B)regional instability
C)legal protection
D)political turmoil

Question 40

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

Question 41

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)GLOCAL
B)global elite
C)counter trade
D)global commons

Question 42

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

Question 43

The primary motive in the contract manufacturing strategy is ________.

A)utilizing inexpensive overseas labor
B)obtaining rights to patented technology
C)sharing managerial expertise
D)sharing financial resources

Question 44

Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?

A)franchising
B)licensing
C)management contract
D)strategic alliance

Question 45

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

A)Customization
B)Globalization
C)Nationalization
D)Regionalization

Question 46

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)the mature phase of a product's life cycle when production is relatively standardized
D)firms that want to control all of the licensee's activities and performances

Question 47

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

Question 48

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)A major advantage of licensing is that it is the least risky method of international expansion.
D)Licensing increases the likelihood that a licensor's product will appear on the black market.

Question 49

________ 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)Distinctive competencies

Question 50

A ________ is an assessment of a firm's capabilities relative to those of its competitors as pertinent to the opportunities and threats in the environment for those firms.

A)SWOT analysis
B)transactional analysis
C)PEST analysis
D)break-even analysis

Question 51

An internal analysis focuses on the company's ________.

A)vision and mission
B)market share
C)competitors
D)resources and operations

Question 52

________ 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

Question 53

________ is an ideal strategy for small businesses with few financial and managerial resources for direct investment abroad.

A)A joint venture
B)Licensing
C)Offshoring
D)A turnkey operation

Question 54

________ reveal an inefficient use of assets that restricts profitability.

A)Sales-force analyses
B)Concentration ratios
C)Financial ratios
D)Competitive analyses

Question 55

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

Question 56

Which of the following is the quickest and cheapest way to develop a global strategy?

A)fully-owned subsidiaries
B)greenfield investments
C)strategic alliances
D)acquisitions

Question 57

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

A)greenfield investment
B)turnkey operation
C)shell corporation
D)globally integrated company

Question 58

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

Question 59

Which of the following is the first step in developing a successful export strategy?

A)identification of a potential market
B)match market needs to the company's abilities
C)initiation of meetings
D)commitment of resources

Question 60

Which of the following most likely encourages firms to localize?

A)increasing tariffs at the host country
B)providing domestic subsidies
C)demand for undifferentiated, standardized products
D)need for economies of scale

Question 61

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

Question 62

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

Question 63

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.

Question 64

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

Question 65

Which of the following strategies would most likely be used by a non-European company wanting to gain quick entry inside the European community?

A)international joint venture
B)greenfield investment
C)turnkey operation
D)offshoring

Question 66

Which of the following is the primary advantage of using e-business as a local-level entry strategy?

A)shared costs and risks
B)access to highly skilled workers
C)rapid entry and exit from markets
D)avoidance of tariffs and regulations

Question 67

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.

Question 68

Meryl Software Inc., an American MNC wishing total control of its operations, wants to acquire an existing firm, Graphiti Animations, in Canada.If acquired, Graphiti Animations would be a ________.

A)fully-owned subsidiary
B)holding company
C)greenfield investment
D)shell corporation

Question 69

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

A)absence of expropriation risks
B)currency stability
C)full control over decision making
D)repatriation

Question 70

Which of the following is a contractual entry mode?

A)wholly owned subsidies
B)turnkey projects
C)joint ventures
D)strategic alliances

Question 71

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.

Question 72

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

Question 73

Which of the following entry strategies is most likely to serve as a short-term strategy and to provide limited income?

A)joint venture
B)management contract
C)offshoring
D)fully owned subsidiary

Question 74

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

Question 75

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

Question 76

A ________ gives a foreign company the rights to oversee the daily operations of a business but not to make decisions regarding ownership, financing, or strategic and policy changes.

A)licensing agreement
B)management contract
C)turnkey operation
D)lease

Question 77

Which of the following is a venture-specific factor that affects the choice of international entry mode for a company?

A)competition in local market
B)level of global competition
C)ability to protect proprietary technology
D)corporate culture and structure

Question 78

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.

Question 79

Which of the following is generally viewed as the most risky entry strategy?

A)turnkey operations
B)new, fully-owned subsidiaries
C)international joint ventures
D)service sector outsourcing

Question 80

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