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MANA 4322 CH 7 & 8

34. (p. 241) A major trend in international developments includes

A. greater international trade and operations.

B. a growing recognition of an international managerial perspective.

C. a large increase in international investment.

D. all of these.

35. (p. 241) The reasons that explain why some governments make better use of the inflows from

foreign investment and know-how than others include all of the following EXCEPT

A. governmental practices that are business-friendly.

B. local entrepreneurs that can train workers and invest in modern technology.

C. high tariffs and taxes on foreign investors and multinational corporations provide income

to improve living conditions.

D. sound management of broader economic factors such as interest rates and inflation.

36. (p. 242) Michael Porter's framework all of the following factors affect a nation's

competitiveness EXCEPT

A. factor conditions.

B. demand characteristics.

C. related and supported industries.

D. policies that protect the nation's domestic competitors.

37. (p. 244) Rivalry is intense in nations with conditions of STRONG consumer demand,

STRONG supplier bases, and HIGH new entrant potential from related industries.

A. weak; weak; high

B. strong; strong; low

C. strong; strong; high

D. weak; weak; low

38. (p. 244) According to Michael Porter, firms that have experienced intense domestic

competition are

A. unlikely to have the time or resources to compete abroad.

B. most likely to design strategies aimed primarily at the domestic market.

C. more likely to design strategies and structures that allow them to successfully compete


D. more likely to demand protection from their governments.

39. (p. 245) All of the factors below have made India's software services industry extremely

competitive on a global scale EXCEPT

A. large pool of skilled workers.

B. large network of public and private educational institutions.

C. tax and antitrust legislation that protect the dominant players in the industry.

D. large, growing market and sophisticated customers.

40. (p. 249) All of the following would be viewed as advantages of global diversification


A. fewer social and political risks than domestic operations.

B. a firm not being solely dependent on the domestic market.

C. a firm with large margins at home helping subsidize its operations in other nations.

D. the potential to lower costs of operation even if the primary market is at home.

41. (p. 248) Optimizing the location of every activity in the value chain can yield all of the

following strategic advantages EXCEPT

A. performance enhancement.

B. cost reduction.

C. extending the life cycle of the product of service.

D. risk reduction.

42. (p. 248) Microsoft decided to establish a corporate research laboratory in Cambridge,


A. because England is an ally of the United States.

B. to access the outstanding technical and professional talent available there so that they can

attain world-class excellence in selected value-creating activities.

C. because the local language is English.

D. because the company views the United States as a risky place to expand due to the actions

of the U.S. Department of Justice.

43. (p. 247) The sale of Boeing's commercial aircraft and Microsoft's operating systems in many

countries enable these companies to benefit from

A. higher prices in their domestic markets.

B. economies of scale.

C. optimizing the location for many activities in their value chain.

D. reducing their exposure to currency risks.

44. (p. 248) Many U.S. multinational companies set up maquiladora operations south of the

U.S.-Mexico border primarily

A. to sell products into the growing Mexican market.

B. as part of US government-initiated measures to discourage illegal immigration.

C. to take advantage of the lower tax rates in Mexico.

D. to take advantage of the low cost of labor.

45. (p. 252) Appreciation of the U.S. dollar will have the following impact on McDonald's:

A. lower sales abroad because foreign customers cannot afford McDonalds' products.

B. more transfer of ingredients from the U.S. to branches abroad to take advantage of the

higher dollar.

C. lower profits, because foreign profits will be reduced when measured in dollars.

D. no impact at all.

46. (p. 254) __________ occurs when a firm decides to utilize other firms to perform value-

creating activities that were previously performed in-house.

A. Offshoring

B. A global strategy

C. Outsourcing

D. A transnational strategy

47. (p. 255-256) Which one of the following is one of Theodore Levitt's assumptions supporting a

pure global strategy?

A. Consumers are willing to pay more for specific product features.

B. Customer needs and interests are becoming more dissimilar.

C. If the world markets are treated as heterogeneous, substantial economies of scale are easily


D. MNCs can compete with aggressive pricing on low cost products that meet the common

needs of global consumers.

48. (p. 250) Pressures to "reduce costs" require that

A. a company should not trade idiosyncratic preferences in product features for higher

economic returns.

B. a company must pursue what is economically beneficial to the company including

maximizing economies of scale and learning curve effects.

C. the manager should follow a multidomestic strategy to maximize the economic benefits to

the company.

D. the company needs to supplement the local foreign economy in a manner specified by the

local government.

49. (p. 257-258) Low pressure for local adaptation combined with low pressure for lower costs

would suggest what type of strategy?

A. international

B. global

C. multidomestic

D. transnational

50. (p. 258, 260) High pressure for local adaptation combined with low pressure for lower costs

would suggest what type of international strategy?

A. Global

B. Multidomestic

C. Transnational

D. Overall cost leadership

51. (p. 264) Software Tech, Inc., a company in the computer software industry, invests heavily in

R&D and product design. Thus, most of its value is added

A. upstream.

B. in its infrastructure.

C. downstream.

D. midstream.

52. (p. 264) Industries in which proportionally more value is added in __________ activities are

more likely to benefit from a __________ strategy.

A. downstream; global

B. upstream; multidomestic

C. upstream; global

D. manufacturing; multidomestic

53. (p. 264) Which of the following types of international firms are most likely to benefit from a

global strategy as opposed to a multidomestic strategy?

A. Firms that compete in industries in which consumer preferences vary substantially in each


B. Firms in industries that are expanding very rapidly.

C. Firms in industries that have value added by sales and marketing departments.

D. Firms in industries that have much value added in research and design or manufacturing.

54. (p. 260) Recent trends that might lead managers of multinational corporations (MNCs) to

adopt a more decentralized strategy for their operations would include all of the following


A. customers' needs, interests, and tastes are becoming increasingly homogenized or similar.

B. consumers around the world are increasingly willing to tradeoff idiosyncratic preferences

in product features for lower price.

C. flexible manufacturing trends have allowed a decline in the minimum volume required to

reach acceptable levels of production efficiency.

D. fluctuating exchange rates.

55. (p. 259) Firms following a global strategy strive to offer __________ products and services

as well as locate manufacturing, R&D, and marketing activities in __________ locations.

A. a wide variety of; several

B. a wide variety of; few

C. standardized; several

D. standardized; few

56. (p. 259) Gillette's worldwide success with its Sensor razor demonstrates

A. the importance of merging global and multidomestic strategies.

B. the values of establishing joint ventures with several multinational corporations.

C. that a global marketing effort can sometimes be successful.

D. the usefulness of a multidomestic strategy.

57. (p. 259) As in the case of Siebel Systems (now part of Oracle), elements of a global strategy

may facilitate the competitive advantage of differentiation by

A. increased freedom of individual business units to adapt to local tastes.

B. the creation of a worldwide network to achieve consistent service regardless of location.

C. flexibility in applying R&D to meet country-specific needs.

D. tailoring products to meet country-specific needs.

58. (p. 260) All of the following are risks associated with a global strategy EXCEPT

A. a firm with only one manufacturing location must export its product—some of which may

be a great distance from the operation.

B. the geographic concentration of any activity may also tend to isolate that activity from the

targeted markets.

C. concentrating an activity in a single location makes the rest of the firm dependent on that


D. the pressures for local adaptation may elevate the firm's cost structure.

59. (p. 260-261) All of the following are limitations of a global strategy EXCEPT

A. limited ability to adapt to local markets.

B. the ability to locate activities in optimal locations.

C. the concentration of activities may increase dependence on a single facility.

D. single locations may lead to higher tariffs and transportation costs.

60. (p. 260) Elements of a multidomestic strategy may facilitate the competitive advantage of

cost leadership by

A. flexibility in adjusting to local laws and customs.

B. decreased duplication of inventories which are often involved in having multiple plants

producing similar products.

C. decreased shipping and transportation costs inherent in local production.

D. economies of scale gained through centralized production of standardized products.

61. (p. 263) All of the following are limitations of a multidomestic strategy EXCEPT

A. less ability to realize cost savings through scale economies.

B. greater difficulty in transferring knowledge across countries.

C. single locations may lead to higher tariffs and transportation costs.

D. may lead to "overadaptation" as conditions change.

62. (p. 263) High pressure for local adaptation combined with high pressure for lower costs

would suggest what type of international strategy?

A. global

B. multidomestic

C. transnational

D. differentiation

63. (p. 264) Units coordinate their activities with headquarters and with one another, units adapt

to special circumstances only they face, and the entire organization draws upon relevant

corporate resources. These are all attributes of which type of strategy?

A. global

B. transnational

C. international

D. multidomestic

64. (p. 265) Which of the following is a disadvantage of a transnational strategy?

A. Less ability to realize cost savings through scale economies.

B. Limited ability to adapt to local markets.

C. Unique managerial challenges in fostering knowledge transfer.

D. Single locations may lead to higher tariffs and transportation costs.

65. (p. 263-264) In order to realize the strongest competitive advantage, firms engaged in

worldwide competition must

A. require that all of their various business units follow the same strategy regardless of


B. ensure that all business units follow a strategy strictly tailored to their respective locations.

C. pursue a strategy that combines the uniformity of a global strategy and the specificity of a

multidomestic strategy in order to achieve optimal results.

D. attempt to use the strategy that was most successful in their home country.

66. (p. 265) According to studies by Rugman and Verbeke, approximately how many of the

world's largest 500 firms are global, that is, they have at least 20% of their total revenues each

in North America, Asia, and Europe?

A. 9

B. 59

C. 79

D. 159

67. (p. 267) Which of the following describes the most typical order of entry into foreign


A. franchising, licensing, exporting, joint venture, and wholly owned subsidiary

B. exporting, licensing, franchising, joint venture, and wholly owned subsidiary

C. licensing, exporting, franchising, joint venture, and wholly owned subsidiary

D. exporting, franchising, licensing, joint venture, and wholly owned subsidiary

68. (p. 268) A domestic corporation considering expanding into international markets for the

first time will typically

A. start off by implementing a wholly owned foreign subsidiary so it can maintain standards

identical to those at home.

B. consider licensing or franchising its operations.

C. consider implementing a low risk/low control strategy such as exporting.

D. form a joint venture with a reputable foreign producer.

69. (p. 267) The form of entry strategy into international operations that offers the lowest level of

control would be

A. franchising.

B. licensing.

C. joint venture.

D. exporting.

70. (p. 268) Fees that a multinational receives from a foreign licensee in return for its use of

intellectual property (trademark, patent, trade secret, technology) are usually called

A. transfer prices.

B. dividends.

C. royalties.

D. intra-corporate inflows.

71. (p. 268-269) The difference between a franchise and licensing contract is that

A. a franchise contract is more specific and usually longer in duration.

B. a franchise contract must include a foreign government.

C. a licensing contract covers more aspects of operations.

D. a franchise contract involves less control and less risk.

72. (p. 269) __________ entail the creation of a third-party legal entity, whereas __________ do


A. Licensing agreements; joint ventures

B. Joint ventures; strategic alliances

C. Strategic alliances; joint ventures

D. Franchising agreements; strategic alliances

73. (p. 271) A __________ is a business in which a multinational company owns 100 percent of

the stock.

A. joint venture

B. strategic alliance

C. wholly owned subsidiary

D. franchising operation

74. (p. 271) __________ are most appropriate where a firm already has the appropriate

knowledge and capabilities that it can leverage rather easily through multiple locations in

many countries.

A. Joint ventures

B. Strategic alliances

C. Licensing agreements

D. Wholly owned subsidiaries

33. (p. 280) In the opening case, iSold It, a firm that helped others sell products on eBay, went

from one of the fastest growing franchise businesses to a firm that saw a number of its

franchises close and declining sales in a matter of months. What was a major challenge iSold

It faced that led to these problems?

A. It did not have the financial resources to maintain the rapidly growing firm.

B. The company lacked knowledgeable executives in key positions.

C. Its concept was rapidly imitated by others.

D. It had weak operational systems and could not maintain control of the growing network of


34. (p. 281) According to the text, for an entrepreneurial start-up to be successful, three

ingredients are critical. What are they?

A. good ideas, a team of investors, and a business plan

B. a viable opportunity, available resources, and a qualified and motivated founding team

C. an opportunity, a marketing plan, and office space

D. management, marketing, and money

35. (p. 281) Which of the following is a common source of new business opportunities?

A. current or past work experiences

B. suggestions by family or friends

C. chance event

D. all of these

36. (p. 281, 284) 36 The process of identifying, selecting, and developing new venture

opportunities is known as

A. innovativeness.

B. bootstrapping.

C. opportunity recognition.

D. brainstorming.

37. (p. 284) Generally speaking, the opportunity recognition process consists of two phases of

activity. They are

A. Global Search and Recycling Profits.

B. Value Creation and Affordability.

C. Discovery and Evaluation.

D. none of these.

38. (p. 286) Which of the following is NOT one of the characteristics of an entrepreneurial


A. attractive

B. affordable

C. achievable

D. value creating

39. (p. 286) When an opportunity is attractive long enough for it to be successfully developed

and deployed, it is said to be

A. value creating.

B. affordable.

C. achievable.

D. durable.

40. (p. 286) Which of the following terms is used to refer to opportunities that are practical and

physically possible?

A. durable

B. valuable

C. achievable – practical and physically possible

D. sustainable

41. (p. 286-287) Financing for entrepreneurial start-ups includes which of the following?

A. investments by family and friends

B. personal savings

C. private investors

D. all of these

42. (p. 287) Which of the following sources of entrepreneurial financing are available to ventures

that have already started to conduct business and generate sales?

A. bank financing

B. venture capital

C. public financing

D. all of these

43. (p. 286) The majority of entrepreneurial start-ups are financed with

A. bank financing.

B. public financing (e.g., SBA loans).

C. venture-capital financing.

D. personal savings and the contributions of family and friends.

44. (p. 287) Private individuals who provide seed capital to young ventures are known as

A. angels.

B. gazelles.

C. cash cows.

D. rising stars.

45. (p. 288-289) All of the following statements about venture capital are true EXCEPT

A. entrepreneurs raise venture capital by selling shares of ownership in their business.

B. venture capital is a form of public equity financing.

C. venture capital is used to finance rapid growth or large capital expenditures.

D. venture capital groups can often provide helpful management advice.

46. (p. 286-289) Based on statistics reported in the text, which of the following statements is


A. Firms that obtain venture-capital funding receive an average of over $1 million each.

B. Total investment in start-up firms averages about $80,000 in the firm's first year.

C. Among the 100 fastest-growing new businesses identified by Entrepreneur magazine, 61

percent obtained start-up funding from personal savings.

D. Ninety percent of the companies financed with venture capital funds fail.

47. (p. 289) According to the text, new ventures launched by entrepreneurial teams are more

likely to be successful than ventures launched by

A. established corporations.

B. bootstrappers.

C. "lone wolf" entrepreneurs.

D. all of these.

48. (p. 286) Which of the following types of resources contribute to the success of

entrepreneurial firms?

A. social capital

B. financial resources

C. human resources

D. All of these contribute to the success of entrepreneurial firms.

49. (p. 291) __________ provide(s) a key avenue for growth for many young and small firms

through partnering to obtain resources and/or expand into new markets.

A. Strategic alliances

B. Bootstrappers

C. "Lone wolf" entrepreneurs

D. Research & development

50. (p. 290) The U.S. Small Business Administration supports small business through all of the

following EXCEPT

A. government contracting.

B. underwriting loans.

C. investing venture capital.

D. training and counseling.

51. (p. 290) Which of the following is NOT one of the three characteristics of entrepreneurial

leadership mentioned by the text?

A. vision

B. dedication and drive

C. commitment to excellence

D. clarifying job responsibilities

52. (p. 290) Why is vision such an important element of entrepreneurial leadership?

A. Because the entrepreneur has to envision realities that do not yet exist.

B. Because a vision statement must be part of the documentation used to obtain venture


C. Because organizations cannot function without a detailed and operational vision.

D. All of these

53. (p. 293) Which of the following is NOT a common new entry strategy according to the text?

A. imitative new entry

B. adaptive new entry

C. proactive new entry

D. pioneering new entry

54. (p. 293) Seeking products or services that have been successful in one market and

introducing the same basic product or service in another segment of the market is referred to


A. imitative new entry.

B. adaptive new entry.

C. proactive new entry.

D. pioneering new entry.

55. (p. 296) Which of the following is NOT a key element of a blue ocean strategy?

A. Pursue low cost and differentiation advantages simultaneously.

B. Make the competition irrelevant.

C. Highlight incremental improvements to capture market share.

D. Create new demand in uncharted territory.

56. (p. 296) Cirque du Soleil is an example of a firm that successfully enacted a "blue ocean"

strategy. Which of the following is a feature of the strategy it enacted?

A. It developed its own musical scores for its circus performances.

B. It discontinued traditional parts of the circus, such as animal acts.

C. It researched customers to learn what circus features are more in demand.

D. All of these.

57. (p. 297) "Doing more with less", by holding down costs or making more efficient use of

resources is one of the ways entrepreneurs achieve success. This is an example of how

entrepreneurs use

A. an imitative strategy.

B. a low-cost leader strategy.

C. a differentiation strategy.

D. a combination strategy.

58. (p. 297) Entrepreneurial firms that pursue a low-cost leadership strategy use which of the

following to achieve lower costs?

A. cost-saving technology such as the Internet

B. simple organizational structures

C. rapid decision making

D. all of these

59. (p. 298-299) When an industry is mature, a __________ strategy is considered to be one of the

most effective approaches for a new entrant.

A. focus

B. differentiation

C. overall low-cost

D. small business

60. (p. 298) According to the text, all of the following might make it difficult for entrepreneurial

firms to effectively pursue a strategy of differentiation EXCEPT

A. incumbent firms are constantly seeking opportunities to specialize in market niches.

B. differentiation strategies are often expensive to enact.

C. it may be difficult for a young firm to establish a strong brand identity.

D. implementing superior new technologies may be challenging for entrepreneurial firms.

61. (p. 300) Intense rivalry involving actions and responses among similar competitors vying for

the same customers in a marketplace is known as

A. competitive dynamics.

B. resource similarity.

C. threat of substitutes.

D. pioneering new entry.

62. (p. 301) Which of the following is NOT one of the reasons a company might launch new

competitive actions?

A. to obtain first mover advantages

B. to improve market position

C. to capitalize on growing demand

D. to find new sources of raw materials

63. (p. 302) Netflix CEO Reed Hastings made this important observation about dealing with


A. "In a highly competitive marketplace, firms must be paranoid about the multitude of

potential rivals."

B. "You can afford to ignore rivals in small markets, but you can never ignore rivals in large

markets, such as online video companies like YouTube."

C. "There are tens and maybe hundreds of start-ups who think that they are going to eat

Netflix's lunch. The challenge for a management team is to figure out which are real threats

and which aren't."

D. "Netflix's position is so strong that I don't worry about new entrants."

64. (p. 302) Aircraft makers Boeing and Airbus have a high degree of __________ because they

make very similar products and have many buyers in common.

A. dynamic capabilities

B. market commonality

C. first mover advantages

D. equity funding

65. (p. 302-305) The Wall Street Journal and the New York Times have seen the intensity of their

rivalry increase. One factor driving this is that the Wall Street Journal has moved from

financial news reporting to general national and global news reporting and finally, to adding

local New York news. The rivalry of these two news providers has increased due to

A. increased dynamic capabilities.

B. increased market commonality.

C. erosion of first mover advantages.

D. the choice of tactical over strategic actions.

66. (p. 302, 306) Which of the following questions should a firm ask itself before responding to a

competitive attack?

A. How serious is the impact of the attack?

B. What is our competitive intent—do we want to blunt the attack or enhance our competitive

position with our response?

C. What resources do we have available for a response?

D. All of these.

67. (p. 304) Which of the below best describes the competitive tendencies of small firms?

A. Because they lack legitimacy in the marketplace, small firms tend to signal their

competitive actions long before they launch those actions.

B. Small firms typically have more resources available as they undertake competitive attacks

than do large firms.

C. Small firms are more nimble and can respond quickly to competitive attacks.

D. All of these.

68. (p. 306) Cirrus Aircraft, a leading manufacturer of small airplanes, sees a market opportunity

and has decided to double its plant capacity over the next two years. What type of competitive

action does this represent?

A. A tactical action because the move is an attempt to fill a gap in service.

B. A strategic action because such a large plant expansion will require a major commitment of


C. A strategic action because the firm can easily reverse the action at any time, thus giving

Cirrus more strategic flexibility.

D. A guerilla offensive because it is fast and will surprise its rivals.

69. (p. 306-307) All of the following are examples of strategic actions a firm might take EXCEPT

A. acquire with competitors to reduce competition.

B. expand into neglected markets.

C. change product packaging.

D. tie up raw materials sources.

70. (p. 306-307) The best example of a tactical action that a company might use in response to a

competitive attack is to

A. acquire the competitor.

B. target the rival's markets.

C. expand into new geographical areas.

D. offer price discounts and rebates.

71. (p. 308) All of the below are factors that affect how a competitor will respond to a

competitive attack EXCEPT

A. how dependent the competitor is on that industry or particular market segment.

B. the degree of market power and reputation of the company that initiated the attack.

C. the resources which are available for a firm to respond.

D. the stock market reaction to the initial competitive attack.

72. (p. 308) Which of the following refers to a situation where a company has a high

concentration of its business in a particular industry's market?

A. competitor's resources

B. market dependence

C. resource similarity

D. actor's reputation

73. (p. 309) A firm is considering a large price cut on its leading product as a way to gain market

share. One executive strongly disagrees with the price cut and states, "We are in the same

marketplace as our rivals, and we do not have any competitive advantages in our cost

structure. If we cut prices, our competitors will likely do the same. The end result is that we

will all make less money." These arguments are an example of

A. a strategy of forbearance.

B. a strategy of co-opetition.

C. a hardball strategy whereby competitive actions are not undertaken without a clear


D. a weakness strategy that leads a company into constant decline.


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