Strategic Management Test Cheat Sheet 3

MC Questions: CHAPTER 8: 1 The globalization of production has caused firms to: lower their cost structure. 2 Which of the following is an advantage of international licensing: It takes away the pressure of development costs and risks associated with opening up a foreign market from the company. 3 Black and Decker, Capitol One, Gillette and Unilever are all companies that conduct business in two or more national markets. These companies are known as: multinational companies. 4 In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative std, CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent: differences in infrastructure? 5 Host government demands generally: increase pressures for local responsiveness. 6 Which of the following factors increases pressures for local responsiveness: host government demands. 7 Which of the following is a disadvantage of strategic alliances: they give competitors a low-cost route to new technology and markets. 8 Which of the following is not a factor of production: competitive forces. 9 Differences in tastes and preferences: increase pressures for local responsiveness. 10 Which of the following factors increases pressures for cost reductions: persistent excess capacity. 11 Which of the following entry modes allows a company to engage in global strategic coordination: wholly owned subsidiaries. 12 Global expansion: can enable companies to increase their profitability and grow their profits more rapidly. 13 Which of the following statements is true about localization strategy: it involves some duplication of function and smaller production runs. 14 WKL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its services in different nations with substantial differences in consumer preferences and where cost pressures are not too intense. Which of the following strategies should WKL Entertainment Inc. managers pursue: localization. 15 For a strategic alliance, firms should seek partners that are: willing to share costs and risks of new product development. 16 Global economies of scale can be realized by: spreading the fixed costs associated with developing a product. 17 Which of the following statements is true about global standardization strategy: it makes most sense when there are strong pressures for cost reductions. 18 Which entry mode gives a multinational the tightest control over foreign operations: setting up a wholly owned subsidiary. 19 On which of the following ideas is a localization strategy based: consumer tastes and preferences differ among national markets. 20 Most manufacturing companies begin their global expansion by: exporting. 21 Which of the following is not a risk of exporting: high manufacturing costs. 22 When a company grows its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following except: adopting high cost structures. 23 Which of the following is not an attribute of a national or country specific environment that has an impact on global competitiveness of companies located within that nation: advertising expenses. 24 Companies that pursue a … strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company’s global network of operations: transnational. 25 Cost reduction pressures can be particularly intense in industries producing: commodity type products. CHAPTER 9: 1 Companies invest in specialized assets because these assets allow them to: lower their cost structure. 2 A company pursuing a strategy of vertical integration may expand its operations: backward into an industry that produces inputs for the company’s products. 3 The price that one division of a company charges another division for its products, which are the other division requires to manufacture its own products, is known as: transfer pricing. 4 Outsourcing: moves some value chain activities outside the firm. 5 To build trust in a cooperative relationship, both firms can: make mutual investments in specialized assets. 6 A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger: decreased cost per unit output. 7 A strategy of vertical integration may be a risky strategy for a company to pursue when demand is: unpredictable. 8 Under which of the following circumstances is vertical integration considered hazardous: when the demand for the product fluctuates frequently. 9 Long term contracts: are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers. 10 GM typically solicits bids from global suppliers to produce a particular component and awards a 1 year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for bid, and once again the lowest cost supplier is most likely to win the bid. Which of the following is GM using: competitive bidding. 11 SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years. This scenario illustrates: a credible commitment. 12 Vertical disintegration occurs when a company: takes advantage of another company it does business with after the other company has made a substantial investment in assets to meet the needs of the company. 13 Strategic alliances are: long term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement. 14 Google bough clever sense, a mobile app company. This is an example of: acquisition. 15 An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event one of the suppliers adopts an uncooperative attitude. Which of the following concepts is illustrated in this scenario: parallel sourcing. 16 Vertical integration is based on a company entering only those industries that: add value to its core products. 17 For a company concentrating on final assembly, adding retail and distribution into its value chain will require: forward integration. 18 Horizontal integration may be thought of as: staying inside the industry in which the company currently operates. 19 Credible commitments refer to: believable promises to support the development of a long-term relationship between companies. 20 In 1999, two pharmaceutical companies that held an equal market share decided to pool their operations to create a new firm that was known by a different name. This is an example of: a merger. 21 Vertical integration can be disadvantageous when: industry technology is changed rapidly. 22 Ownership of retail outlets may be necessary if: the required stds of after sales service for complex products are to be maintained. 23 Adams boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is true of this scenario: the company will buy or merge with one of its rivals. 24 Outsourcing occurs when a firm: hires another firm to perform value creation activities. 25 … is the process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations: horizontal integration. CHAPTER 10: 1 Most companies consider … when they are generating free cash flow: diversification. 2 Acquisitions often fail because of: differences in corporate culture. 3 The three main types of diversification strategies are: acquisitions, internal new ventures and joint ventures. 4 When one or more components of a company’s value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue: related diversification. 5 An internal new venture is the most appropriate strategic choice when: the firm has competencies that can be leveraged. 6 Which of the following is perhaps the most important reason why acquisitions fail: the expense of the acquisition. 7 Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity: related diversification. 8 When mcdonalds introduced the mccafe, it began offering a new product that was not available in traditional mcdonalds stores. The introduction of the mccafe is an example of which of the following : diversification. 9 Diversification may dissipate value if it is wrongly based on: rescuing core business. 10 What is the process of transferring resources to and creating a new business unit of division in a new industry called: internal new venturing. 11 Which of the following statements concerning research and development is correct: exploratory research and development research are needed for internal new venturing. 12 Miller Brewing, which was acquired by Philip Morrie, was related to the parent company’s tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following: transferring competencies. 13 Joint venture: are an alternative to new ventures. 14 Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope: the strategy requires the head office to evaluate each business unit as a stand-alone operation. 15 at its simplest level, a joint venture may be though of as: pooling of resources by two or more firms to create a new business. 16 Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create: a new business unit in a different industry. 17 Stanley’s services firm wants to enter an embryonic market, but it doesn’t have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley: diversify with a joint venture. 18 Which of the following entry strategies should be used when speed is an important consideration: acquisition. 19 In 2007, Google bought YouTube. This is an example of which of the following: acquisition. 20 Which of the following statements is false: joint ventures are generally preferable to acquisitions when entry barriers are high. 21 …involve taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry: transferring competencies. 22 Which of the following is not a general organizational competency: product bundling. 23 Internal venturing is a more attractive strategy than acquisitions when: a company’s business model is based on using its technology or design skills to innovate new kinds of products and enter related markets or industries. 24 A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies: acquisition. 25 If a company is to increase the probability of a new product’s commercial success, the company must foster close links between: research and development and marketing. 26 To be commercially successful, new products must be developed with … in mind: customer requirements. 27 Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue: diversification for pooling risks. 28 Economies of scope can be defined as: the synergies that arise when one or more of a diversified company’s business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities. 29 New venture: are often preferred by technology-based companies VOCAB: CHAPTER 8 Multinational company: a company that competes in several different businesses and has created a sperate, self-contained division to manage each Location economies: the economic benefits that arise from performing a value creation activity in an optimal location Global standardization strategy: a business model based on pursuing a low-cost strategy on a global scale Localization strategy: a strategy focused on increasing profitability by customizing a company’s good or services so that they provide a favorable match to tastes and preferences in different national markets Transitional strategy: a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets and fosters a flow of skills between different subsidiaries in the company’s global network of operations Global strategic alliances: cooperative agreements between companies from different countries tat are actual or potential competitors Opportunism: seeking one’s own self-interest often through the use of guile Franchising: a strategy in which the franchisor grants to its franchisees the right to use the franchisors name, reputation and business model in return for a franchise fee and often a percentage of the profits CHAPTER 9: Horizontal integration: The process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations Acquisition: when a company uses its capital resources to purchase another company Merger: an agreement between two companies to pool their resources and operations and join together to better compete in a business or industry Product bundling: offering customer the opportunity to purchase a range of products at a single, combined price: this increases the value of a company’s product line because customers often obtain a price discount when purchasing a set of products at one time, and customer become used to dealing with only one company and its representatives Cross-selling: when a company takes advantage of or leverages its established relationship with customers by way of acquiring additional product lines or categories that it can sell to them. In this way, a company increases differentiation because it can provide a “total solution” and satisfy all of a customer’s specific needs. Vertical integration: when a company expands its operations either backward into an industry that produces inputs for the company’s products (backward/ vertical integration) or forward into an industry that uses, distributes, or sells the company’s products (forward vertical integration) Tapered integration: when a firm uses a mix of vertical integration and market transactions for a given input. For example, a firm might operate limited semiconductor manufacturing while also buying semiconductor chips on the market. Doing so helps to prevent supplier hold up and increases its ability to judge the quality and cost of purchased supplies. Transfer pricing: the price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products Quasi integration: the use of long-term relationships or investment in some activities normally performed by suppliers or buyers, in place of full ownership of operations that are backward or forward in the supply chain Strategic alliances: long term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are part of the agreement Hostage taking: a means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain Credible commitment: a believable promise or pledge to support the development of a long-term relationship between companies Parallel sourcing policy: a policy in which a company enters into long-term contracts with at least two suppliers for the same component to prevent any incidents of opportunism Strategic outsourcing: the decision to allow one or more of a company’s value-chain activities to be performed by independent, specialist companies that focus all their skills and knowledge on just one kind of activity to increase performance Virtual corporation: when companies pursued extensive strategic outsourcing to he extent that they only perform the central value creation functions that lead to competitive advantage CHAPTER 10: Diversification: the process of entering new industries, distinct from a company’s core or original industry, to make new kinds of products for customers in new markets Diversified company: a company that makes and sells products in two or more different or distinct industries Transferring competencies: the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry Commonality: a skills or competency that, when shared by two or more business units, allows them to operate more effectively and create more value for customers Leveraging competencies: the process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry Economies of scope: the synergies that arise when one or more of a diversified company’s business units are able to lower cots or increase differentiation because they can more effectively pool, share and utilize expensive resources or capabilities General organizational competencies: competencies that result from the skills of a company’s top managers and that help every business unity within a company perform at a higher level than it could if it operated as a separate or independent company Organizational design skills: the ability of a company’s manager to create a structure, culture and control systems that motivate and coordinate employees to perform at a high level Turnaround strategy: when manager of a diversifies company identify inefficient, poorly managed companies in other industries and then acquire and restructure them to improve their performance – and thus the profitability of the total corporation Related diversification: a corporate level strategy based on the goal of establishing a business unit in a new industry that is related to a company’s existing business units by some form of commonality of linkage between their value-chain functions Unrelated diversification: a corporate level strategy based on a multi business model that uses general organizational competencies to increase the performance of all the company’s business units Internal capital market: a corporate level strategy whereby the firm’s headquarters assesses the performance of business units and allocates money across them. Cash generated by units that are profitable buy have poor investment opportunities within their business is used to cross subsidize businesses that need cash and have strong promise for long run profitability Bureaucratic costs: the costs associated with solving the transaction difficulties between business units and corporate headquarters as a company obtains the benefits from transferring, sharing and leveraging competencies Internal new venturing: the process of transferring resources to and creating a new business unit or division in a new industry to innovate new kinds of products Restructuring: the process or reorganizing and divesting business units and exiting industries to refocus upon a company’s core business and rebuild its distinctive competencies Acquisition: when a company uses its capital resources to purchase another company