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Chapter 8

Chapter 8

Foreign subsidiaries play a major role in shaping the future direction of a company pursuing a(n)

transnational strategy 280-281

A localization strategy is most appropriate when

pressure for cost reduction is low, pressure for local responsiveness is high. (p 278)

A company that enters a foreign market by entering into a licensing agreement with a local company

risks losing control of technology to the partner. (288)

For a hotel company whose competitive advantage is based on high brand-name recognition, which of the following ways of serving an overseas market makes the most sense?

Franchising (p 288)

Which entry mode gives a multinational the tightest control over foreign operations?

Wholly owned subsidiaries 290

Which of the following companies exemplifies the trend toward national markets merging into one large global marketplace?

Coca-cola, Citigroup credit cards, blue jeans, Starbucks, McDonalds Hamburgers... etc... (p 265)

A nation's companies gain competitive advantage if their domestic customers are

NA chapter 8

Global economies of scale can be realized by

1)spreading fixed costs associated with developing a product and setup global production facilities to lower average unit cost.
2)By serving global market the production facilities are utilized more intensively leading to higher productivity, lower costs, & greater profitability.
3) As global sales increase size of enterprise, bargaining power with suppliers increase. ( 270-271)

Factors of production include all but which of the following?

ethnic diversity the factors are land, labor,capital, and raw materials (267)

Which of the following entry modes allow(s) a company to engage in global strategic coordination?

Exporting & Wholly owned subsidiaries. (291)

A key to making a strategic alliance work is

Partner selection: 1. helps the company achieve strategic goals, 2. shares the firms vision for the purpose of the alliance, 3. is unlikely to try to exploit the alliance opportunistically for it own ends. Alliance structure: should be structured so that the company risk of giving too much away to the partner is reduced to an acceptable level

Attaining a credible commitment from a potential partner

is a believable promise or pledge to support the development of a long-term relationship between companies. (322)

Companies that pursue a transnational strategy are trying to develop

A business model that simultaneously achieves low cost, differentiates the product offerings across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations

Most manufacturing companies begin their global expansion by

transferring aspects of their business model and applying them to foreign markets. (270)

What are the risks associated with licensing as a means of entering overseas markets?

Doesn't give a company the tight control over manufacturing, marketing and strategic functions in foreign countries that it needs to have in order to realize scale economies and location economies. 2. Competing in a global marketplace may make it necessary for a company to coordinate strategic moves across countries so that the profits earned in one countries can be sued to support competitive attacks in another.
3 risk associated with licensing tech know how to foreign companies

Chapter 9

Chapter 9

Another name for long-term cooperative relationships between two or more companies who agree to commit resources to develop new products is

Strategic Alliance p.319

A hospital supply company invests in training for a team of sales associates to learn the details of each hospital chain's operations. In return, the hospital chain invests in a computer system that supports supply ordering. The supply company and the hospital chain are working to ensure the success of their long-term relationship by

NA CH 9

Vertical integration is based on a company entering industries that add _________ to its core products.

VALUE (312)

Forward integration means that a company is moving into

an industry that uses, distributes, or sells a company's products. (312)

Ownership of retail outlets may be important for a manufacturer if

it wants to forward integrate and add value p.312

Which of the following problems is (are) associated with a strategy of vertical integration?

disadvantages due to tech changing fast, disadvantages due to unpredictable demand. (317)

To build trust in a cooperative relationship, both firms can

establish a credible commitment. P.322

John's surfboard shop has a long-term relationship with two surfboard makers. John is using

a strategic alliance (319)

When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?

NA CH 9

Long-term contracts

Hostage taking (both companies are mutually dependent on one another), Credible Commitment ( believable promise/pledge to support development of another company), Parallel Sourcing Policy ( create contract with two suppliers in case one gets lazy/ goes against agreement) (322-323) Not 100% sure about this one!!

Outsourcing occurs when a firm

wants to strengthen their business models and increase their profitability p.324

In which of the following is a firm most likely to lose direct control over value creation activities?

NA CH 9

Outsourcing

1. Lower cost structure 2. Increase product differentiation 3. Focus on the distinctive competencies that are vital to its long term competitive advantage and profitability

To ensure the easy transfer of important competitive information between a firm and its outsourcing contractors, the firm should

NA Ch 9

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself

locked into an old, inefficient technology and prevents it from changing to a new one that would strengthen its business model. P.318

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is

unpredictable because it is hard to manage the volume or flow of products along the value-added chain. (318)

Strategic alliances are

long term agreements between 2 or more companies to jointly develop new products that benefit all companies concern

Chapter 10

Chapter 10

To be commercially successful, new products must be developed with __________ utmost in mind

Customer Requirements (353)

If a company is to increase the probability of a new product's commercial success, the company must foster close links between

R&D + Marketing (354)

Which of the following seems to be a major determinant of a new venture's success?

Company must foster close links between R&D and marketing to increase the probability of new products commercial success. P.354

An internal new venture is the most appropriate strategic choice when

a company possesses one or more generic distinctive competencies in its core business model that can be leveraged or recombined to enter a new industry. (351)

Which of the following entry strategies should be used when speed is an important consideration?

NA Ch 10

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. (355)

Acquisitions often fail because of

1. Companies often experience difficulties when trying to integrate different organizations structures and cultures
2. Companies overestimate the potential economic benefits from an acquisition
3. Acquisitions tend to be very expensive 4. Companies often do not adequately screen their acquisitions targets. P355-356

Which of the following is (are) the probable consequence(s) of an inability to integrate two divergent corporate cultures after an acquisition?

NA CH10

What accounts for the high failure rate of all new products that reach the marketplace?

NACH10

Joint ventures

are an alternative to new ventures. (360)

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?

NACH10

In the joint venture between Stephanie's dressmaking shop and Kevin's fabric factory, the partners argue constantly about how to schedule tasks and reward workers. Which of the following disadvantages is Stephanie and Kevin's joint venture experiencing?

There is a conflict on how to run the venture. (360)

Economies of scope typically involve

one of more of a diversified company's business units are able to realize cost saving or differentiation advantages because they can more effectively pool, share, and utilize expensive resources or capability's such as skilled people, equipment, manufacturing facilities, distribution channels, advertising campaigns, and R&D laboratories. P339

The greater the number of business units in a company's portfolio, the _________ it is for corporate managers to remain informed about the complexities of each business.

More Difficult (348)

What is perhaps the most important reason why acquisitions made by a company fail?

NACH10

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?

1.Changing industry and firm specific conditions
2. Diversification for the wrong reasons, 3. The bureaucratic costs of diversification ( 1. The # of business units in company portfolio, 2. Extent to which coordination is required among these different business units.) (346-348)

Diversification is sometimes pursued by a company for the wrong reasons. Which of the following is a faulty justification for diversification?

Diversification could be used to obtain the benefits of risk pooling or risk reduction. P346-347

At its simplest level, a joint venture may be thought of as a(n)

NACH10

Chapter 11

Chapter 11

The basic principles of agency theory are

to capture the relationship between management and stockholders and cover the relationship with other key stakeholders (such as employees), as well as relationships between different layers of management within a corporation. P.372

The purpose of governance mechanisms in corporations is to

reduce the scope and frequency of the agency problem : to help ensure that agents act in a manner that is consistent with the best interest of their principals. (377)

What is the major purpose of a corporate board of directors?

Board members are directly elected by stockholders and they represent the stockholders' interest in the company. Legally accountable for the company's actions. Allows BOD to monitor corporate strategy decisions and ensure that they are consistent with stockholder interests. p.377

A typical board of directors is composed of

a mix of inside(Senior employees like the CEO) and outside directors( not full time employees of the company). (377)

A stock option is a right to buy

the company's shares at a predetermined price at some point in the future, usually within ten years of the granted date. P.379

Sarbanes-Oxley, federal legislation enacted in 2002, requires

CEO's and CFO's to endorse their company's financial statements, and barred companies from hiring the same accounting firm for auditing and consulting services. (380)

The takeover constraint refers to the

risk of being acquired by another company. P380-381

Thinking of it in its simplest terms, the balanced scorecard approach may be viewed as the

efficiency, quality, innovation, and responsiveness to customers. (382)

Ethics may best be thought of as

accepted principles of right or wrong that govern the conduct of a person, members of a profession, or actions of an organization. P384

Chapter 12

chapter 12

Which of the following is not one of the advantages of a geographic structure?

NA chapter 12

Which of the following structures is the flattest?

Matrix (431)

Matrix structures

value chain activities are grouped in two ways, 1. Activates are grouped vertically by faction so that there is a familiar differentiation of tasks into functions such as engineering, sales and marketing, and R&D. 2. Grouping by product or project in which people and resources are grouped to meet ongoing product develop needs. Matrix structures are flat and decentralized, employees inside a matrix have two bosses; functional boss, who is the head of a function, and a product/project boss: who is responsible for managing the individual projects. P432

A matrix structure would be the most appropriate for which of the following firms?

High Tech?? (432)

To a large degree, any organization's tasks are a function of its

NA chapter 12

Essentially, centralization or decentralization are concepts that refer to the

levels where decisions re made in an organization. (408-409)

The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as

behavior control p 413

The most appropriate structure for a company pursuing low-cost and differentiation strategies simultaneously is

The product team structure. (434)

Which of the following is required by a restructuring?

Downsizing, reengineering p 435

Which of the following actions would you expect to see in a company that is undergoing a reengineering?

They focus on a business process, not functions. A business process is any activity that is vital to delivering goods and services to customers quickly or that promotes high quality or low costs ( such as IT, materials management, or product development) and that is not the responsibility of any one function but cuts across all functions. ( 435-436)

Restructuring is

streamlining the hierarchy of authority and reducing the number of levels in the hierarchy to a minimum and then reducing the number of employees to lower operating costs. P435

A hospital examines its processes closely and then changes them radically to become more patient-centered. Among the changes are new ways of doing tasks and new groupings of workers. This is an example of

re-engineering. (436-438)

In a successful company, the purpose of a control system is to

target-setting, measurement, and feedback systems that allow strategic managers to evaluate whether a company is achieving superior efficiency, quality, innovation and customer responsiveness and implementing its strategy successfully. P411

In any organization, for-profit or not-for-profit, span of control refers to the

the number of subordinates who report directly to a manager. (405)

The basic building blocks of competitive advantage include control and which of the following factors?

Efficiency, quality, innovation, and customer responsiveness. (411)

Strategic control systems utilized to ensure long-run profitability include

Personal control, Output control, and Behavior control (411-413)

The specific collection of values, norms, beliefs, and attitudes shared by people and groups in a company is commonly referred to as

Organization culture p 416Organization culture p 416v

The term used to describe how people learn an organization's culture and way of behaving in the organization is

organizational socialization (416)

An organization that has an adaptive culture is an organization that is

innovative and that encourages and rewards middle and lower level managers for taking the initiative. P 417

A functional organizational structure offers a company which of the following advantages?

1.People who perform similar tasks are grouped together, so they learn from one another to become more specialized and productive in what they do.
2. They can monitor each other to make sure everyone is performing their tasks effectively.
3. Managers gain greater control over organizational activities. Because this limits the hierarchy spanning upward as much the organization becomes less tall. (420)

Organizations strive to control employees' behavior by linking __________ systems to their control systems.

Strategic reward (415)

The organization structure that organizations most commonly adopt to solve control problems that result from producing many different kinds of products for many different market segments is the

Product Structure. (428)

As a company begins producing or selling in many different regional areas, it may encounter problems associated with

location factors (425)

Chapter 13

Chapter 13

PepsiCo bought many of its bottlers. Which entry mode is PepsiCo using to enter the bottling industry?

Vertical Integration (452)

Which of the following strategies can companies use as they begin to market their products and establish production facilities overseas?

localization, international, global standardization, and transnational. (457-459)

In general, the choice of structure and control systems for managing a global business is a function of which of the following factors?

1. centralization of authority
2. Horizontal differentiation
3. Need for complex integrating mechanisms
4. Organizational Culture (456)

A company that makes and sells the same product in many different countries often groups its overseas divisions into _________ to simplify the coordination of products across countries.

global matrix structure (459)

The global-product strategy is weak when it comes to

responsiveness to customers because the focus is still on centralized control to reduce costs. P459

Implementation of a global matrix provides a company with which of the following advantages?

1. Gives flexibility to overseas managers. 2. Allows knowledge and experience to be transferred among divisions in both product groups and geographic regions. 3. Facilitates the transmission of a company's norms and values ( global corp culture)

When Toyota first decided to manufacture and market cars in the United States, it entered into a _____________ with General Motors.

Joint venture (462

In joint venturing, two or more companies typically agree to

pool specific resources and capabilities that they believe will create more value for both companies, and managers from both companies are appointed to oversee the operation. (465)

Which of the following is not a consequence of the increased ability of managers to use information technology as they implement strategies?

NA chapter 13

Business-to-business (B2B) networks link firms to

each other and the firms establish industry specifications and standards. (470)

When a company uses a network structure to implement outsourcing,

many firms along the value chain can easily cooperate. (471-472)

Which of the following companies is the best example of an organization that formally encourages and supports entrepreneurship?

NA chapter 13

Joint ventures are best suited for projects that

neither company could do it on its own. (466-467)

The purpose of a joint venture between two or more companies is often to

gain value by pooling together the competencies of two companies??? (465)

Ownership of the company created by a joint venture

is usually a matter to be negotiated between companies invested in the venture. (466-467)

Which of the following are innovations that the multidivisional organization structure possesses over the functional or product organizational structure?

1. in each industry in which a company operates, strategic managers organize its business units or companies in that industry into one or more divisions.
2. The office of corporate HQ staff is created to monitor divisional activities and to exercise financial control over each of the divisions. (444-445)

The most widely used vehicles that companies can use to enter new industries or countries are

NA ch13

Information technology facilitates

NA ch 13

At the level of organizational structure, control, and culture, ____________ has given strategic managers many new options in implementing strategies.

NA ch13

The set of strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product is called a(n)

network structure. (470)

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