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International Management, 9e (Deresky) Chapter 6 Formulating Strategy 1) 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 Answer: A 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 3) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge

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4) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 5) 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 Answer: D Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 6) 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 Answer: B Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-1: To understand the reasons companies engage in international business AACSB: Analytical thinking

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7) 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 Answer: A Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 8) 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 Answer: C Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-1: To understand the reasons companies engage in international business AACSB: Analytical thinking 9) 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge

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10) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 11) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Analytical thinking 12) 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 Answer: D Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-1: To understand the reasons companies engage in international business AACSB: Analytical thinking

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13) 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.

Answer: TRUE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 14) Globalization of competitors is one of the reactive reasons that prompt a company to operate overseas.

Answer: TRUE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 15) Companies seek out less restrictive foreign operating environments when the regulations and restrictions enforced by the firm's home government become expensive.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 16) Customer demands have no impact on a company international business strategy.

Answer: FALSE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 17) One pressing reason for many large firms to expand overseas is to seek economies of scale.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge

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

Answer: FALSE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Analytical thinking 19) The availability of raw materials and other resources offers both greater control over inputs and lower transportation costs.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 20) Trade barriers, such as tariffs and quotas, decrease risk and increase profits. Hence, they are attractive to foreign companies.

Answer: FALSE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 21) What is strategy? What is strategic planning?

Answer: Strategy is the basic means by which a company competes. It includes the choice of business or businesses in which to operate and the ways to differentiate itself from competitors.

Strategic planning is 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.

Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge

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

Answer: A company can operate internationally for different reasons. These reasons are of two types: reactive (or defensive) and proactive (or aggressive). The reactive reasons are globalization of competitors, trade barriers, regulations and restrictions, and customer demands.

The proactive reasons are seeking economies of scale, growth opportunities, resource access and cost savings, and incentives.

Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-1: To understand the reasons companies engage in international business AACSB: Application of knowledge 23) 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.

Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 24) 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 Answer: C Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking

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25) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 26) The second part of the strategic management process involves the ________.

A) implementation phase B) assessment stage C) planning phase D) analysis stage Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 27) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 29) 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 Answer: A Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 30) ________ 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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31) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 33) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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34) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 35) 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 36) 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 Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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37) 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 Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: 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 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 Answer: C Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 39) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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40) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 41) An internal analysis focuses on the company's ________.

A) vision and mission B) market share C) competitors D) resources and operations Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 42) ________ reveal an inefficient use of assets that restricts profitability.

A) Sales-force analyses B) Concentration ratios C) Financial ratios D) Competitive analyses Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking

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43) ________ 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking 44) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 45) 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 Answer: A Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking

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

A) Customization B) Globalization C) Nationalization D) Regionalization Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 47) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 48) 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 Answer: A Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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49) 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 Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 50) 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 Answer: D Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking 51) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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52) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 53) ________ 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 54) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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55) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 56) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 57) 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 Answer: C Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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58) 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.

Answer: C Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 59) ________ 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 Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 60) 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 Answer: A Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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61) 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.

Answer: B Difficulty: 3: Challenging Chapter: 6 Skill: Critical Thinking LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Reflective thinking 62) 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.

Answer: A Difficulty: 3: Challenging Chapter: 6 Skill: Critical Thinking LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Reflective thinking

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63) 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 64) 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 65) 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.

Answer: B Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking

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66) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 67) Which of the following is a contractual entry mode?

A) wholly owned subsidies B) turnkey projects C) joint ventures D) strategic alliances Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 68) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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69) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 70) 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 Answer: A Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking 71) 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 Answer: A Difficulty: 3: Challenging Chapter: 6 Skill: Application LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking

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72) 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 Answer: C Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: 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 generally viewed as the most risky entry strategy?

A) turnkey operations B) new, fully-owned subsidiaries C) international joint ventures D) service sector outsourcing Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 74) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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75) 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.

Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 76) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: 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 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 Answer: D Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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78) 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 Answer: A Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 79) 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 Answer: C Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 80) 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 Answer: B Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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81) The strategic management process invariably follows a linear format.

Answer: FALSE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Analytical thinking 82) The strategic management process consists of independent and discontinuous steps.

Answer: FALSE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 83) The mission of an organization provides a basis for strategic decision making.

Answer: TRUE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 84) Production, one of the five global corporate objectives, deals with development of new products with global patents.

Answer: FALSE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 85) After clarifying the corporate mission and objectives, the first major step in weighing international strategic options is the environmental assessment.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 27 Copyright © 2017 Pearson Education, Inc.

86) Environmental scanning should be conducted on the global level exclusively.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 87) Antidumping laws enable formal institutions to affect international competition.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 88) In environmental scanning, the first broad scan of all potential world markets results in the firm being able to eliminate from its list those markets that are closed or insignificant or do not have reasonable entry conditions.

Answer: TRUE Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 89) Internal analysis is carried out to assess a firm's capabilities and critical success factors compared to those of its competitors.

Answer: FALSE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 90) Core competencies are challenging and at times difficult for competitors to imitate.

Answer: TRUE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 28 Copyright © 2017 Pearson Education, Inc.

91) The term globalization refers to the establishment of worldwide operations and the development of standardized products and marketing.

Answer: TRUE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 92) Offshoring is when a company moves one or all of its factories from the host country to the home country.

Answer: FALSE Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 93) List the seven steps in the strategic management process.

Answer: The seven steps of strategic management process are: (1) defining the company's mission and objectives; (2) assessing the environment for threats and opportunities; (3) assessing the company's internal strengths and weaknesses; (4) considering alternative strategies using competitive analysis; (5) choosing a strategy; (6) implementing the chosen strategy through complementary structure, systems, and operational processes; and (7) setting up control and evaluation systems to ensure success and feedback to planning.

Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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

Answer: Environmental scanning is the process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest. This activity should be conducted on three levels–multinational, regional, and national. Scanning should focus on the future interests of the firm and should cover the major variables such as political and economic risk; major technological, legal, and physical constraints; and the global competitive arena, as well as the opportunities available in different countries.

Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 95) What is the difference between environmental scanning at the multinational level and the regional level?

Answer: Companies should assess the multinational level for significant worldwide trends through identification, monitoring, and forecasting activities. These trends would include the political and economic developments of nations around the world, as well as global technological progress. From this information, managers can choose certain appropriate regions of the world to consider further. At the regional level, the analysis should focus more on the critical environmental factors that would generate threats or opportunities for marketing the company's products, services, or technologies.

Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 96) Describe the various sources of information that are available to managers.

Answer: The various sources of information that are available to managers are: (1) computer databases, having business information services that are tailored to specific industries and regions; (2) corporate "clipping" services; (3) information packages; (4) alert field personnel who, with firsthand observations, can provide up-to-date and relevant information for the firm.

Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge

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

Answer: A SWOT analysis is a summary of the external issues (opportunities and threats) and internal resources (strengths and weaknesses) that are most likely to influence the future or intended direction of the firm. In comparing the company with potential international competitors in host markets, a SWOT analysis becomes useful for managers to draw up a competitive position matrix for each potential location. This analysis is used after assessing the external and internal environments to help firms determine their strategic direction.

Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 98) Compare and contrast globalization and regionalization.

Answer: Globalization is the strategy of treating the world as an undifferentiated marketplace, and the establishment of worldwide operations and the development of standardized products and marketing. A regionalization strategy focuses more on certain regions of the world only and their distinctiveness. With a regionalization strategy, local markets are linked together within a region allowing more local responsiveness and specialization. Globalization requires establishing worldwide economies of scale; regionalization requires flexibility and adaptability.

Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 99) Describe the strategies of globalization and regionalization. When can each strategy be used most effectively?

Answer: A globalization strategy is based on the premise that the world can be treated as an undifferentiated marketplace and the firm can develop and market standardized products. The rationale is to compete by establishing worldwide economies of scale, offshore manufacturing, and international cash flows. Companies such as Sony, Caterpillar, and ICI follow globalization strategies. A regionalization strategy is more effective for those firms that are in multidomestic industries. In such cases, local markets are linked together within a region, allowing more local responsiveness and specialization. Top managers within each region decide on their own investment locations, product mixes, and competitive positioning—thus running their subsidiaries as quasi-independent organizations. Such a strategy often reduces environmental risk and allows for more adaptation to the local market. Samsung Tesco is an example of a firm that has successfully used the regionalization strategy.

Difficulty: 2: Moderate Chapter: 6 Skill: Concept LO: 6-2: To learn the steps in global strategic planning, including assessing entry strategies for different markets AACSB: Application of knowledge 31 Copyright © 2017 Pearson Education, Inc.

International Management Managing Across Borders and Cultures Text and Cases 9th Edition Der

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

Answer: The first level, global strategic alternatives, determines what overall approach to the global marketplace a firm wishes to take. The second level, entry strategy alternatives, applies to firms of any size; these alternatives determine what specific entry strategy is appropriate for each country in which the firm plans to operate.

Difficulty: 1: Easy Chapter: 6 Skill: Concept LO: 6-3: To become familiar with strategic planning for emerging markets AACSB: Application of knowledge

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