MAN Final Exam (Hailey)

An international diversification strategy is best described as a strategy through which a firm:

Expands the production and/or sales of its goods and/or services across the borders of global regions and countries into a potentially large number of geographic locations or markets

What is the primary advantage of a 'regionalization' strategy for a firm expanding internationally?

marshal resources to compete effectively; better understand cultures, legal/social norms, and other factors

According to the text, a clothing manufacturer establishing a factory in a country with lower labor costs is primarily leveraging which incentive for international expansion?

location advantage

The 'liability of foreignness' refers to a set of costs that firms face when entering foreign markets. Which scenario best illustrates this concept?

Walt Disney World: lawsuits in Paris, France because of the lack of fit between personnel policies and French employees charged to enact them

What is the term for the trend, driven by a popular backlash in advanced economies, that can hurt multinational companies' interests and lead to increased trade restrictions?

deglobalization

A firm that establishes R&D facilities in multiple international regions to absorb new technical expertise and develop innovations is primarily taking advantage of which international strategy incentive?

learning

What is the main purpose of establishing a global value chain?

create a competitive advantage; add value through combining and altering resources

The text suggests that for a multinational firm to successfully leverage its international R&D investments, it must first have which of the following?

a strong R&D system already in place to absorb knowledge resulting from effective R&D activities

A government's instability, corruption, or potential to seize a company's foreign-based assets are all primary examples of what type of risk?

political risks

How do trade agreements like the European Union (EU) and the United States-Mexico-Canada Agreement (USMCA) typically influence firms' international strategies?

promote the flow of trade across country boundaries within their respective regions

A multinational mining company is evaluating an emerging economy for a new operation. The country has a state-owned electrical utility known for frequent, long-lasting power outages. According to the source material, this situation represents which primary type of risk?

economic risk

According to the text, what is the primary reason that firms pursuing international diversification often face increased management difficulty?

larger size and greater operational complexity (different cultures)

In Michael Porter's framework for determining a nation's competitiveness, which factor does the presence of a well-established leather-processing industry in Italy represent for its shoe manufacturers?

related and supporting industries

A firm wants to enter a new international market as quickly as possible and is willing to take on significant debt and complex negotiations to do so. Which entry mode would be most appropriate?

cross-border acquisitions

The case of Komatsu learning technology from its partners and later dropping the licensing agreements to become a competitor illustrates a significant disadvantage of which international entry mode?

licensing and franchising

A firm chooses a greenfield venture over a cross-border acquisition. According to the research cited in the text, which of the following conditions would favor this decision?

- industries with close contact with end customers and high level of professional skills required

- the firms business relies on the quality of its capital-intensive manufacturing facilities

- strong intangible capabilities

The concept of "cultural distance" is important for a firm to consider before entering a new country because it can lead to what kind of problems?

communication problems, problems assimilating, and management issues

The U.S. Foreign Corrupt Practices Act of 1977 creates a management problem for U.S. executives because it:

- prohibits bribery and requires companies to maintain accurate records

- puts US companies at a disadvantage when operating in a country where bribery is the norm

What is the primary risk associated with global value chains that prompted Volkswagen to rethink its approach to globalization?

interconnectedness of operations across international borders

Which of the following scenarios best describes a strategic alliance as an international entry mode?

Groupe Limagrain specializes in seeds. They formed an alliance with a Brazilian seed company, Sementes Guerra.

- collaborate with another firm in different setting to enter one or more international markets

Which of the following best describes a key characteristic of a joint venture?

- two or more firms create a legally independent company to share resources

- partners own equal percentages and contribute equally

Apple outsources its manufacturing to firms like Foxconn. According to the text, this arrangement is a common example of which type of cooperative strategy?

nonequity strategic alliance

In fast-cycle markets, what is a primary reason for firms to form strategic alliances?

Speed up development of new goods or services, market entry, maintain leadership, form technology standard, share R&D expenses, overcome uncertainty

The alliance between General Motors and Honda to develop affordable electric vehicles, while they also compete in the broader automobile market, is an example of what concept?

coopetition

The partnership between Sony (electronics and content) and Honda (automotive manufacturing) to build electric vehicles is best classified as which type of business-level alliance?

vertical alliance

According to the text, why did Google, Intel, and TAG Heuer form a partnership to create a smartwatch?

Combine their unique resources to pursue what they believe is a value-creating shared objective (cooperative strategy)

What is the term for a competitive advantage developed through a cooperative strategy, where the relationship between the partners is the foundation of the advantage?

collaborative or relational advantage

Which of the following alliance types is described as being less formal, demanding fewer partner commitments, and unsuitable for transferring complex tacit knowledge?

nonequity strategic alliance

Firms in standard-cycle markets, such as the airline industry, primarily form alliances for which of the following reasons?

Gain market power, gain access to complementary resources, better economies of scale, overcome trade barriers, meet challenges from competitors, pool resources for large projects, and learn new techniques

A partnership where Panasonic invested $30 million in Tesla and contributed its battery cell technology is a classic example of a(n):

equity strategic alliance

According to the text, which type of business-level cooperative strategy has the highest probability of creating a sustainable competitive advantage?

Complementary business-level strategic alliance, especially vertical

A group of airlines in an industry dominated by a few major carriers begin to match each other's price increases and capacity reductions without any direct negotiation. This scenario best illustrates which concept?

tacit collusion

The Renault-Nissan-Mitsubishi alliance, where the firms share manufacturing platforms to produce cars under different brands, is presented as an example of what type of corporate-level strategy?

synergistic strategic alliance

What is a primary reason a firm would choose to form a cross-border strategic alliance when entering a new country?

Limited domestic growth opportunities and foreign government economic policies

The formation of the Corporate Electric Vehicle Alliance by Ceres, with members like Amazon and IKEA, was designed to address what primary issue?

Risk of being left behind the competition when applying new technology

In which type of industry environment are dynamic alliance networks most commonly used?

frequent product innovations and short profuct life cycles (Apple and IBM)

A firm using franchising as a corporate-level cooperative strategy relies on the franchisor to provide what primary resource to its franchisees?

Develop programs to transfer to the franchisees the knowledge and skills needed

What distinguishes corporate-level cooperative strategies from business-level cooperative strategies?

corporate are broader in scope and more complex and costly

Mutual forbearance is a form of tacit collusion where firms:

Do not take competitive actions against rivals they meet in multiple markets

The failure of the Ford-Mahindra cross-border alliance illustrates what key challenge?

cross-border strategic alliance (trust and liability of foreignness)

What is the primary objective of corporate governance?

Ensuring top-level managers interests are aligned with stakeholder interests (specifically shareholders)

What fundamental shift in business structure led to the 'separation of ownership and managerial control' in modern corporations?

Control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed

In the context of an agency relationship, what is managerial opportunism?

The seeking of self-interest with guile (cunning or deceit)

According to the text, why might top-level managers favor greater product diversification than shareholders do?

Maximize personal welfare and minimize personal risk (prevent max shareholder wealth)

Which of the following is identified in the chapter as one of the three primary internal governance mechanisms?

Ownership concentration, board of directors, and executive compensation

How does 'ownership concentration' function as a governance mechanism?

To control managerial decisions so that they will best represent owners' interests

Based on the Bed Bath & Beyond case, what is the primary goal of an activist investor like Ryan Cohen's firm?

Push for changes in governance (top-management and board)

What are agency costs?

The sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent

The text describes a situation where several activist investors join forces, often in an uncoordinated manner, to pressure a company. What is this formation called?

wolf packs

What has been the most significant effect of the rise of institutional owners in the U.S. equity market?

- Influence a targeted firm's strategic decision (social issues)

- Discipline managers and enhance likelihood of a firm taking actions for the better of all stakeholders

According to the source material, what is the primary role of a firm's board of directors?

Ensure the corporation operates in ways that will serve stakeholder interests (affect strategic planning process)

What is a significant disadvantage of having a board composed mainly of 'outsiders'?

- Do not have contact with day-to-day operations and access to info

- Lack insights to effectively evaluate decisions

The 2019 statement from the Business Roundtable represented a significant shift in corporate purpose by:

Not prioritizing shareholders:

- Most important duty is to shareholders, employees, customers, suppliers, and communities

What legally distinguishes a 'benefit corporation' from a traditional corporation?

- Higher level of transparency and publish reports that outline their social and environmental performance

- Consider other benefits besides profits

What is 'CEO duality', and why is it often viewed as a corporate governance concern?

- An individual holds both CEO and chair of the board title

- They hold a lot of power which could be contrary to the interests of shareholders

In the context of a hostile takeover, what is the primary function of a 'poison pill' defense?

An action the target firm takes to make its stock less attractive to a potential acquirer

The Sarbanes-Oxley Act (SOX) of 2002 was enacted primarily to address concerns about:

Egregious behavior beyond mere ineffective corporate strategies

According to the text, how do creditors often influence a firm's governance, even without the firm defaulting on a loan?

- A firm violates financial covenants associated with a loan

- Have a seat on the board of directors

What is one of the primary arguments AGAINST the high levels of CEO compensation discussed in the material?

- CEOs are overpaid and nobody deserves that much

- Their compensation is not strongly related to firm performance

Which of the following is listed as a voluntary change boards are making to enhance their effectiveness?

1. Increase in diversity backgrounds of board members

2. Strengthening internal management and accounting control systems

3. Increased attention to CSR (sustainability and global warming)

4. Establish processes to evaluate board member performance

5. Modify compensation of directors (reduce/eliminate stock options)

6. Create "lead director" with strong powers for agenda and oversight

According to the case study, what was the ultimate resolution proposed by Toshiba's management in April 2022 after facing persistent pressure from foreign shareholders?

Sell the whole company and move private

What is the primary function of an organization's structure, as defined in the text?

Specifies that firm's formal reporting relationships, procedures, controls, and authority and decision-making processes

Which statement best describes the reciprocal relationship between strategy and structure?

- Changes to the strategy create the need to change how the organization completes its work

A company implementing an unrelated diversification strategy would most likely emphasize which type of organizational controls?

financial controls

Which of the following characteristics best describes a functional structure adapted for a cost leadership strategy?

- Achieve efficiencies and deliver products at lower costs

- Simple reporting, few layers in authority, centralized corporate staff, strong focus on process improvements through manufacturing function

According to Alfred Chandler's research, what typically forces a successful firm to change its organizational structure?

inefficiencies

The Toshiba case is presented as tangible evidence of the modernization of Japan's corporate governance system primarily because it shows:

Shareholders have had such a dramatic influence on the direction of the company

What is the primary reason a firm would need to switch from a functional structure to a multidivisional structure?

Using a diversification strategy

A firm that provides the stability to manage daily work routines while also providing the flexibility to pursue new opportunities is said to have what?

- Structural stability and flexibility

- Appropriately designed organizational structures

Which of the following best describes strategic controls?

Largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company's competitive advantages

A company implementing a related constrained strategy would most likely adopt which multidivisional structure to facilitate economies of scope?

Cooperative form; share competencies

In the competitive form of the multidivisional structure, what is the primary basis for the corporate office allocating resources to divisions?

Organizational controls

A firm that wants to tailor its products and marketing to the specific preferences of consumers in each country it operates in should use which international structure?

Multidomestic strategy

What is a primary characteristic of the Strategic Business Unit (SBU) form of the multidivisional structure?

- Sharing competencies within individual SBUs

- Less constrained links bt divisions

In a strategic network, what is the primary role of the strategic center firm?

- Strategic outsourcing, competencies, technology, race to learn

- Ensure incentives are aligned to remain connected

A firm pursuing a global strategy, which emphasizes offering standardized products to achieve economies of scale, would benefit most from which organizational structure?

Worldwide product divisional structure

According to the comparison in Table 11.1, how does the divisional incentive compensation of the Cooperative M-Form differ from the Competitive M-Form?

- Cooperative: linked to overall corporate performance

- Competitive: linked to divisional performance

What is a significant challenge associated with the transnational strategy and its corresponding combination structure, such as a global matrix?

- Corporate reporting relationships are complex and vague

- Employees are in position of higher accountability than managers

How does a digital platform structure, as described in the text, function similarly to a network structure?

The platform creator playing a role similar to a strategic center firm

A large, multi-industry company like Textron, which operates independent businesses such as Cessna and Bell and emphasizes internal competition for capital, is an example of which structure?

Competitive form of the multidivisional structure implementing an unrelated diversification strategy