MAN4720 Exam 3

1. How is a firm's home market defined when discussing international strategy?

The country where the firm originates and where its headquarters and primary operations are located.

2. Which international strategy focuses on expanding production and sales into numerous geographic markets across regional boundaries?

Global strategy.

3. What minimum percentage of ownership in a foreign affiliate is required for a parent company to be considered a multinational corporation (MNC)?

At least 10% ownership.

4. Why would a company choose to pursue a regionalization strategy instead of competing on a broad global scale?

To focus on cultural, economic, and geographic similarities that improve efficiency and competitiveness.

5. According to Raymond Vernon’s product life‑cycle theory, where are innovations most often introduced first?

In the firm’s home country.

6. In what way can participation in global value chains encourage a company to vertically integrate its operations?

By revealing opportunities to control more stages of production for efficiency and cost advantages.

7. Which modern trade agreement strengthens intellectual property protections while reducing restrictions on cross‑border data flows and storage?

USMCA.

8. Which of the following represents an advanced factor of production that may attract firms to a foreign country?

Highly skilled labor.

9. What term describes the situation in which a multinational corporation adopts a superior practice developed by one of its foreign subsidiaries?

Reverse innovation.

10. What does the term liability of foreignness refer to?

The additional costs and disadvantages firms face when operating outside their home country.

11. Which trend has emerged because of increasing ideological divisions and opposition to globalization in many developed nations?

Deglobalization.

12. According to the text, how did Russia respond when many Western businesses exited the country following the invasion of Ukraine?

It transferred ownership of departing firms’ assets to domestic operators.

13. Eskom, the state‑owned electric utility in South Africa, illustrates which type of economic risk faced by firms?

Infrastructure risk.

14. Why can a strengthening U.S. dollar create challenges for American multinational corporations?

It makes U.S. exports more expensive and reduces foreign earnings when converted back to dollars.

15. What management challenge commonly arises from differences in workplace flexibility across countries?

Coordinating HR policies across diverse cultural expectations.

16. In Porter’s Diamond Model, what is meant by related and supporting industries?

Local industries that complement or support the firm’s operations and enhance competitiveness.

17. Which international corporate‑level strategy gives individual country business units authority over both strategic and operating decisions?

Multidomestic strategy.

18. What underlying belief guides firms that pursue a global strategy?

That standardized products and centralized decisions create efficiency and competitive advantage.

19. IKEA’s worldwide use of standardized furniture designs and packaging is an example of which international strategy?

Global strategy.

20. Which foreign market entry method allows another company to manufacture and market a firm’s products in exchange for royalty payments?

Licensing.

21. What is one significant drawback of entering an international market through a strategic alliance?

Risk of opportunistic behavior or partner misrepresentation.

22. Which international entry strategy provides the highest level of ownership and control but also requires the greatest investment of time and resources?

Wholly owned subsidiary.

23. Why might a company prefer acquiring an existing foreign business rather than establishing a new operation from scratch?

Faster market entry and access to established resources and customers.

24. Research examining international diversification generally finds what pattern between geographic expansion and firm performance?

An inverted U‑shaped relationship.

25. In what way can expanding internationally enhance a firm’s ability to innovate?

By exposing the firm to diverse knowledge, markets, and technologies.

26. What characteristic most clearly defines a cooperative strategy between businesses?

Sharing resources to pursue mutual goals.

27. Which form of strategic alliance creates a separate legal entity owned jointly by the participating firms?

Joint venture.

28. Firms operating in which type of market are most likely to use strategic alliances to gain access to protected markets or establish franchises abroad?

Slow‑cycle markets.

29. In fast‑cycle markets, companies most commonly form strategic alliances for what purpose?

Speeding up new product development.

30. Which business‑level cooperative strategy involves firms at the same stage of the value chain sharing resources to gain a competitive advantage?

Horizontal complementary alliance.

31. In competition‑reducing strategies, what is meant by mutual forbearance?

Firms avoid aggressive competition because they compete in multiple markets.

32. Which corporate‑level cooperative strategy most closely resembles a horizontal complementary alliance because both seek economies of scope?

Diversifying alliances.

33. Why might a company select a nonequity strategic alliance instead of a joint venture for outsourcing activities?

Lower commitment and fewer resource requirements.

34. What is a major concern when alliance partners misrepresent their capabilities or expertise?

Adverse selection.

35. How does an opportunity‑maximization approach to managing alliances differ from a cost‑minimization approach?

It focuses on learning, flexibility, and value creation rather than strict controls.

36. Stable alliance networks are most commonly found in industries with which characteristics?

Mature, stable markets.

37. What is the primary distinction between explicit collusion and tacit collusion?

Explicit collusion involves direct communication; tacit collusion does not.

38. What best defines a cross‑border strategic alliance?

A partnership between firms headquartered in different countries.

39. Why is trust viewed as a source of competitive advantage in cooperative relationships?

It reduces monitoring costs and improves collaboration.

40. What was the primary motivation behind the partnership among Google, Intel, and TAG Heuer to develop a smartwatch?

Combining complementary resources and expertise.

41. In a vertical complementary strategic alliance, firms contribute resources from which part of the value chain?

Different stages of the value chain.

42. What risk does a firm face after making alliance‑specific investments in a partnership?

The holdup problem.

43. Why are horizontal complementary alliances generally more difficult to sustain than vertical complementary alliances?

Partners are direct competitors.

44. What is the principal purpose of forming a dynamic alliance network?

Rapid adaptation to changing environments.

45. Within a franchising arrangement, what is the franchisor primarily responsible for providing?

Brand, training, and operating systems.

46. What is the central objective of corporate governance in modern corporations?

Aligning managerial actions with shareholder interests.

47. What does the term managerial revolution describe in the context of large corporations?

The separation of ownership and control.

48. How do shareholders typically reduce the risk associated with their investments?

Diversification.

49. Which concept refers to managers pursuing their own interests through deceptive or self‑serving behavior?

Managerial opportunism.

50. Why do top executives often favor greater product diversification than shareholders do?

It reduces managerial employment risk.

51. Which of the following represents an agency cost?

Expenses incurred to monitor and control managers.

52. How is ownership concentration generally measured within a corporation?

Percentage of shares held by large block shareholders.

53. What governance role do institutional investors, such as pension funds, typically perform?

Active monitoring of management.

54. What occurs when CEO duality exists within a company?

The CEO also serves as board chair.

55. Who are considered related outsiders on a board of directors?

Independent directors with some relationship to the firm.

56. What makes executive compensation a difficult governance mechanism to design effectively?

Balancing incentives with long‑term shareholder value.

57. Which external governance mechanism is most likely to become important when internal governance systems are ineffective?

The market for corporate control.

58. What is the purpose of adopting a poison pill defense?

To deter hostile takeovers.

59. What issue is primarily addressed by Section 404 of the Sarbanes‑Oxley Act?

Internal control systems and reporting accuracy.

60. If a company is meeting its debt obligations, how can lenders such as banks still influence corporate governance?

By imposing covenants and monitoring activities.

61. What factor has the greatest influence on corporate governance practices in China?

Government involvement.

62. Which statement accurately describes benefit corporations?

They pursue profit while legally committing to social and environmental goals.

63. What has research generally concluded about diversity on corporate boards?

It improves decision quality and firm performance.

64. Which aspect of organizational structure establishes reporting relationships and defines decision‑making authority?

Organizational hierarchy.

65. In the organizational control process, what step comes immediately after setting objectives based on desired outcomes?

Measuring actual performance.

66. Which form of organizational control uses qualitative, judgment‑based measures to determine whether strategies fit the external environment?

Strategic controls.

67. According to the text, how are organizational structure and strategy related?

Structure follows strategy.

68. A company with one primary product, serving a local market under the direction of an owner‑manager, is most likely organized using which structural form?

Simple structure.

69. Which feature is commonly associated with a functional organizational structure designed to support a cost leadership strategy?

Centralized decision‑making.

70. Why is decision‑making authority often decentralized in a functional structure supporting a differentiation strategy?

To encourage creativity and responsiveness.

71. Which multidivisional organizational form best supports a related constrained diversification strategy by encouraging cooperation among divisions?

Cooperative M‑form.

72. What is one important disadvantage of using the Strategic Business Unit (SBU) multidivisional structure?

Complexity and high administrative costs.

73. The competitive multidivisional structure is best suited for implementing which corporate‑level strategy?

Unrelated diversification.

74. Which international organizational structure gives individual country units responsibility for making both strategic and operating decisions to meet local market needs?

Worldwide geographic area structure.

75. When pursuing a global strategy, what is the primary purpose of a worldwide product divisional structure?

Standardizing products and centralizing decisions.

76. What type of organizational structure is most commonly used to implement a transnational strategy?

Matrix structure.

77. Within a strategic network, what responsibility does the strategic center firm have regarding technology?

Facilitating knowledge sharing and innovation.

78. Which statement most accurately describes the organizational structure of a digital platform?

A hub connecting multiple independent participants.

79. How does structural flexibility differ from structural stability?

Flexibility enables change; stability maintains consistency.

80. Which type of strategic network is specifically designed to coordinate international cooperative strategies across multiple regional markets?

Distributed strategic network.