Which one of the following is not a reason a company decides to enter



Which one of the following is not a reason a company decides to enter foreign markets?

To spread business risk across a wider geographic market base

To capitalize on company competencies and capabilities

To achieve lower costs and enhance the firm’s competitiveness

To build the profit sanctuaries necessary to wage guerrilla offensives against global challengers endeavoring to invade its home market

To gain access to more buyers for the company’s products/services

4 points Saved


The advantages of using a licensing strategy to participate in foreign markets include

being especially well suited to the use of cross-market subsidization.

being able to charge lower prices than rivals.

enabling a company to achieve competitive advantage quickly and easily.

being able to leverage the company’s technical know-how or patents without committing significant additional resources to markets that are unfamiliar, politically volatile, economically uncertain, or otherwise risky.

being able to achieve higher product quality and better product performance than with an export strategy.

4 points Saved


Two drawbacks of a “think local, act local” multidomestic strategy are

that it is especially vulnerable to fluctuating exchange rates and that it can usually be defeated by companies employing cross-market subsidization tactics.

excessive vulnerability to fluctuating exchange rates and having to craft a separate strategy for each country market in which the company competes.

hindering a company’s transfer of competencies and resources across country boundaries (since somewhat different competencies and capabilities are likely to be employed in different host countries) and not promoting the building of a single, unified competitive advantage in all country markets where a company competes.

greater exposure to both increases in tariffs and restrictive trade barriers and added difficulty in accommodating the diverse trade restrictions and regulatory requirements of host governments.

not being able to export products manufactured in one country to markets in other countries and being largely unsuitable for competing in the markets of emerging countries.

4 points Saved


The advantages of using a franchising strategy to pursue opportunities in foreign markets include

having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support foreign franchisees.

being particularly well suited to the global expansion efforts of companies with multicountry strategies.

helping build multiple profit sanctuaries.

being well suited to companies that employ cross-market subsidization.

being well suited to the global expansion efforts of manufacturers.

4 points Saved


The reasons behind the accelerating pace of globalization include

countries with previously planned economies are embracing market or mixed economies.

information technology shrinks the importance of geographic distances.

ambitious growth-minded countries race to build global share.

lower barriers to international trade.

All of these.

4 points Saved


A “think global, act global” approach to strategy making is preferable to a “think local, act local” approach when

a big majority of the company’s rivals are pursuing localized multidomestic strategies.

country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.

plants need to be scattered across many countries to avoid high shipping costs.

market growth rates vary considerably from country to country.

host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.

4 points Saved


The strategic options for expansion into foreign markets include

employing a franchising strategy.

maintaining a national (one-country) production base and exporting goods to foreign markets.

licensing foreign firms to produce and distribute one’s products.

establishing a subsidiary in a foreign market.

All of these.

4 points Saved


Strategic alliances, joint ventures, and cooperative agreements between domestic and foreign firms are a potentially fruitful means for the partners to

enter additional country markets.

gain better access to scale economies in production and/or marketing.

fill competitively important gaps in their technical expertise and/or knowledge of local markets.

share distribution facilities and dealer networks, thus mutually strengthening their access to buyers.

All of these.

4 points Saved


Checking a diversified firm’s business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

whether the parent company’s competitive advantages are being deployed to maximum advantage in each of its business units.

whether the competitive strategies employed in each business act to reinforce the competitive power of the strategies employed in the company’s other businesses.

whether the competitive strategies in each business possess good strategic fit with the parent company’s corporate strategy.

the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual capital from one business to another.

how compatible the competitive strategies of the various sister businesses are and whether these strategies are properly aimed at achieving the same kind of competitive advantage.

4 points Saved


Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when

all of the potential acquisition candidates are losing money.

it is impractical to outsource most of the value chain activities that have to be performed in the target business/industry.

there is ample time to launch the new business from the ground up.

the company has built up a hoard of cash with which to finance a diversification effort.

none of the companies already in the industry are attractive strategic alliance partners.

4 points Saved


A diversified company’s business units exhibit good resource fit when

each business is a cash cow.

a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company’s overall resource strengths.

each business is sufficiently profitable to generate an attractive return on invested capital.

each business unit produces large internal cash flows over and above what is needed to build and maintain the business.

the resource requirements of each business exactly match the resources the company has available.

4 points Saved


Retrenching to a narrower diversification base

is usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish growth.

is directed at improving long-term performance by building stronger positions in a smaller number of core businesses.

is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit.

is sometimes an attractive option for deepening a diversified company’s technological expertise and supporting a faster rate of product innovation.

is a strategy best reserved for companies in poor financial shape.

4 points Saved


Which of the following is an important appeal of a related diversification strategy?

Represents an effective way of capturing valuable financial fit benefits

Offers opportunities to transfer skills, expertise, technical know-how, or other capabilities from one business to another

Offers significant opportunities to strongly differentiate a company’s product offerings from those of rivals

Is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification

Is typically more profitable than unrelated diversification, which is a major factor in helping related diversification pass the attractiveness test

4 points Saved


Conclusions about what the priorities should be for allocating resources to the various businesses of a diversified company need to be based on such considerations as

each business’s profit and growth prospects.

industry attractiveness and competitive strength of the various businesses.

the degree of strategic fit and resource fit with other business units.

each business’s cash flow characteristics and return on capital invested.

All of these.

4 points Saved


Divestiture can be accomplished by

selling a business outright.

spinning the unwanted business off as a managerially and financially independent company by selling shares to the investing public via an initial public offering of stock.

spinning the unwanted business off as a managerially and financially independent company by distributing shares in the new company to existing shareholders of the parent company.

All of these.

None of these; the best and quickest ways to divest a business are either to close it or else just walk away and give the keys to creditors.

4 points Saved


The one factor that is not relevant for company managers to worry about when their company has many unrelated firms, especially when they are very diverse is to

stay abreast of what’s happening in each industry and subsidiary.

pick business-unit heads having requisite combination of managerial skills and know-how to motivate people.

understand the true value of strategic investment proposals by business-unit managers.

know what to do if a business unit stumbles.

rely on the skills and expertise of business-level managers to build competitive advantage.

4 points Saved


The task of crafting corporate strategy for a diversified company encompasses

picking the new industries to enter and deciding on the means of entry.

initiating actions to boost the combined performance of the businesses the firm has entered.

pursuing opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage.

steering corporate resources into the most attractive business units.

All of these.

4 points Saved


Vertical integration strategies

extend a company’s competitive and operating scope because its operations extend across more parts of the total industry value chain.

are one of the best strategic options for helping companies win the race for global market leadership.

are a cost effective means of expanding a company’s lineup of products and services.

are particularly effective in boosting a company’s ability to expand into additional geographic markets, particularly the markets of foreign countries.

are a good strategy option for improving a company’s supply chain management capabilities, pursuing efforts to remodel a company’s value chain, achieving direct control over the costs of performing value chain activities, and gaining access to buyers.

4 points Saved


Once a company has decided to employ one of the five basic competitive strategies, then it must also consider such additional strategic choices as

whether and when to go on the offensive and initiate aggressive strategic moves to improve the company’s market position.

whether to outsource certain value chain activities or perform them in-house.

whether to form strategic alliances and collaborative partnerships to add to its accumulation of resources and competitive capabilities.

whether to integrate forward or backward into more stages of the industry value chain.

All of these

4 points Saved


A strategic alliance

is a collaborative arrangement where companies join forces to defeat mutual competitive rivals.

involves two or more companies joining forces to pursue vertical integration.

is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.

is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing.

is usually a cheaper and more effective way for companies to join forces than is merger.

4 points Saved


A blue ocean type of offensive strategy

refers to initiatives by a market leader to steal customers away from unsuspecting smaller rivals.

involves a preemptive strike to secure an advantageous position in a fast-growing market segment.

entails attacking rivals head-on with deep price discounts and continuous product innovation.

involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.

involves the use of surprise hit-and-run guerrilla tactics to harass money-losing rivals and drive them into bankruptcy.

4 points Saved


Experience indicates that strategic alliances

are generally successful.

work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency.

work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies.

stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals.

are usually a company’s best approach to building a distinctive competence.

4 points Saved


Which one of the following is not a strategically beneficial reason a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?

To acquire or improve access to new markets

To expedite the development of promising new technologies or products

To enable greater vertical integration

To improve supply chain efficiency

To overcome deficiencies in technical and manufacturing expertise and to create desirable new skill sets and capabilities

4 points Saved


Which of the following is not an example of a defensive move to protect a company’s market position and restrict a challenger’s options for initiating competitive attack?

Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers/brands

Signaling challengers that retaliation is likely in the event they launch an attack

Publicly committing the company to a policy of matching a competitors’ terms or prices

Maintaining a war chest of cash and marketable securities

Challenging struggling runner-up firms that are on the verge of going under

4 points Saved


Why do mergers and acquisitions sometimes fail to produce anticipated results?

They do not produce the hoped for outcomes and changes to existing operations may not eventuate.

Cost savings may prove smaller than expected.

Gains in competitive capabilities may take substantially longer or never materialize.

Efforts to mesh corporate cultures can stall due to formidable resistance from organization members and key employees can become disenchanted and leave.

All of these.

4 points Saved



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