BUS 536 Week 11 Final Exam – Strayer University New

BUS/536 Week 11 Final Exam – Strayer New

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Chapter 7 Through 12

CHAPTER 7 – MAKING STRATEGIC ALLIANCEE AND NETWORKS WORK
TRUE/FALSE QUESTIONS
1. Examples of equity-based alliances include strategic investment.

2. A non-JV, equity-based alliance can be regarded as two firms “getting married,” but not having “children.”

3. The term “strategic networks” is derived from the term “social networks” highlighting the social aspects of interfirm relationships.

4. In regards to strategic alliances and networks, in the traditional industry-based view, firms are dependent players.

5. From the view of industry structure, in oligopolistic industries, there are an above average number of available players as potential partners.

6. From the perspective of network position, firms located in the center of interfirm networks accumulate less power and influence.

7. Firms with a high degree of network centrality are likely to be more attractive partners.

8. Successful alliances and networks normally avoid socially complex relations among partners.

9. The ad hoc approach to organization allows firms to systematically learn from the experience.

10. Since firms act to enhance or protect their legitimacy, copying other reputable organizations is not a way to gain legitimacy.

11. In finding organizational partners, it is desirable to identify candidates that present both strategic fit and organizational fit.

12. The more tacit the resources and capabilities are, the less likely firms will prefer equity involvement in establishing relationships.

13. A firm would prefer equity relationships if it fears that its intellectual property may be expropriated by partners.

14. As each firm is likely to have multiple interfirm relationships, it is important to not manage the relationships as a corporate portfolio.

15. Possible ways to minimize the threat of opportunism include swapping critical skills and technologies through credible commitments.

16. In international alliances, setting up a parallel and reciprocal relationship in the foreign partner’s home country may decrease the incentives for both partners to cooperate.

17. Weak ties excel at connecting with distant others who possess unique and novel information.

18. Strong ties are more beneficial to environments conductive for exploitation whereas weak ties are more suitable for exploration.

19. An increase in the experience of one partner may bring instability into the relationship as it reduces the need to rely on the other partner.

20. Higher level shared technology is associated with lower profitability for parent firms.

MULTIPLE CHOICE QUESTIONS
1. Strategic alliances involve:
a. Voluntary agreements between firms.
b. Compromises between short-term transactions and long-term solutions.
c. Contracts.
d. Equity-based arrangements.
e. All of the above.

2. Contractual alliances include all of the following except:
a. Co-marketing.
b. Research and development (R&D) contracts.
c. Cross-shareholding.
d. Turnkey projects.
e. Licensing/franchising.

3. A joint venture can be described as:
a. A special case of equity-based alliance.
b. A new legally independent entity.
c. A “corporate child” given birth by two (or more) parent firms.
d. All of the above.
e. None of the above.

4. Which represents an alliance with suppliers?
a. Horizontal alliances.
b. Upstream vertical.
c. Downstream vertical.
d. All of the above.
e. None of the above.

5. Which is not an advantage of strategic alliances and networks?
a. Reduce costs, risks and uncertainties.
b. Costs of negotiation and coordination.
c. Gain access to complementary assets and capabilities.
d. Opportunities to learn from partners.
e. Possibilities to use alliances and networks as real options.

6. Which of the following are not true regarding managers involved in alliances and networks?
a. They require relationship skills which foster trust with partners.
b. They must guard against opportunism.
c. They must recognize that interests of the firms fully overlap.
d. They have to represent the interests of their respective firms.
e. They must attempt to make the complex relationship work.

7. Institution-based considerations regarding organization include:
a. Collusion concerns.
b. Entry requirements.
c. The social pressures to find partners.
d. The internalized beliefs in the value of collaboration.
e. All of the above.
8. Cooperation between rivals is usually suspected of being:
a. Tacit collusion.
b. Explicit collusion.
c. Socialism.
d. All of the above.
e. None of the above.
9. Emerging trends concerning formal government policies on entry mode requirements include:
a. More liberal policies.
b. Imposing considerable requirements.
c. A and B above.
d. Welcoming wholly owned subsidiaries.
e. Banning joint ventures.

10. Which (if any) of the following are not involved in the stages of forming business relationships?
a. The decision to cooperate.
b. The decision to not cooperate.
c. The choice of contract or equity.
d. Positioning the Relationship.
e. All of the above are involved.

11. The strategic choice concerning whether to form cooperative interfirm relationships or to rely on pure market transactions or M&As to grow the firm is part of:
a. Stage One.
b. Stage Two.
c. Stage Three.
d. Stage Four.
e. Stage Five.

12. In comparing M&As with alliances and networks, which of the following is not correct?
a. M&As are costly.
b. M&As have significant transaction costs.
c. Many M&As end up destroying value.
d. Alliances and networks preclude future upgrading into possible M&As.
e. Alliances and networks can be considered as a flexible intermediate solution.

13. Strategic fit refers to whether the partner firm possesses:
a. Technology.
b. Capital.
c. Distribution channels.
d. A through C above.
e. Goals, experiences, and behaviors that facilitate cooperation.

14. The first concern in determining whether a relationship should be based on contract or equity is:
a. The kind of resources and capabilities that are shared.
b. Direct monitoring and control.
c. Real options.
d. Institutional constraints.
e. None of the above.

15. Weak ties in organizational relationships:
a. Are more trustworthy and are cultivated over a long period of time.
b. Are associated with exchanging finer-grained information.
c. Provide an informal, social control mechanism.
d. A through C above.
e. Are less costly to maintain.

16. As a type of relationship tie, exploitation refers to such things as:
a. Selfishness.
b. Choice.
c. Efficiency.
d. Execution.
e. B through D above.

17. In measuring the performance of strategic alliances and networks, subjective measures include:
a. Market performance.
b. Stability.
c. A and B above.
d. The level of managers’ satisfaction.
e. Longevity.

18. Which (if any) of the following will not influence the performance of alliances and networks?
a. Equity.
b. Learning and experience.
c. Nationality.
d. Relational capabilities.
e. All can have an influence.

19. A lower level of ____contribution may indicate a firm’s relative lack of commitment:
a. Equity
b. Learning and experience
c. Nationality
d. Relational capabilities
e. All of the above

20. The stock market responds favorably to alliance activities, but only under which circumstances?
a. Complementary resources.
b. Previous alliance experience.
c. Ability to manage the host country’s political risk.
d. Partner buyouts.
e. All of the above.

SHORT ANSWER ESSAY QUESTIONS
1. How can an organizational alliance be “win-win?” How can the concept of “cooperative specialization” help?

2. Why and how might a “real option” be useful in a joint venture?

3. A friend of yours stated: “I would never want to be dependent on an alliance. I prefer an acquisition so that everything would be under my control.” How would you respond?
4. What are the limitations in trying to clearly identify rights and expectations for alliances and acquisitions among global corporations?

5. What can be done to maintain a successful alliance among global firms?

CHAPTER 8 – MANAGING GLOBAL COMPETITIVE DYNAMICS

TRUE/FALSE QUESTIONS
21. Strategy involves planning for actions rather than reactions or interaction.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Moderate

22. Multimarket competition occurs when firms engage the same rivals in multiple markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Easy

23. Multimarket competition destroys mutual forbearance.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Comprehension; Difficulty: Moderate

24. If an attack is so subtle that rivals are not aware of it, the attacker’s objectives are not likely to have been attained.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Moderate

25. If the attacked market is of marginal value, managers may decide not to counterattack.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy

26. The “strategy as action” perspective highlights the power of creative destruction.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Comprehension; Difficulty: Easy

27. Bargaining can take place through signals and actions.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy

28. Industry-based considerations are fundamentally concerned with the very first of the Porter five forces, interfirm rivalry.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate

29. Barriers for entrants with similar products and with substitute products are involved in the other two of the five forces.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Challenging

30. Collusion survives because it does not have an incentive problem as is illustrated by the prisoner’s dilemma.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Challenging

31. The capability to attack in multiple markets throws the firm off balance leaving it vulnerable to rivals and thus reducing value.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Moderate

32. Firms that have a high degree of resource similarity are likely to have similar strengths and weaknesses.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Easy
33. Under antitrust law a company can be in trouble for setting prices too high but not for setting them too low.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-3; Bloom’s: Knowledge; Difficulty: Easy

34. US courts have not sought to unilaterally punish non-US cartels (if they are legal elsewhere) simply because they may have a substantial adverse impact on US markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Easy

35. Critics of US policy on dumping at least agree that our policy on predatory pricing is consistent both domestically and internationally.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Moderate

36. Thrust makes use of military theory that the attacker needs to have at least a three-to-one advantage to overcome a well-defended position through a conventional frontal assault.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy

37. Local firms’ primary strengths lie in a deep understanding of local markets, and thus they would pursue a dodger strategy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Moderate

38. A strategy that leverages local assets is called an extender strategy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy

39. An extender strategy may be appropriate in some industries where pressures for globalization are relatively low.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Easy

40. An extender strategy is being used when local firms engage in rapid learning to approach the capabilities of the MNEs and then expand overseas.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy

MULTIPLE CHOICE QUESTIONS
21. Which is true of strategy?
f. Business strategy has similarities with military strategy.
g. Military principles cannot be completely applied in business.
h. Militaries fight over territories, waters, and air spaces, firms compete in markets.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Easy

22. Which of the following are least likely to result in collusion?
f. High concentration ratio.
g. Heterogeneous products.
h. High entry barriers.
i. High market commonality.
j. Industry price leader exists.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Analysis; Difficulty: Challenging

23. The main types of attack include:
f. Thrust.
g. Feint.
h. Gambit.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy

24. Issues affecting collaboration include:
f. Secrecy.
g. Exclusivity.
h. Informality.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate

25. In developing a strategy regarding competition or cooperation, it would be useful to not:
f. Understand the nature of your industry.
g. Strengthen capabilities that more effectively compete and/or cooperate.
h. Understand the rules of the game governing competition.
i. “Look ahead, reason back
j. All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-8; Bloom’s: Analysis; Difficulty: Moderate

26. Industry-based considerations regarding strategy:
f. Focus on the nature of collusion.
g. Deal with the relationship between industry structures and firms’ propensity to collude.
h. Deal with the relationship between industry structures and firms’ propensity to collude to competing.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate

27. Explicit collusion is exemplified by:
f. Cartels.
g. Trusts.
h. Users of game theory.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate

28. Firm A may be more successful in imitating Firm B if Firm B:
f. Is competitively aggressive.
g. Carries out complex actions.
h. Uses difficult to execute maneuvers.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Analysis; Difficulty: Moderate

29. Which of the following will enable a firm to be competitive even if there is a lack of top management commitment and employee involvement?
a. Organizational structure.
b. Use of stealth attacks.
c. Rapid responses, and willingness to answer challenges.
d. All of the above.
e. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Analysis; Difficulty: Moderate

30. “The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm” refers to similarity of:
f. Strategy.
g. Resources.
h. Markets.
i. Industry.
j. Economic environment.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Moderate

31. Which of the following aspects of U.S. competition/antitrust policy has been opposed by the EU?
f. Collusive price setting.
g. Predatory pricing.
h. Extraterritoriality.
i. Court decisions.
j. Changes in policy.
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Moderate

32. Cartels:
f. Involvecollusion.
g. Are often outlawed.
h. A and B above.
i. Entail the “prisoner’s dilemma for participants.
j. All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Easy
33. Which is not true concerning US anti trust policy today?
f. Legislation has legally permitted rivals to join hands in research and development (R&D).
g. There is increased permissiveness regarding mergers among rivals.
h. Clarity of policy has improved.
i. The legal standards for interfirm cooperation are no longer ambiguous in the United States.
j. The legal standards for interfirm cooperation are ambiguous in many other countries.
AACSB: BUSPROG: Reflective Thinking; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Analysis; Difficulty: Challenging

34. Dumping is defined as:
f. Shipping hazardous waste to locations in other countries.
g. An exporter selling below cost abroad.
h. Unloading unsold inventory from the US in other countries.
i. Excessive criticism of international rivals.
j. Getting rid of unprofitable operations.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-4; Bloom’s: Knowledge; Difficulty: Easy

35. Which of the following would not be considered an initial set of actions to gain competitive advantage:
a. Price cuts.
b. Advertising campaigns.
c. Market entries.
d. Counterattacks.
e. New product introductions.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy

36. A firm’s attack on a focal arena important to a competitor, but not the attacker’s true target area, is referred to as:
f. Thrust.
g. Feint.
h. Gambit.
i. Miscalculation.
j. Practice attack.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy

37. The three drivers of counterattacks do not include:
f. Awareness.
g. Motivation.
h. Capability.
i. B and C above.
j. Vengeance.
AACSB: BUSPROG: Reflective Thinking; DISC: Motivation Concepts
LO: 8-5; Bloom’s: Comprehension; Difficulty: Moderate

38. Which of the following is not a legal means of signaling?
f. Nonaggression or fat cat.
g. Direct discussion of reduced rivalry with competitors.
h. Truce seeking.
i. Communication via governments.
j. Strategic alliances.
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-5; Bloom’s: Knowledge; Difficulty: Moderate

39. In some industries where pressures for globalization are relatively low, local firms may possess some skills and assets that are transferable overseas, thus leading to a/an_____strategy.
f. Defender
g. Extender
h. Dodger
i. Contender
j. Transfer
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Moderate

40. Local firms in emerging economies typically can at least match the ________ of MNEs.
a. Expertise
b. Experience
c. Endowments
d. A and B above
e. None of the above
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy

SHORT ANSWER ESSAY QUESTIONS
1. The text points out that modern ideas of strategy, pioneered by Michael Porter, have turned IO economics “on its head.” While IO economics attempts to prevent any firm from gaining sustained competitive advantage, the very purpose of strategy is to gain a sustainable advantage. Is that good or bad?

2. Dumping involves selling something below cost. Using what you have learned in accounting or economics (or perhaps by talking to someone familiar with these courses) point out why it might sometimes be difficult to prove that a firm is selling below cost.

3. In the interest of maintaining high standards for international trade, the U.S. has at various times attempted to legislate the behavior of U.S. based companies. It has even at times tried to apply U.S. standards to those from other countries. Does this make sense to you?

4. Can national policies that seek to promote the well being of its citizens by its attempts to maintain competition actually have the opposite effect? Why or why not?

5. In some of the discussions of strategy. It was suggested that a firm might attempt to mislead a rival as to the firm’s true objective – i.e. feint. Is that unethical? Explain.

CHAPTER 9 – DIVERSIFYING, ACQUIRING, AND RESTRUCTURING
TRUE/FALSE QUESTIONS
41. Operational synergy involves economies of scale.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

42. Not all product-related diversifiers outperform product-unrelated diversifiers.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy

43. Porter’s five forces affect the structural attractiveness of an industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Moderate

44. The economic benefits of the last unit of growth (such as the last acquisition) can be defined as MBC.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Easy

45. The scope of the firm is thus determined by a comparison between MEB and MBC.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate

46. In the United States between the 1950s and 1970s MEB decreased, resulting in a decreased scope of the firm into conglomeration.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate

47. By the 1980s MBC began to decrease.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Easy

48. Interest in conglomerates has declined in emerging economies due to their developed capital markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy

49. You should understand that the nature of your industry might call for diversification, acquisitions, and restructuring.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-6; Bloom’s: Knowledge; Difficulty: Easy

50. You and your firm need to develop policies that avoid acquisitions and restructuring.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-6; Bloom’s: Knowledge; Difficulty: Easy

51. Answering why firms choose different diversification strategies does not help answer why firms differ and how they behave.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy

52. A superior product-related diversification strategy does not require a centralized and cooperative organizational architecture in order to add value.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

53. Instead of operational synergy, conglomerates focus on financial synergy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

54. Diversification discount is the situation when unrelated-product diversification enables conglomerate units to beat stand-alone rivals.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

55. When conglomerate units are better off competing as stand-alone entities, we call it diversification premium.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

56. Research shows that the linkage between product diversification and firm performance seems to be inverted-U shaped.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy

57. Porter’s five forces model can be used in regards to the structural attractiveness of an industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate

58. High entry barriers often result in green-field entries as opposed to acquisitions.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Moderate

59. An industry whose products can be easily substituted faces more threats from other firms currently not in the same industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy

60. Although the term mergers and acquisitions (M&As) is often used, in reality, acquisitions dominate the scene.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-3; Bloom’s: Knowledge; Difficulty: Easy

MULTIPLE CHOICE QUESTIONS
41. Sources of operational synergy include:
k. Technologies.
l. Marketing.
m. Manufacturing.
n. All of the above.
o. None of the above.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Comprehension; Difficulty: Moderate

42. Conglomeration tends to provide all of the following except:
k. Product-unrelated diversification.
l. Financial synergy.
m. Economies of scale.
n. Economies of scope.
o. Internal capital market.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Analysis; Difficulty: Challenging

43. Diversification premium is the same thing as:
k. Conglomerate advantage.
l. Diversification discount.
m. Conglomerate disadvantage.
n. Level of product diversification.
o. Measurement of firm performance.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Comprehension; Difficulty: Easy

44. Which would be more characteristic of conglomerates?
k. “Putting one’s eggs in one basket.”
l. “Putting one’s eggs in similar baskets.”
m. “Putting one’s eggs in different baskets.”
n. A and B above.
o. B and C above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-1; Bloom’s: Comprehension; Difficulty: Moderate

45. Research regarding the relationship between product diversification and firm performance indicates that:
k. Performance may increase as firms shift from single business strategies to product-related diversification.
l. Performance may decrease as firms change from product-related to –unrelated.
m. The linkage between diversification and performance is inverted U shaped.
n. “Putting your eggs in similar baskets,” has emerged as a balanced way to both reduce risk and leverage synergy.
o. All of the above.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Challenging

46. Which geographic diversification is most likely to reduce the liability of foreignness?
k. Culturally adjacent countries.
l. Extensive international scope.
m. Beyond geographically neighboring countries.
n. Beyond culturally neighboring countries.
o. All of the above
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-1; Bloom’s: Comprehension; Difficulty: Easy

47. Which is not true regarding geographic diversification and firm performance?
k. U-shaped relationship at low level of internationalization.
l. Initially a negative effect of international expansion on performance.
m. Affected by the liability of foreignness.
n. Inverted-U shape at moderate to high levels of internationalization.
o. Positive only at high levels of internationalization.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Analysis; Difficulty: Challenging

48. In combining product and geographic diversification, which is not one of the four possible combinations?
k. Anchored replicators.
l. Multinational replicators.
m. Far-flung conglomerates.
n. Classic replicators.
o. Classic conglomerates.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 9-1; Bloom’s: Comprehension; Difficulty: Moderate

49. At its core, diversification is essentially driven by all of the following except:
a. Economic benefits.
b. Bureaucratic costs.
c. Synergy.
d. Less complicated information systems.
e. MEB.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 9-1; Bloom’s: Analysis; Difficulty: Moderate

50. Select the best choice: a company that is engaged in oil production, pipelines and tankers, refining, and gasoline stations has engaged in ______________ expansion.
k. Horizontal
l. Vertical
m. Conglomerate
n. Friendly M&A
o. Hostile M&A
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 9-3; Bloom’s: Application; Difficulty: Moderate

51. Which is one motive for M&A which does not necessarily increase shareholder value?
k. Synergistic.
l. Hubris.
m. Performance.
n. A and C above.
o. None of the above.
AACSB: BUSPROG: Analytic; DISC: Motivation Concepts
LO: 9-3; Bloom’s: Comprehension; Difficulty: Easy

52. Corporate scope is shaped by:
k. Industry conditions.
l. Firm capabilities.
m. Institutional constraints.
n. Opportunities in both developed and emerging economies.
o. All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Moderate

53. Product-related diversification involves all of the following except:
k. A single business strategy.
l. Entries into activities that are related to a firm’s existing markets and/or activities.
m. The emphasis is on economies of scale rather than scope.
n. Increases in competitiveness.
o. Synergy.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 9-3; Bloom’s: ; Difficulty: Challenging

54. Sources of operation synergy:
k. Technologies.
l. Marketing.
m. Manufacturing.
n. All of the above.
o. None of the above.
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Analysis; Difficulty: Moderate

55. Diversification can pay off in all of the following situations except:
a. Risk is spread over several (product or country) markets.
b. Core resources are leveraged.
c. The art of post-acquisition integration has been mastered.
d. Commonly shared industry skills are used.
e. Firms are organized to minimize the costs.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Analysis; Difficulty: Challenging

56. The following managerial motives for conglomerations do not benefit shareholders except:
k. Norms.
l. Reducing managers’ employment risk.
m. Organizational stability.
n. Pursuing power, prestige, and income.
o. Empire building.
AACSB: BUSPROG: Reflective Thinking; DISC: Motivation Concepts
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy

57. Which of the following is true regarding M&As?
k. As many as 70 percent of M&As reportedly fail.
l. On average, the acquiring firms’ performance improves after acquisitions.
m. Target firms, after being acquired and becoming internal units, often perform better than when they were independent, stand-alone firms.
n. The only identifiable losers are the shareholders of target (acquired) firms.
o. The outstanding success of M&As is due to pre- and post acquisition phases.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-3; Bloom’s: Knowledge; Difficulty: Moderate

58. To ensure the success of the M&A, managers need to make sure of all the following except:
k. Be willing to walk out when premiums are too high.
l. Engage in adequate due diligence concerning strategic fit.
m. Seek organizational contrast and variety rather than organizational fit.
n. Address the concerns of multiple stakeholders.
O. Recognize that that integration management is a fulltime job.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 9-3; Bloom’s: Analysis; Difficulty: Moderate

59. Which is true regarding restructuring?
k. There are two primary ways of restructuring namely downsizing and upsizing.
l. A rising level of competition within an industry normally prevents restructuring.
m. Corporate restructuring is not widely embraced around the world.
n. Restructuring is one of the first things to consider when trying to improve profitability.
o. Restructuring is easier in knowledge-intensive firms than capital intensive firms.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-4; Bloom’s: Knowledge; Difficulty: Moderate

60. Which is true of relatedness?
a. Measurement of product relatedness is no longer debatable.
b. A “product-related” firm will be considered related regardless of the measure used.
c. Some argue that product relatedness refers specifically to the visible product linkages.
d. Relatedness can be a common underlying dominant logic that connects various businesses in a diversified firm.
e. Product-unrelated conglomerates are not linked by institutional relatedness.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-5; Bloom’s: Knowledge; Difficulty: Moderate

SHORT ANSWER ESSAY QUESTIONS
1. You recently noticed a comment in a blog which stated: “By its very nature, restructuring is a violation of CSR!” How do you feel about that?

2. In that same blog another person stated: “Decisions about diversification and acquisition are not based on the well being of the shareholder but instead on the needs of the CEO such as ego and job security. As a result, all such decisions should be submitted to a government agency for approval.” Do you agree? Why or why not?

3. Other comments you saw in the blog are less hostile to business. In one, the person was claiming that recent developments in financial markets suggest that it is time to revive the use of conglomerates. Based on what is happening now, do you agree? Why or why not?

4. You are the CEO of International Widget and you are contemplating expanding into Lower Slobovia. You have the resources needed to start from scratch in that country but it would be possible to acquire the company that dominates the Lower Slobovian Widget industry. Which do you think would be best: start from scratch or an acquisition?

5. You are the CEO of Mega Global Corporation and you are weighing a number of decisions involving diversification, acquisition, and restructuring. Long ago you were the manager of a mutual fund and you decide to make your decisions using the same approach as you used in managing that fund. How would that affect your decisions and decision process?

CHAPTER 10 – STRATEGIZING, STRUCTURING, AND LEARNING
AROUND THE WORLD
TRUE/FALSE QUESTIONS
61. Home replication strategy emphasizes the home country replication of international based competencies.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Knowledge; Difficulty: Easy

62. Localization strategy is an extension of the home replication strategy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-; Bloom’s: Knowledge; Difficulty: Easy

63. Transnational strategy supposedly is a trade off between being cost efficient and locally responsive but is really locally responsive.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Moderate

64. Global product division structure is the same as the geographic area structure.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Easy

65. Many MNEs have phased out the geographical area structure.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Knowledge; Difficulty: Easy

66. Strategy drives structure: a misfit, such as combining a global strategy with a geographic area structure, may have grave performance consequences.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Easy

67. The Porter five forces are not helpful in understanding MNE structure.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-2; Bloom’s: Comprehension; Difficulty: Easy

68. No one argues that knowledge management is the defining feature of MNEs.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

69. It is obviously a lot easier to imitate an intangible philosophy or mentality than to imitate a tangible structure.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Comprehension; Difficulty: Easy

70. Knowledge management not only depends on IT, but also on informal social relationships within the MNE.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Comprehension; Difficulty: Easy

71. In a transnational MNE, the role of subsidiaries is to adapt and leverage parent company competencies.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Comprehension; Difficulty: Moderate

72. The “not invented here” syndrome causes managers to accept ideas invented elsewhere.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Individual Dynamics
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

73. MNEs often must rely on a great deal of informal integrating mechanisms.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

74. Overall, the micro, informal interpersonal relationships among managers of various units may create a micro-macro link.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

75. It is hard to distinguish between subsidiary initiative and empire building.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 10-4; Bloom’s: Comprehension; Difficulty: Moderate

76. European MNE’s are more likely than Japanese MNE to appoint host-country or third country nationals as head of a foreign subsidiary.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 10-2; Bloom’s: Knowledge; Difficulty: Easy

77. Customer-focused dimensions cut across all three existing mainstream dimensions.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-4; Bloom’s: Comprehension; Difficulty: Easy

78. Transnational strategy aims to capture “the best of both worlds” by endeavoring to be both cost efficient and locally responsive.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Easy

79. An international division serves as a means of coordination with the rest of the firm.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Knowledge; Difficulty: Moderate

80. The text recommended that firms avoid simplifying both product and geographic scope by downsizing and downscoping.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 10-1; Bloom’s: Knowledge; Difficulty: Moderate

MULTIPLE CHOICE QUESTIONS
61. Pressures for cost reductions and local responsiveness include:
p. The framework of how to simultaneously deal with these two sets of pressures.
q. Host country demands and expectations.
r. Being locally responsive makes local customers and governments happy but increase costs.
s. All of the above.
t. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Moderate

62. Four strategic choices for MNEs do not include:
p. Home replication.
q. Domestic.
r. Multidomestic.
s. Transnational.
t. Global.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Moderate

63. Multidomestic strategy involves all of the following except:
p. Focuses on a number of foreign countries/regions.
q. Each foreign country is regarded as a stand-alone “domestic” market.
r. Is effective when there are clear differences among national and regional markets.
s. A multidomestic strategy has high costs.
t. Global standardization strategy is the same as a multidomestic strategy.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-1; Bloom’s: Analysis; Difficulty: Challenging

64. The structure that is typically set up when firms initially expand abroad is a:
p. International division structure.
q. Geographic area structure.
r. Global product division structure.
s. Global matrix structure.
t. Flexible matrix structure.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Knowledge; Difficulty: Easy

65. In which of the following structures are foreign subsidiary managers not given sufficient voice relative to domestic managers?
p. International division structure.
q. Geographic area structure.
r. Global product division structure.
s. Global matrix structure.
t. Flexible matrix structure.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-1; Bloom’s: Analysis; Difficulty: Challenging

66. The most appropriate structure for a multidomestic strategy is a:
p. International division structure.
q. Geographic area structure.
r. Global product division structure.
s. Global matrix structure.
t. Flexible matrix structure.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Application; Difficulty: Moderate

67. Which of the following is not true of the global matrix structure?
p. Is often used to alleviate the disadvantages associated with the geographic area structure.
q. Is often used to alleviate the disadvantages associated with the global product division structures.
r. Often used for sharing and coordinating responsibilities between product divisions and geographic areas.
s. This structure benefits front-line managers who now have only one boss – either a country manager or a product division manager.
t. The matrix structure may add layers of management.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-1; Bloom’s: Analysis; Difficulty: Challenging

68. Which are not true in regards to institution-based considerations?
p. Externally, MNEs are subject to the formal institutional frameworks erected by various home- and host-country governments.
q. Host-country governments often encourage, or coerce MNEs into undertaking certain activities.
r. Strategists weigh the informal, backlash against activities which result in domestic job losses.
s. Formal organizational charts do not necessarily reveal the informal rules of the game, such as organizational norms, values, and networks.
t. To staff the position of the head of a subsidiary, MNEs, in the absence of formal regulations, essentially have only one choice: to use a home-country national as the head of a subsidiary.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-2; Bloom’s: Analysis; Difficulty: Challenging

69. The type of knowledge that is codifiable (that is, it can be written down and transferred without losing much of its richness) is called:
a. Explicit.
b. Implicit.
c. Tacit.
d. Lucid.
e. Clear.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

70. Knowledge management uses “centers of excellence” in which type of MNE?
p. Home replication.
q. Local (multidomestic).
r. Global.
s. Transnational.
t. All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-3; Bloom’s: Comprehension; Difficulty: Moderate

71. Which is true of globalized R&D?
p. Is often known as innovation-avoidance expense.
q. One way to access such a high technology and research-rich cluster is to avoid FDI.
r. R&D work performed by different locations and teams around the world virtually guarantees failure.
s. For large firms, there are actually diminishing returns for R&D.
t. Global virtual teams, which do not meet face to face, may overcome communication and relationship barriers.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-3; Bloom’s: Knowledge; Difficulty: Easy

72. This structure is commonly used in professional service firms:
p. Global account structure.
q. An industry sector structure.
r. Solutions-based structure.
s. All of the above.
t. None of the above.
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 10-4; Bloom’s: Knowledge; Difficulty: Moderate

73. This structure is often used to supply customers (often other MNEs) in a coordinated and consistent way across various countries.
p. Global account structure.
q. An industry sector structure.
r. Solutions-based structure.
s. All of the above.
t. None of the above.
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 10-4; Bloom’s: Knowledge; Difficulty: Moderate

74. Which of the following is a solution rather than a problem in knowledge management?
p. Open innovation.
q. Knowledge leakage.
r. Not invented here syndrome.
s. All of the above.
t. None of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Environmental Influence
LO: 10-3; Bloom’s: Comprehension; Difficulty: Easy

75. Which of the following is not an argument in favor of centralization in knowledge management but instead is an argument in favor of decentralization?
a. Capability to facilitate corporate-wide coordination.
b. Consistency in decision-making.
c. Permits greater speed, flexibility, and innovation.
d. Sufficient power for corporate-level managers to initiate necessary actions.
e. None of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-3; Bloom’s: Analysis; Difficulty: Moderate

76. Which of the following is not an argument in favor of decentralization in knowledge management but instead is an argument in favor of centralization?
p. Better motivates subsidiary-level managers and employees through empowerment.
q. Reduces corporate level overload of responsibilities.
r. Better motivates subsidiary level managers.
s. Sufficient power for corporate-level managers to initiate necessary actions.
t. All of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-3; Bloom’s: Analysis; Difficulty: Moderate

77. Which of the following is a customer-focused dimension?
a. Global account structure.
b. An industry sector structure.
c. Solutions-based structure.
d. All of the above.
e. None of the above.
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 10-4; Bloom’s: Comprehension; Difficulty: Moderate
78. Unique to international competition are the pressures for local responsiveness, which are reflected in:
p. Consumer preferences.
q. Distribution channels.
r. Host country demands.
s. A through C above.
t. Shareholder demands.
AACSB: BUSPROG: Analytic; DISC: Environmental Influence
LO: 10-1; Bloom’s: Comprehension; Difficulty: Easy

79. Which of the following is a key idea regarding the reciprocal relationship between strategies and structures within MNEs?
p. The fit between strategies and structures is crucial.
q. The relationship is two way.
r. Strategies and structures are not static.
s. All of the above.
t. A good strategy cancels the effect of a bad structure.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 10-1; Bloom’s: Comprehension; Difficulty: Moderate

80. Which is not one of the suggestions for international managersthat can be drawn from this chapter?
a. Create a common structure for all MNEs.
b. Understand the nature and evolution of your industry.
c. Actively develop learning and innovation capabilities.
d. Masterthe external rules of the game.
e. Understand and be prepared to change the internal rules of the game.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 10-5; Bloom’s: Comprehension; Difficulty: Easy

SHORT ANSWER ESSAY QUESTIONS
1. To what extent should a firm be committed to a particular strategy versus making frequent changes in the strategy? If a strategy is likely to be changed, what is the point in having one?

2. Normally when a firm first expands overseas, it may use an international division and later use a different organizational structure. Under what circumstances might such a firm wish to shift back to the use of an international division?

3. Global R&D has pros and cons for the firm that uses that approach. However, suppose you are the leader of the country where that firm is based. How might you view having R&D being conducted by a global team in a matter that is vital to the nation’s economic health/and or security?

4. Suppose you are the leader of a nation which currently has few capabilities other than a well-educated populace that could contribute to economic growth. However, you think you have a bright idea. You are going to encourage MNEs from around the world to locate their headquarters in your country. What might attract them and how might that pay off if you are successful?

5. Mega Global Corporation has centralized all of its global operations. The firm’s manager in Lower Slobovia would like to see more decentralization. Her complaint: “We are the experts on what needs to be done in this country but we have to get approval from people who have no idea as to what is going on here. That makes neither sense nor dollars.” Evaluate her statement.

CHAPTER 11 – GOVERNING THE CORPORATION AROUND THE WORLD
TRUE/FALSE QUESTIONS
81. Founders usually start up firms and completely own and control these enterprises.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-1; Bloom’s: Knowledge; Difficulty: Easy

82. Since the 1980s, state ownership has expanded and privatization has declined.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Environmental Influence
LO: 11-1; Bloom’s: Knowledge; Difficulty: Easy

83. The relationship between shareholders and professional managers is a relationship between principals and agents.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-2; Bloom’s: Comprehension; Difficulty: Easy

84. Principal-Principal Conflicts: such conflicts are within one class of principals such as a disagreement among certain majority stockholders and other majority stockholders.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-2; Bloom’s: Comprehension; Difficulty: Easy

85. Inside directors are top executives of the firm.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Easy

86. The trend around the world is to introduce more inside directors and less outside directors.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Easy

87. CEO duality refers to a situation in which two people share the role of CEO.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Easy

88. Board interlocks refers to bonding and teamwork among the members of a board of directors.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Easy

89. How directors strategically prioritize is about the same around the world.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Easy

90. The Market for Corporate Control is another term for the stock market.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-4; Bloom’s: Knowledge; Difficulty: Easy

91. The Market for Private Equity involves going private by tapping into private equity.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-4; Bloom’s: Comprehension; Difficulty: Easy

92. Overall, governance practices need to fit with the nature of the industry in which firms are competing. This cautions against prescribing universal “best” practices.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-6; Bloom’s: Comprehension; Difficulty: Easy

93. Managerial human capital refers to the skills and abilities of top managers and directors.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-6; Bloom’s: Knowledge; Difficulty: Easy

94. Formal legal protection encourages founding families and their heirs to dilute their equity.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 11-6; Bloom’s: Comprehension; Difficulty: Moderate

95. Large shareholders in emerging economies usually need to have a significantly lower percentage of shares to ensure control than in the US.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-6; Bloom’s: Knowledge; Difficulty: Moderate

96. The rise of capitalism has not affected governance.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-6; Bloom’s: Knowledge; Difficulty: Easy

97. FPI investors demand less protection.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 11-6; Bloom’s: Knowledge; Difficulty: Easy

98. The thirst for global capital requires adherence to listing requirements.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 11-6; Bloom’s: Knowledge; Difficulty: Easy

99. Recently, stewardship theory suggests that by and large managers can be viewed as stewards of owners’ interests.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-7; Bloom’s: Knowledge; Difficulty: Easy

100. Convergence advocates argue that a “survival-of the-fittest” process will force firms globally to accept the best practices exemplified by Anglo-American practices.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-7; Bloom’s: Knowledge; Difficulty: Easy

MULTIPLE CHOICE QUESTIONS
81. Ownership will likely be diffused under which of the following situations?
u. A start up firm.
v. Family owned firm.
w. State ownership.
x. All of the above.
y. None of the above.
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 11-1; Bloom’s: Comprehension; Difficulty: Moderate

82. Issues involved regarding how a board of directors can be established so as to be most effective include:
u. The insider/outsider mix.
v. CEO duality.
w. Board Interlocks.
x. The Role of Boards of Directors.
y. All of the above.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Comprehension; Difficulty: Moderate

83. Boards of directors perform all of the following except:
u. Control.
v. Service.
w. Resource acquisition functions.
x. A through C above.
y. Day to day operations.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-3; Bloom’s: Comprehension; Difficulty: Moderate

84. Which of the following make up a governance package?
u. Internal Mechanisms + External Mechanisms.
v. Carrots to motivate managers such as stock options.
w. Sticks that may result in CEO and top management team turnover.
x. The Market for Corporate Control.
y. The Market for Private Equity.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-4; Bloom’s: Knowledge; Difficulty: Easy

85. Three decades of privatization suggest all of the following except:
u. Privatization to insiders helps improve the performance of small firms.
v. In large corporations privatization to insiders, without external governance pressures, is hardly conducive for needed restructuring.
w. Outside ownership and control, preferably by blockholders, funds, foreigners, and/ or banks, are more likely to facilitate restructuring.
x. Such outside ownership and control does not happen frequently because incumbent managers do not necessarily welcome such outside “intrusion.”
y. When outside investors such as institutional investors do come in, they fail to assert their power.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-7; Bloom’s: Analysis; Difficulty: Moderate

86. Industry-Based Considerations regarding corporate governance include all of the following except:
u. Having more outside directors on the board is often regarded as having a negative impact on performance because of their lack of understanding as compared to insiders.
v. In industries characterized by rapid innovation requiring significant R&D investments (such as information technology), outside directors may have a negative impact on firm performance.
w. Research finds that for firms in low-growth, stable industries, no relationship exists between inside management ownership and firm performance.
x. In relatively high-growth, turbulent industries, there is a relationship between inside management ownership and firm performance.
y. In industries experiencing great turbulence, the presence of a single leader may allow a faster and more unified response to changing events.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-6; Bloom’s: Comprehension; Difficulty: Moderate

87. Institution-based considerations in governance include all of the following except:
u. Formal institutional framework.
v. International experience of senior executives.
w. Formal legal protection and impact on founder’s dilution of equity.
x. Lack of legal protection and its impact regarding large shareholders in emerging economies.
y. Impact of informal norms and values.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-6; Bloom’s: Comprehension; Difficulty: Moderate

88. Which are not among the aspects of globalization?
u. Contact with different governance norms.
v. FPI investors demand more protection.
w. The focus on governance has been replaced by a focus on shareholder value.
x. The thirst for global capital requires adherence to listing requirements.
y. The global diffusion of “best practices.”
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 11-6; Bloom’s: Comprehension; Difficulty: Challenging

89. Agency theory assumes that managers:
a. Have a responsibility to the owners.
b. Are agents who are opportunistic and engage in self-serving activities.
c. A and B above.
d. Can be left to their own devices.
e. Are effective steward of the owners’ interests.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-2; Bloom’s: Comprehension; Difficulty: Moderate

90. In regards to global convergence:
u. Advocates argue that globalization will unleash a “survival-of the-fittest” process.
v. Advocates claim firms will be forced to adopt globally the best practices.
w. Others contend that governance practices will continue to diverge throughout the world.
x. The text indicates that complete divergence in corporate governance is probably unrealistic.
y. All of the above.
AACSB: BUSPROG: Analytic; DISC: Operations Management
LO: 11-7; Bloom’s: Knowledge; Difficulty: Moderate

91. Strategists should:
u. Understand the nature of principal–agent and principal–principal conflicts to create better governance mechanisms.
v. Develop firm-specific capabilities to differentiate on governance dimensions.
w. Understand the rules, anticipate changes, and be aware of differences, especially when doing business abroad.
x. Use an understanding of corporate governance to help answer the four fundamental questions in strategy.
y. All of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 11-2; Bloom’s: Knowledge; Difficulty: Moderate

92. As the closing case points out, the positive side private equity firms excel in all the following ways except:
p. They always send experts to sit on the board and are hands-on in managing.
q. They use a high level of debt that imposes strong financial discipline.
r. Private equity turns managers from agents to principals with substantial equity, thus providing a powerful incentive to them.
s. They pay managers more generously, but also punish failure more heavily.
t. They reduce income inequality between financiers and the rest of us.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-1; Bloom’s: Comprehension; Difficulty: Easy

93. As the closing case points out on the negative side, private equity firms have been accused of all of the following except:
u. Being “barbarians.”
v. Being “asset strippers,” and “locusts.”
w. Internationally, causing shock in countries suddenly facing the full rigor of Anglo-American private equity.
x. Placing CSR ahead of all rational economic decisions.
y. None of the above.
AACSB: BUSPROG: Ethics; DISC: Leadership Principles
LO: 11-1; Bloom’s: Comprehension; Difficulty: Easy

94. The defense of private equity includes all of the following points except:
u. While private equity results in job cuts, the same might happen if targets were acquired by public firms.
v. It would not be rational for private buyers to destroy their prize therefore they attempt to avoid doing that.
w. Their record as corporate citizens is no more barbaric than that of public firms.
x. They point to a Texas utility in which owners paid shareholders a 25% premium, gave retail customers a 10% price cut, and dropped plans to build eight dirty coal-fired power plants—hailed by environmentalists as a major victory.
y. The actions of U.S. private equity firms have enhanced the image of the U.S. and capitalism around the world.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-1; Bloom’s: Comprehension; Difficulty: Moderate

95. Diffused ownership is the opposite of concentrated ownership, and is more common in:
a. The US and UK.
b. South America.
c. Asia.
d. Africa.
e. The Pacific.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-1; Bloom’s: Knowledge; Difficulty: Easy

96. Most large, publicly traded UK corporations are now characterized by all of the following except:
u. Diffused ownership.
v. Numerous small shareholders.
w. A separation of ownership and control.
x. Control is largely concentrated in the hands of salaried, professional managers.
y. Corporate managers who own a majority of the stock.
AACSB: BUSPROG: Analytic; DISC: Leadership Principles
LO: 11-1; Bloom’s: Knowledge; Difficulty: Moderate

97. Which of the following is not true regarding large institutional investors?
u. They include professionally managed mutual funds and pension pools.
v. They now own over 50 percent of the stock in major corporations.
w. They are the controlling stockholders in China.
x. Their ability to dump the stock is limited because selling out depresses the share price and harms the institutions.
y. They are more likely to exercise shareholder rights than smaller investors.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-1; Bloom’s: Knowledge; Difficulty: Moderate

98. In regards to family ownership, all of the following are true except:
u. Most small firms in the world are owned and controlled by families.
v. The vast majority of large corporations throughout continental Europe, Asia, Latin America, and Africa no longer feature concentrated family ownership and control.
w. Family ownership and control may provide better incentives for the firm to focus on long-run performance.
x. Such ownership may also minimize the conflict between owners and professional managers typically encountered in widely owned firms.
y. Family ownership and control may lead to the selection of less qualified managers who happen to be the sons, daughters, and relatives of owners.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-1; Bloom’s: Knowledge; Difficulty: Moderate

99. Which of the following is true in regards to outside directors?
u. The trend around the world is to introduce less outside directors.
v. In the United States, less than a half century ago, most boards were made up entirely or largely of outside directors.
w. Many US firms are now favoring a board that is entirely made of people who are insiders due the need for people who can understand the increasing complexity of MNEs.
x. Japanese boards have not waited until they are in financial difficulty to bring in outside directors from banks.
Y. Academic research has failed to empirically establish a link between the outsider/insider ratio and firm performance.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Moderate

100. Which of the following is true regarding CEO duality?
a. From an agency theory standpoint, if the board is to supervise agents such as the CEO, it seems imperative that the board be chaired by the same individual.
b. In US firms with CEO duality, the trend now is to appoint a lead independent director, who chairs the sessions held by outside directors that do not involve company executives.
c. A corporation led by two top leaders—a board chairman and a CEO – will at least have unity of command and experience less top-level conflict.
d. East Asia and Latin America where most firms have concentrated family ownership and control, there is less CEO duality.
e. Firms around the world are being pressured to combine the two top jobs.
AACSB: BUSPROG: Reflective Thinking; DISC: Leadership Principles
LO: 11-3; Bloom’s: Knowledge; Difficulty: Moderate

SHORT ANSWER ESSAY QUESTIONS
1. You are the founder of a firm that appears to have significant long-term growth potential. Right now you and your family own 100% of the firm’s shares and you are trying to figure out to keep things that way. How might you do that? Should you do that?

2. At this present time, what do you see happening in regards to privatization of SOEs?

3. Are there potential issues involving economic power and national sovereignty in the dominant stock ownership position of institutional investors?

4. Can interlocking directorates lead to unfair market advantages and investor exploitation? How?

5. What is the potential relationship between concern about a board dominated by insiders and concern about excess executive pay?

CHAPTER 12 – STRATEGIZING WITH CORPORATE SOCIAL RESPONSIBILITY
TRUE/FALSE QUESTIONS
101. A stakeholder is “any group or individual who can affect or is affected by the achievement of the organization’s objectives.”
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

102. Nearly all CSR advocates argue for a revival of socialism in the world.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Group Dynamics
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

103. The more concentrated an industry is, the more likely that competitors will recognize their mutual interdependence based on old ways of doing business that are not up to the higher CSR standards.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-2; Bloom’s: Comprehension; Difficulty: Moderate
104. Companies have had their CSR policies certified by NGOs that might otherwise be hostile.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Knowledge; Difficulty: Easy

105. Firms pursuing a reactive CSR strategy actively participate in policy discussions, build alliances with stakeholder groups, and voluntarily go beyond what the regulations require.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Comprehension; Difficulty: Easy

106. Since each firm is different (a basic assumption of the resource-based view), not every firm’s economic performance is likely to benefit from CSR.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 12-2; Bloom’s: Comprehension; Difficulty: Easy

107. A key goal for CSR is global sustainability, which is defined as the ability “to meet the needs of the present without compromising the ability of future generations to meet their needs.”
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Strategy
LO: 12-2; Bloom’s: Knowledge; Difficulty: Moderate

108. According to the text, one driver of CSR in the twenty-first century is the declining levels of population in some countries.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Environmental Influence
LO: 12-2; Bloom’s: Knowledge; Difficulty: Easy

109. The anti-WTO protests in Seattle in 1999 are indicative of resentment against globalization and a perceived lack of CSR in firms, particularly those that relocate offices (and jobs) to foreign countries.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Group Dynamics
LO: 12-2; Bloom’s: Comprehension; Difficulty: Moderate

110. Compared with the relatively expanded power of national governments in the wake of globalization, NGOs and other civil society stakeholders have lost the ability to affect firms and their management or to impact legislation.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Group Dynamics
LO: 12-2; Bloom’s: Analysis; Difficulty: Moderate

111. Suppliers and customers are typically considered primary stakeholders.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

112. Primary stakeholder groups are defined as “those who influence or affect, or are influenced or affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival.”
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

113. Milton Friedman, a University of Chicago economist and Nobel laureate, suggested: “The business of business is business.”
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

114. Advocates of shareholder capitalism argue that if firms attempt to attain social goals, it will actually help them focus on profit maximization (and its derivative, shareholder value maximization).
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 12-1; Bloom’s: Knowledge; Difficulty: Easy

115. The more concentrated an industry is, the more likely that competitors will recognize their mutual interdependence based on old ways of doing business that are not up to the higher CSR standards.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-2; Bloom’s: Comprehension; Difficulty: Moderate

116. The five forces framework reinforces the important point that all industries are equal in terms of their exposure to CSR challenges.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Comprehension; Difficulty: Easy

117. There is no conclusive evidence of a direct, positive link between CSR and economic performance, such as profits and shareholder returns.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 12-2; Bloom’s: Knowledge; Difficulty: Easy

118. Reactive Strategy often involves an “out of sight, out of mind” mentality.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 12-2; Bloom’s: Comprehension; Difficulty: Easy

119. Although framed in a domestic versus overseas context, the heart of this debate boils down to the foundational thorny point that frustrates CSR advocates: In a capitalist society, the shareholders—otherwise known as capitalists—are the ones who matter at the end of the day.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Ethical Responsibilities
LO: 12-1; Bloom’s: Analysis; Difficulty: Moderate

120. The idea that MNEs should not interfere in the domestic political affairs of the host country has been enshrined in a number of codes of MNE but CSR advocates have stressed the necessity for MNEs to engage in actions that often constitute political activity.
a. True b. False
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-3; Bloom’s: Knowledge; Difficulty: Moderate
MULTIPLE CHOICE QUESTIONS
101. CSR tends to be the least concerned with improving:
z. Global sustainability.
aa. Shareholder wealth maximization.
bb. Rising levels of population.
cc. Inequity.
dd. High levels of poverty in some countries.
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-1; Bloom’s: Comprehension; Difficulty: Easy

102. NGOs have the ability to:
z. Affect firms’practices.
aa. Influence firms’ management.
bb. Impact legislation.
cc. All of the above.
dd. None of the above
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Comprehension; Difficulty: Moderate

103. Secondary stakeholder groups are:
z. Constituents on whom the firm relies for its continuous survival and prosperity.
aa. Those who do not influence or affect the corporation.
bb. Not influenced or affected by the corporation.
cc. Not engaged in transactions with the corporation and are not essential for its survival.
dd. B through D above.
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Knowledge; Difficulty: Moderate

104. The CSR debate centers on the question:
z. Why does the firm exist?
aa. Why does private property exist?
bb. What laws are needed to control the firm’s behavior?
cc. What can be done to prevent unreasonable profits?
dd. All of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Ethical Responsibilities
LO: 12-1; Bloom’s: Analysis; Difficulty: Moderate

105. Free market advocates tend to do all of the following except:
z. Argue that “the social responsibility of business is to increase its profits, which leads to efficient capital and product markets.”
aa. Argue that all stakeholders have an equal right to bargain for a “fair deal.”
bb. Believe that the first and foremost stakeholder group is shareholders.
cc. Argue that if firms attempt to attain social goals, managers will lose their focus on profit maximization.
dd. Fear that firms will become like SOEs.
AACSB: BUSPROG: Reflective Thinking; DISC: Ethical Responsibilities
LO: 12-1; Bloom’s: Analysis; Difficulty: Moderate

106. Those who advocate CSR:
z. Conduct their debate within the constraints of capitalism.
aa. Argue that a humane capitalism is an oxymoron and unattainable.
bb. Argue that the concepts justice and fairness are simply matters of opinion.
cc. Argue that the most important stakeholder is the stockholder.
dd. None of the above.
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-1; Bloom’s: Knowledge; Difficulty: Moderate

107. Using the five forces model, which will likely result in a higher level of CSR?
z. A highly concentrated industry.
aa. Existence of incumbents.
bb. Socially and environmentally conscious suppliers with standardized products that have multiple substitutes.
cc. No monitoring program for all supplier factories.
dd. Substitutes that are superior to existing products and costs are reasonable.
AACSB: BUSPROG: Analytic; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Analysis; Difficulty: Challenging

108. Which is not true about CSR?
z. Some CSR policies may reduce the firm’s value.
aa. CSR policies may not pay off if common.
bb. CSR that is embedded in people is easier to imitate.
cc. Organization: a firm needs to tie together CSR activities.
dd. It is difficult to prove a link between CSR and economic performance.
AACSB: BUSPROG: Ethics; DISC: Strategy
LO: 12-2; Bloom’s: Analysis; Difficulty: Challenging

109. Which of the following is an accommodative CSR strategy?
a. Neither for or against CSR.
b. Resist imposition of what seems unreasonable.
c. View CSR as worthwhile.
d. Actively participate in CSR policy discussion.
e. Voluntarily go beyond what the regulations require.
AACSB: BUSPROG: Ethics; DISC: Strategy
LO: 12-2; Bloom’s: Comprehension; Difficulty: Challenging

110. Those who feel that firms that expand into emerging economies are failing their CSR responsibilities are most likely to claim that it:
z. Potentially hurts corporate profits.
aa. Reduces shareholder returns.
bb. Fails to provide employment to host countries.
cc. Reduces the standard of living in host countries.
dd. Domestic employees and communities pay the price for the overseas expansion.
AACSB: BUSPROG: Analytic; DISC: Ethical Responsibilities
LO: 12-3; Bloom’s: Knowledge; Difficulty: Easy

111. There is agreement throughout society that:
z. Overseas expansion is good because it helps improve standards of living around the world.
aa. Overseas expansion is bad because it causes loss of jobs in the home country.
bb. Firms should stick strictly to business within a country and not seek to impose their views of human rights on other countries that have different views.
cc. Firms have a responsibility to do whatever is necessary to assure that the human rights that are respected in the home country are implemented in host countries.
dd. None of the above.
AACSB: BUSPROG: Analytic; DISC: Ethical Responsibilities
LO: 12-3; Bloom’s: Knowledge; Difficulty: Moderate

112. An example of a primary stakeholder group is:
u. Media.
v. Social activists.
w. Environmental groups.
x. Employees.
y. Fair labor practice groups.
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Comprehension; Difficulty: Moderate
113. An example of a secondary stakeholder group is:
z. Social and environmental groups.
aa. Suppliers.
bb. Customers.
cc. Governments.
dd. Communities.
AACSB: BUSPROG: Analytic; DISC: Group Dynamics
LO: 12-1; Bloom’s: Comprehension; Difficulty: Moderate

114. In regards to managers and CSR, the following is true except:
z. All sides of the CSR debate agree that they have a unique and central role.
aa. All sides of the CSR debate agree as to how they should implement their role.
bb. As a stakeholder group they are unique in terms of potential coordination.
cc. They are positioned at the center of all the stakeholder relationships.
dd. They make decisions on behalf of the firm that affect other stakeholders.
AACSB: BUSPROG: Ethics; DISC: Leadership Principles
LO: 12-1; Bloom’s: Comprehension; Difficulty: Challenging

115. In regard to the extent of CSR challenges, the following is true except:
a. All industries are equal in terms of their exposure to CSR challenges.
b. Energy- and materials-intensive industries (such as chemicals) have been criticized.
c. Firms that are major outsourcers in foreign countries have been criticized.
d. Some firms have turned to NGO critics to have the NGOs certify their policies.
e. None of the above.
AACSB: BUSPROG: Reflective Thinking; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Comprehension; Difficulty: Moderate

116. In regards to the link between CSR and economic performance:
z. There is no conclusive evidence of a direct, positive link between CSR and economic performance.
aa. Some studies report a positive relationship.
bb. Some studies find a negative relationship or no relationship.
cc. It appears some firms are not cut out for a CSR-intensive strategy.
dd. All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 12-2; Bloom’s: Knowledge; Difficulty: Moderate

117. The instrumental view of CSR advocates who are skeptical of CSR compliance claims:
z. That firms may not necessarily be sincere.
aa. That firms may be compelled to appear to be sensitive to CSR by impression management—in other words, “window dressing.”
bb. That many firms may chase fads by following what others are doing, while not having truly internalized the need for CSR.
cc. That CSR activities simply represent a useful means to help make good profits. Firms are not necessarily becoming more “ethical.”
dd. All of the above
AACSB: BUSPROG: Ethics; DISC: Group Dynamics
LO: 12-2; Bloom’s: Knowledge; Difficulty: Moderate

118. Some CSR advocates who question motives of firms implementing CSR are pleased that:
z. Firms are embarking on some tangible CSR journey.
aa. CSR’s legitimacy is rising on the organizational agenda.
bb. By adopting codes of conduct (even if only for “window dressing” purposes), they create a set of criteria against which they can be judged.
cc. All of the above.
dd. None of the above.
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Knowledge; Difficulty: Moderate

119. Reactive firms:
z. Actively participate in regional, national, and international policy discussions.
aa. Often build alliances with stakeholder groups.
bb. Engage in voluntary activities that go beyond what the regulations require.
cc. React negatively to aspects of CSR that may increase costs.
dd. All of the above.
AACSB: BUSPROG: Ethics; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Knowledge; Difficulty: Easy

120. From an institutional perspective, proactive activities are indicative of all the following except:
a. Normative beliefs.
b. Cognitive beliefs.
c. The desire to do the right thing.
d. An absence of “window dressing.”
e. A quest for better profits.
AACSB: BUSPROG: Reflective Thinking; DISC: Ethical Responsibilities
LO: 12-2; Bloom’s: Comprehension; Difficulty: Challenging

SHORT ANSWER ESSAY QUESTIONS
6. Your firm has sought to be a responsible part of the community and has sought out ways to implement CSR within your capabilities. However, a news organization that has been trying to boost its ratings has done a series on your organization that suggests that your product is harming consumers and the community’s environment. You believe the reports are totally false but protests have recently been directed toward your facilities and a politician who seeking an issue has been loudly condemning your organization? Some of your shareholders are suggesting that the company takes its losses on the product by discontinuing it rather than risk further damage to the company and its reputation. What should you do?

7. Last week you attended a series of lectures at the local university in which the speakers were discussing the role of corporations (such as yours) overseas. The first lecturer discussed the role of MNEs over the years as instruments of national power for the country in which they were based and discussed instances in which the firms became involved in local politics. The speaker condemned such companies as imperialists for attempting to impose U.S. values on foreign nations. The last speaker in the series argued that MNEs have a responsibility to identify injustice and violation of human rights in the nations where they operate and to use either persuasion or economic pressure to bring about change. Whose advice will you follow?

8. A representative of an NGO that has a very significant influence on some your key stakeholders (especially your customers) has met with you. The person has indicated that they are considering conducting a campaign against one of your policies. You feel the policy is totally justified but you have seen how the organization has smeared and destroyed others that it has targeted. The person seems to be hinting that perhaps they might launch a campaign against some other target if you demonstrated CSR by making a big contribution to the NGO. You feel that you are a victim of extortion but the cost of buying them off might be less than the damage that they could do to you. What should you do?

9. Your company has been active in CSR. It has even avoided shutting down its local factory and moving its production overseas where its labor costs could be significantly less because it recognizes the harm that would do the employees and the community. However, the CSR has resulted in a lower level of profitability and now a corporate raider appears to be ready to launch a takeover bid for your company. In the past, when that raider has taken over a company, payrolls have been slashed, all CSR has been discontinued, and nearly all stakeholders other than some investors have been harmed. What should you?