BUS 536 Week 5 Midterm Exam – Strayer University NEW

BUS/536 Week 5 Midterm Exam – Strayer NEW

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Midterm Exam Chapter 1 Through 6

CHAPTER 1 – STRATEGIZING AROUND THE GLOBE
TRUE/FALSE QUESTIONS
1. The opening case is an example of how the publishing industry now requires a simultaneous penetration of all markets rather than trying to win one market after another.

2. In the opening case, the formal rules in China stated that foreign companies could not publish books on their own.

3. In China, political correctness may need to be considered when making reference to Taiwan.
4. The closing case illustrates how to strategically focus on the base of the global economic pyramid and to do so successfully.

5. A SWOT analysis resonates very well with Sun Tzu’s teachings.

6. If a strategy (theory) is truly successful, it will work not just for one firm but for all others as well.

7. Determining the scope of the firm involves not only growth of the firm but also contraction.

8. The text stresses that realism indicates that all companies should “go global” and endeavor to do so as quickly as possible in view of the vast opportunities that exist.

9. The industry-based view posits that the degree of competitiveness in an industry largely determines firm performance.

10. The resource-based view suggests that firm-specific capabilities do not drive performance differences.

11. The institution-based view argues that institutional forces provide an answer to similarities in firm performance but not differences.

12. As illustrated by Cengage Learning’s penetration of the China market with Global Strategy (opening case), the idea that firms must “think global and act local” simultaneously is simply not possible.

13. The earliest MNEs existed in some form thousands of years ago in the Assyrian, Phoenician, and Roman empires.

14. According to the text, today’s most successful MNEs far exceed the historical clout of some MNEs such as Britain’s East India Company during colonial times.

15. During the second half of the twentieth century, Hong Kong, Singapore, South Korea, and Taiwan, refused to participate in the global economy and became known as the “Four Toothless Tigers.”

16. During the 1990s there was an increase in both global trade and opposition to global trade.

17. Semiglobalization involves doing business in either the northern or southern hemisphere but not both.

18. Beginning in the late 1990s and early twenty first century, a corporate governance crisis has developed.

19. According to the text, business students may tend to focus more on the economic gains of globalization, and be less concerned with its darker sides.

20. A lot of opponents of globalization are nongovernmental organizations (NGOs), such as environmentalists and consumer groups.

MULTIPLE CHOICE QUESTIONS
1. Multinational enterprises (MNEs) are firms that:
a. Engage in foreign direct investment (FDI).
b. Directly control value-adding activities in other countries.
c. Manage value-adding activities in other countries.
d. All of the above.
e. None of the above.

2. Which of the following best describes foreign direct investment (FDI)?
a. A firm’s direct investment in production and/or service activities abroad.
b. The purchases of foreign securities by people within the U.S.
c. The purchases of U. S. securities by people from other countries.
d. Avoidance of brokers or other financial intermediaries when making foreign investments.
e. B and C above.

3. Which of the following best defines “Triad” as the term is used in the text?
a. The U.S., Japan, and Germany.
b. The U.S., Canada, and Mexico.
c. North America, Europe, and Japan.
d. North America, Europe, and Asia.
e. The U.S. dollar, the Euro, and the Yen.

4. According to the text, the current brand of “global strategy” seems relevant only for MNEs from:
a. BRIC.
b. The Triad.
c. OPEC nations.
d. NAFTA.
e. The E. U.

5. Emerging economies (or emerging markets):
a. Now command a full one-third of the worldwide FDI flow.
b. Command half of the global gross domestic product (GDP) measured at purchasing power parity.
c. A and B above
d. Despite their growth, they still command less than 10% of global GDP.
e. Consist of countries which are in a state of decline but which are believed to have potential for growth.

BRIC refers to:
a. Bahrain, Russia, Iran, and China.
b. Bolivia, Romania, India, and Columbia.
c. Bulgaria, Romania, Iraq, and China.
d. Bermuda, Rwanda, Iraq, and the Czech Republic.
e. Brazil, Russia, India, and China.

6. Many BRIC local firms are:
a. Effectively competing at home.
b. Launching offensives abroad.
c. Creating serious ramifications for Triad-based MNEs.
d. All of the above.
e. BRIC local firms have yet to become significant globally.

7. Strategy:
a. Dates back to 500bc and the work of the strategist Sun Tzu of China.
b. Applies concepts developed by the strategist von Clausewitz.
c. Includes application of principles of military strategy to business competition.
d. All of the above.
e. In this century, civilian companies no longer apply military theories and principles in dealing with competition.

8. A hallmark of theory building and development is:
a. The outcome of a test.
b. Replication.
c. Intuition.
d. Consensus.
e. Lack of controversy.

9. Overall, strategy is:
a. A rulebook.
b. A blueprint.
c. A set of programmed instructions.
d. All of the above.
e. None of the above.
10. Much of our knowledge about “the firm” is from research on firms in:
a. Anglo-American capitalism.
b. Japan after World War II.
c. German mathematical models.
d. Emerging markets.
e. The early industrial era.

11. The word _______has now become the most famous Chinese business word to appear in English-language media.
a. Keiretsu
b. Guanxi
c. Chaebol
d. Blat
e. None of the above.
12. The _______ view primarily focuses on the ______ in a SWOT analysis.
a. Industry-based, OT
b. Resource-based, OT
c. Industry-based, SW
d. Resource-based, SW
e. Industry and resource, SWOT

13. As shown in the closing case, the informal rules of the game:
a. Must be avoided because global business is not a mere game.
b. Are not applicable in cultures in which tend to be very formal.
c. Often require that the firm seek to change the informal rules instead of going along with those rules.
d. Need to be understood by firms.
e. Are being replaced by formal rules.

14. Diversification:
a. Was acclaimed in the West during the 1960s and 1970s but was discredited twenty years later.
b. Is believed by Western media to destroy value in emerging economies.
c. Has resulted in higher profitability for some in emerging economies than independent firms.
d. In emerging economies may be a function of the level of institutional (under) development.
e. All of the above.

15. “Global strategy” refers to:
a. A particular theory on how to compete.
b. Offering standardized products and services on a worldwide basis.
c. Any strategy outside one’s home country.
d. Strategy of firms around the globe—essentially various firms’ theories about how to compete successfully.
e. All of the above.

16. Globalization is viewed as:
a. A new force sweeping through the world in recent times.
b. A long-run historical evolution since the dawn of human history.
c. A pendulum that swings from one extreme to another from time to time.
d. All of the above.
e. None of the above.

17. Which of the following were the first to express concern about international competition from low-cost countries?
a. American political leaders in the twenty first century.
b. Union leaders in the last half of the twentieth century.
c. American business leaders in the late 1800s.
d. The King of England in the late 1700s.
e. A first century Roman emperor.

18. The current era of globalization originated in the aftermath of:
a. World War I.
b. World War II.
c. The Korean Conflict.
d. The Vietnam Conflict.
e. The Gulf War.

19. At the dawn of the 21st century, __________ had significant ramifications for companies and strategists around the world.
a. Antiglobalization protests
b. Terrorist attacks
c. Corporate governance crisis
d. All of the above
e. None of the above

SHORT ANSWER ESSAY QUESTIONS
1. How can principles of military strategy be useful in developing a global business strategy? Explain by using SWOT analysis.

2. The text points out that not all firms should go global. In view of the vast opportunities, why should some firms not pursue international business?

3. Having valuable, unique, and hard-to-imitate capabilities may be advantageous in doing business globally. However, what is the problem with trying to maintain that advantage?

4. Why is there a backlash against globalization, and how do aspects of that backlash actually enhance globalization?

5. As you examine the current political, social, and economic environment of your country and the world as of the moment you are reading the text, what is your estimate of the extent to which globalization will increase or decrease in the short run? In the long run?

CHAPTER 2 – MANAGING INDUSTRY COMPETITION
TRUE/FALSE QUESTIONS
21. Mass markets tend to be characterized by low profit margins.

22. An industry is defined as a group of firms producing goods and/or services that are similar to each other.

23. A key proposition of the five forces framework is that industry structure is unrelated to firm performance and the strength of the five forces.

24. A key indicator of intense rivalry among firms is low cost competitive actions and reactions.

25. High exit costs from an industry tend to reduce the intensity of rivalry.

26. Product proliferation is a potential strategy used to reduce the threat of potential entry.

27. Substantial switching costs reduce the threat of potential entry.

28. The threat of substitutes (products from different industries that satisfy customer needs being met by focal firms) is greater if there are low switching costs.

29. Core features of the five forces model remain remarkably insightful when analyzing old industries but not new phenomena, such as e-commerce.

30. Japanese firms do not tend to maintain close relationships with their suppliers.

31. One of the benefits of having a cost advantage is that it serves as barrier to entry.

32. If there are many buyers but only a few sellers, the buyers tend to have the most bargaining power.

33. If there are many sellers but only a few buyers, the sellers tend to have the most bargaining power.

34. The three generic strategies can strengthen a focal firm’s position relative to the five forces.

35. A focused firm avoids being either a specialized differentiator or a specialized cost leader.

36. Choosing whether to perform activities differently than rivals or to perform different activities than competitors is the essence of the Three Generic Strategies.

37. Telecommunications is an example of one industry in which one can determine exact boundaries.

38. Strategic alliances are on the decline.

39. The five forces model overemphasizes threats and downplays opportunities.

40. If a low-cost firm has already achieved the maximum efficient scale, it must turn to differentiation to distinguish itself from competitors.

41. Strategies of firms within a strategic group tend to be differentand so does their performance.

42. Recent success of firms in unattractive industries suggests that firm-specific resources and capabilities are not needed to determine firm performance.

43. The industry-based view ignores the impact of industry history and institutions on firm performance.

44. The traditional view recommends avoidance of integration.

45. Recent work favors outsourcing and willingness to collaborate with suppliers/buyers, as well as competitors.

MULTIPLE CHOICE QUESTIONS
20. The luxury market is characterized by:
a. Fewer competitors than in a mass market.
b. Less use of incentives and price cuts to induce purchases.
c. Healthier profit margins than in a mass-market segment.
d. All of the above.
e. None of the above.

21. The ultra luxury automobile market is characterized by:
a. Little competition in the past – but that is changing.
b. A small number of cars produced each year – but they are very expensive.
c. Being the same as the luxury market.
d. A and B above.
e. None of the above.

22. Which of the following is NOT true of the industrial organization (IO) economics model?
a. Industry structure determines firm conduct (strategy), which determines firm performance.
b. Original goal – help regulators set policy to minimize the ability of firms to earn excess profits.
c. Strategists use the IO model to try to earn above-average returns (excess profits).
d. All of the above are NOT true.
e. All of the above ARE true.

23. Which of the following tends to reduce the intensity of rivalry?
a. Similarity of firms in terms of size, market influence and product offerings.
b. Products are big-ticket items and purchased infrequently.
c. New capacity must be added in large increments.
d. Slow industry growth or decline in demand.
e. None of the above.

24. Which of the following are scale-based low cost advantages?
a. Experience curves.
b. Proprietary technology.
c. Favorable access to raw materials and distribution channels.
d. Favorable locations.
e. None of the above.

25. Which of the following would tend to reduce the bargaining power of suppliers?
a. Dominance of the supplier industry by a few firms.
b. Suppliers provide unique, differentiated products with few or no substitutes.
c. Focal firm is not an important customer.
d. Unwillingness and inability of suppliers to integrate forward.
e. None of the above.

26. Which of the follow would tend to reduce the bargaining power of buyers?
a. Large number of buyers.
b. Products of the industry do not produce clear cost advantages or enhance the quality of life for buyers.
c. Purchase standard, undifferentiated commodity products from suppliers.
d. Willingness and ability of buyers to integrate backward.
e. All of the above.

27. Which of the following are true concerning cost leadership?
a. Targets average customers for mass market – little differentiation.
b. Key functional areas are manufacturing and materials management.
c. Relentless drive to cut costs might compromise value that customers desire.
d. All of the above.
e. None of the above.

28. Which is generally NOT true of differentiation?
a. Difficult to sustain basis of differentiation in the long run.
b. Relentless efforts of competitors to duplicate differentiation.
c. Key areas of application include research and development, marketing/sales and after-sale services.
d. It is a challenge to identify attributes that are valued by customers in each market segment.
e. Inability to pass on suppliers’ price increases to buyers.

29. Related and supporting industries are called _________ and they are an additional force that can impact the competitiveness of an industry.
a. Complementors
b. All-rounders
c. Customizers
d. Flexible manufacturing
e. Supporters

30. One noncontroversial issue with strategic groups is:
a. Stability of strategic groups.
b. Mobility barriers between strategic groups.
c. The requirement for large quantities of objective data.
d. All of the above are controversial issues.
e. None of the above is controversial.

31. The industry-based view recommends:
a. Backward integration as a way to defend against the power of suppliers.
b. Backward integration as a way to defend against the power of buyers.
c. Forward integration as a way to defend against the power of suppliers.
d. Forward integration as a way to defend against the power of buyers.
e. Backward or forward integration as a way to defend against the power of suppliers and buyers.

32. Which is a reason for integration as opposed to outsourcing?
a. Greater expense.
b. Strategic flexibility is enhanced.
c. Those within the firm are often more competitive.
d. The activity is crucial to the core business.
e. All of the above.

33. Which is a reason for outsourcing as opposed to integration?
a. Less expense.
b. Strategic flexibility is enhanced.
c. Those outside the firm are often more competitive.
d. The activity is not crucial to the core business.
e. All of the above.

34. Which of the following is NOT true regarding supplier relationships?
a. Supplier relationships that are too close may introduce rigidities, including loss of flexibility.
b. In Japan suppliers may become trusted members of the keiretsu.
c. In Japan, instead of treating suppliers as adversaries, they are treated as collaboration partners.
d. In view of A through C above, supplier relationships in Japan tend to be ineffective.
e. In view of A through C above, close supplier relationships are not necessarily good or bad.

35. Porter’s five forces framework:
a. Identifies relevant variables but fails to ask the needed questions.
b. Identifies only questions to ask.
c. Identifies both relevant variables and questions to ask.
d. Eliminates the need for other frameworks to add insight about firm performance.
e. None of the above.

36. A systematic foundation for industry and competitor analysis is best provided by:
a. The industry-based view.
b. Resource-based view.
c. Historical view.
d. Macro analysis.
e. None of the above.

37. An industry-based view provides some answers to which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

38. Maximizing opportunities and minimizing threats presented by the five forces provides some answers to which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

39. The relative bargaining power of the focal firm and (according to the traditional view) the degree of integration helps answer which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

SHORT ANSWER ESSAY QUESTIONS
6. An intense focus on above-average firm performance is shared by IO economists and those involved in the strategy of firms and yet their perspective is opposite of each other. Explain.
7. How can high exit costs increase the chance that firms may continue to operate for at least a while when operating at a loss? Explain by giving examples.
8. Many high-technology industries are characterized by network externalities. What are those externalities and how can they pay off?

9. How can backward integration be used by buyers and what are some examples?

10. What are the “Three Generic Strategies,” and what lessons can we learn from their use?

CHAPTER 3 – LEVERAGING RESOURCES AND CAPABILITIES
TRUE/FALSE QUESTIONS
46. In SWOT analysis, the resource view focuses on OT: Opportunities and Threats.

47. In SWOT analysis, the industry view focuses on SW: Strengths and Weaknesses.
48. Intangible resources and capabilities are assets that are more easily quantified.
49. Most goods and services are produced through a chain of vertical activities which add value.

50. It is easier to imitate intangible resources/capabilities than tangible ones.
51. Causal ambiguity refers to the difficulty of identifying the outcomes of causal determinants.

52. Valuable, rare, but imitable resources/capabilities may provide temporary competitive advantage.

53. Imitation is not likely to be a successful strategy.

54. A sustained competitive advantage can last since not all advantages eventually erode.

55. The logic of the resource-based view is relatively static.

56. Critics suggest that the resource-based view should eliminate dynamic capabilities.

57. Tightly bundled resources/capabilities may be a disadvantage in high velocity environments.

58. How a firm performs different value-adding activities relative to rivals determines the scope of a firm.

59. A SWOT analysis engages managers to ascertain a firm’s strengths and weaknesses on an activity-by-activity basis.

60. On any given activity, one of the four choices for managers in terms of modes and locations includes inshoring.

61. The Closing Case describes the admiration on the part of firms in developed nations for companies from emerging economies who copy products and processes from companies in developed nations.

62. IBM is an example of how capabilities may cease to add value and instead become core rigidities.

63. The chapter indicates that Toyota is an example of causal ambiguity.

64. Many multinationals consist of many people scattered in many different countries. As a result, their invisible relationships do not add value.

65. Resource-based theorists readily admit that “the source of sustainable competitive advantage is likely to be found in different places at different points in time in different industries.”

MULTIPLE CHOICE QUESTIONS
1. In the Opening case, which of the following attributes describe IBM?
f. Innovative culture
g. Commitment to customer relationships
h. Willingness to change
i. Strong leadership team
j. All of the above.

40. A firm’s__________ are its tangible and intangible assets a firm uses to choose and implement its strategies.
a. Resources
b. Dynamic capabilities
c. Core competencies
d. Net worth
e. None of the above

41. According to the text, which of the following are intangible resources and capabilities?
a. Trade secrets.
b. Organizational.
c. Formal structures.
d. All of the above.
e. None of the above.

42. International outsourcing involves:
a. Offshoring.
b. Inshoring.
c. A and B above.
d. Captive sourcing.
e. None of the above.

43. Having valuable, but common resources/capabilities leads to:
a. Competitive parity.
b. Competitive advantage.
c. Competitive disparity.
d. Competitive disadvantage.
e. Lack of competition.

44. Ways to imitate include:
a. Direct duplication.
b. Substitution.
c. A and B above.
d. Innovation.
e. None of the above.

45. Taking advantage of strengths embodied in resources/capabilities and overcoming weaknesses deals with which fundamental question?
a. Why do firms differ?
b. What determines the scope of the firm?
c. How do firms behave?
d. What determines the international success and failure of firms?
e. All of the above.

46. Traditional resource-based view:
a. Overemphasizes leveraging existing resources/capabilities.
b. Underemphasizes developing new resources/capabilities.
c. Both of the above.
d. Underemphasizes leveraging existing resources/capabilities.
e. Overemphasizes developing new resources/capabilities.

47. Academic research has found support for ______________effects on firm performance.
a. Resource-based
b. Industry-based
c. Complementary specific collective
d. All of the above
e. None of the above

48. Which of the following is better performed in-house instead of being outsourced?
a. An activity with a high degree of industry commonality.
b. A high degree of commoditization.
c. An industry-specific and firm-specific (proprietary) activity.
d. All of the above.
e. None of the above.

49. The VRIO framework does not include capabilities and resources that are:
a. Valuable.
b. Rare.
c. Imitable.
d. Organizationally embedded.
e. All of the above.

50. Examining whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors is known as _________ in SWOT analysis.
a. Parity
b. Competition
c. Benchmarking
d. Deskmarking
e. Standardization

51. If Company A and Company B both have valuable assets that are identical, the text indicates that in order for A to gain a competitive advantage over B, A must:
a. Use its assets differently.
b. Find some basis for suing B.
c. Get out of its existing business.
d. Increase its quantity of those assets.
e. All of the above.

52. Tacit knowledge is probably the most _________ resource.
a. Valuable
b. Unique
c. Hard-to-imitate
d. Organizationally complex resource
e. All of the above

53. Recent research suggests that capabilities in very dynamic high-velocity industries (such as IT) involve all of the following except:
a. Simple (not complicated).
b. Experiential (not analytic).
c. Iterative (not linear processes).
d. Involve “learning by doing.”
e. “Learning before doing.”

54. Which of the following are not involved in hypercompetition?
a. A shortened window during which a firm may command competitive advantage.
b. Dynamic maneuvering.
c. Unleashing a series of small, unpredictable, but powerful actions.
d. Slowing the pace of change.
e. Attempts to erode rivals’ competitive advantage.

55. Recent aspects of outsourcing include all of the following except:
a. “Business process outsourcing” (BPO).
b. High-end services to countries led by India.
c. Digitization and commoditization of service work.
d. As stated by the text, the outsourcing of services is definitely a long-term benefit.
e. Increases due to the Internet and the reduction of international communication costs.

56. All of the following are arguments used by proponents of offshoring except:
a. It creates enormous value for firms and economies.
b. Western firms are able to tap into low-cost and high-quality labor.
c. Firms can focus on their core capabilities.
d. For every dollar spent by US firms on India, the U.S. obtains $1.13.
e. It is not true that some US employees may lose their jobs.

57. Critics of offshoring make all of the following arguments except:
a. If even core functions like engineering, R&D, manufacturing, and marketing can—and often should—be moved outside the country, what is left of the firm?
b. Critics argue such offshoring nurtures rivals.
c. Offshoring increasingly results in job losses in high-end areas such as design, R&D, and IT/BPO.
d. Many large US firms claim that they are “global companies” but they seem to be bound by “American values.”
e. In some cases, it undermines national security.

58. Critics of outsourcing agree that MNEs and their outsourcing can be praised for which of the following?
a. Not exploiting cheap labor.
b. Not treating people as “tradable commodities” that can be jettisoned.
c. Not destroying jobs destroying jobs at home.
d. Protecting customer privacy.
e. None of the above.

SHORT ANSWER ESSAY QUESTIONS
11. What is the relationship of benchmarking to the Value Chain? Any cautions in benchmarking?

12. How has offshoring contributed to complex supply-chain management? What are some examples?

13. How is it possible for a strength to become a weakness? How does IBM illustrate that possibility?
14. As you read through the text, you may be looking for secrets of success in doing business globally. This chapter gives IBM as an example of a firm that has been very successful. What did it say about the problem of identifying the reason for IBM’s success? If the reason for success cannot be determined, should we abandon any attempt to develop a rational strategy and simply depend on luck?

15. What do you think about the use of offshoring by MNEs? Is it a threat to jobs in the U.S.? Has it benefited MNEs and other countries more than the U.S.?

CHAPTER 4 – EMPHASIZING INSTITUTIONS, CULTURES, AND ETHICS
TRUE/FALSE QUESTIONS
66. Cognitive pillar refers to the internalized, taken-for-granted values and beliefs that guide individual and firm behavior.
67. The key role of institutions is increasing uncertainty for international firms.

68. Adopting binding international commercial arbitration eliminates political risk in emerging markets.

69. Opportunism fosters transaction costs.
70. Relational contracting is not advantageous when the size of the economy is limited.
71. One disadvantage of relational contracting is that it may cause firms to abandon established relationships.

72. Formal, market-supporting institutions lower transaction costs and facilitate new entries.

73. Historically, the strategy literature has focused on the specific relationship between strategic choices and institutional frameworks.

74. Strategic choices are selected within and constrained by institutional frameworks in developed economies.

75. Striking differences between institutions in developed and emerging economies has eliminated the institution-based view from strategy discussions.

76. Strategic choices are direct outcomes of the reduced interaction between institutions and firms.

77. Western firms tend to focus on relatively short-term profits and shorter planning horizons.

78. All sides agree that ethics can make or break a firm.

79. Catastrophes may allow ethical firms to shine.

80. Ethics are universal. What is unethical in one country will be viewed as unethical in other countries.

81. Richer, developed countries tend to be less corrupt than poorer, developing countries.

82. Transaction cost theorists argue that institutions emerge to combat opportunism.
83. Doing business with foreigners may significantly reduce transaction costs over doing business with domestic firms.

84. Joint ventures between Chinese and Western firms outperformed joint ventures between local (Chinese) and Asian firms.

85. Hofstede’s studies were based on surveys from 1968-1972 and might not capture the cultural changes that have occurred throughout the world in the past forty years.

MULTIPLE CHOICE QUESTIONS
59. Countries with a weak rule of law do not include?
f. IndiaJapan.
g. Brazil.
h. China.
i. Russia.

60. Reasons for increased FDI in China in recent years do not include:
f. Low cost labor.
g. A sizeable domestic market.
h. Strong intellectual property protections.
i. Increased emphasis on binding international commercial arbitration by Chinese authorities.
j. All of the above.

61. Which of the following defines institutions?
f. “Humanly devised constraints that structure human interaction.”
g. “Regulatory, normative and cognitive structures and activities that provide stability and meaning to social behavior.”
h. Government of individual and firm behavior.
i. All of the above.
j. None of the above.

62. Institutions do which of the following?
f. Reduce uncertainty.
g. Signal which conduct is acceptable and which is not.
h. Constrain the range of acceptable actions.
i. Reduce opportunism and transaction costs.
j. All of the above.

63. How do institutions reduce uncertainty?
f. Relational contracting.
g. Arm’s length transaction with 3rd party enforcement.
h. Institutional transitions.
i. All of the above.
j. None of the above.

64. Porter’s “diamond” model:
f. Explains competitive advantage of leading industries within the same country.
g. Explains competitive disadvantage of globally leading industries in different countries.
h. Has been criticized for ignoring history.
i. Has been criticized for focusing on institutions.
j. C and D above.

65. Which are true regarding informal constraints?
f. When formal institutional constraints fail, informal constraints tend to fail as well.
g. Following the collapse the former Soviet Union, informal constraints were unable to facilitate growth of entrepreneurial firms.
h. Even in developed economies, the best-connected firms can reap significant benefits.
i. All of the above.
j. None of the above.

66. According to ___________ culture is the “Collective programming of the mind which distinguishes the members of one group or category of people from another.”
f. Porter
g. Hofstede
h. North
i. Scott
j. Merck

67. Power distance is best defined as:
a. The degree of social inequality.
b. The identity of an individual is not based on the identity of his or her collective group.
c. Sex role differentiation.
d. The extent to which people accept ambiguous situations.
e. Emphasis on perseverance and savings.

68. Individualism is best defined as:
a. The degree of social inequality.
b. The identity of an individual is not based on the identity of his or her collective group.
c. Sex role differentiation.
d. The extent to which people accept ambiguous situations.
e. Emphasis on perseverance and savings.

69. Long-term orientation is best defined as:
a. The degree of social inequality.
b. The identity of an individual is not based on the identity of his or her collective group.
c. Sex role differentiation.
d. The extent to which people accept ambiguous situations.
e. Emphasis on perseverance and savings.

70. Which of the following are true regarding cultures and strategic choices?
f. Managers in high power distance countries have a greater penchant for centralized authority.
g. Solicitation of subordinate feedback and participation is a sign of weak leadership in high power distance countries.
h. Individualistic cultures prefer more formal contractual safeguards in alliances than collectivistic cultures.
i. Managers in low uncertainty avoidance countries rely more on experience and training.
j. All of the above.

71. Which tends to be true of masculine cultures?
f. May have a relative advantage in small-scale, customized manufacturing.
g. May be at a disadvantage in making products efficiently, well and fast.
h. Stereotypical manager is decisive.
i. Stereotypical manager is accustomed to seeking consensus.
j. None of the above.

72. The norms, principles and standards of conduct that govern behavior:
f. Are an important part of national culture but not organizational culture.
g. Are private matters and not issues for formal institutions.
h. Have a substantial overlap with what is illegal.
i. Are sometimes ignored in the case of downsizing.
j. All of the above.

73. Which is the instrumental view regarding motivation to become ethical?
a. Jump on the “bandwagon” to appear more legitimate without becoming more ethical.
b. Be self-motivated to “do it right” regardless of social pressures.
c. Good ethics are a way to achieve good profits.
d. Ethics is an instrument to impose the values of the elite on the masses.
e. Ethics is a game that is played like a musical instrument.

74. Ethical imperialism is best expressed by which of the following:
f. “When in Rome, do as the Romans do.”
g. “There is only one set of Ethics, and we have it!”
h. “Respect for human dignity and basic rights should be the absolute, minimal ethical threshold for ALL operations around the world.”
i. “The abuse of public power for private benefit.”
j. “Ignore corruption.”

75. Strong correlation between high level of corruption and low level of economic development is evidenced by:
f. China’s low level of corruption and high level of economic development.
g. China’s high level of corruption and low level of economic development.
h. Indonesia’s low level of corruption and high level of economic development.
i. Indonesia’s high level of corruption and low level of economic development.
j. None of the above.

76. The Foreign Corrupt Practices Act (FCPA) bans:
f. Bribery to American officials by companies based in other countries.
g. Bribery to foreign officials by companies based in the U.S.
h. Bribery to American officials by companies based in the U.S. but operating overseas.
i. Bribery to foreign officials by companies based overseas.
j. Bribery to all officials everywhere by companies based anywhere.

77. Which best defines an accommodative strategy?
f. Firms do not feel compelled to act unless faced with a disaster or public outcry.
g. Denial is the first line of defense.
h. Focus on regulatory compliance, firm fights demand for changes unless they are regulatory.
i. Organizational norms emerge to accept responsibility for actions – cognitive beliefs/values that promote ethical choices are internalized.
j. Firms constantly anticipate institutional changes and do more than is required to act ethically and responsibly.

78. In regards to individualism vs. collectivism:
a. Collectivists never discriminate against out-group members and may be more opportunistic when dealing with in-group members.
b. Individualists make more distinction between in-group and out-group membership.
c. Individualists are more opportunistic when dealing with in-group members.
d. Individualists may view social interactions/activities as related to the business at hand.
e. Collectivists may view social interactions/activities as unessential and wasteful of resources.

SHORT ANSWER ESSAY QUESTIONS
16. What is the benefit of formal, rule-based, impersonal exchange with third-party enforcement (often termed arm’s-length transaction) versus informal institutions? Why can’t we assume that formal institutions are inherently better than informal ones? How do formal and informal institutions complement each other?

17. How is the problem of counterfeiting related to ethics and how institutions matter?

18. Why is it not true that relying on informal connections is a strategy only relevant to firms in emerging economies and that firms in developed economies only pursue “market-based” strategies?

19. More than goods and services are moving across borders: as technology enables ideas and lifestyles to be observed by a variety of people around, cultures are undergoing modification, Hofstede’s dimensions of culture were based on surveys of IBM employees from 1968-1972. Much has changed in the past forty years. Nevertheless, his dimensions do provide a starting point for better understanding and relating to people from around the world. Give some examples of people you have known who have come to this country from a somewhat different culture. To what extent have they retained their cultural identity versus undergone cultural change? Have these changes created any problems for them?

20. What is ethical in one country may be unethical or illegal in other countries – and vice versa. Nevertheless, ethical imperialism (absolute belief that “there is only one set of Ethics, and we have it!”) is alive and well. You may be able to identify some values that seem to be almost universally accepted. However, such is not the case with all values. As a result, doesn’t a global company need to “pick sides” in ethical controversies and thus be an “ethical imperialist?”

CHAPTER 5 – GROWING AND INTERNATIONALIZING THE ENTREPRENEURIAL FIRM
TRUE/FALSE QUESTIONS
86. Entrepreneurship is not the exclusive domain of small, young firms.

87. Innovative, proactive and risk-seeking behavior crosses national borders.

88. Development of entrepreneurship around the world depends on avoiding the impact of formal institutions that govern how entrepreneurs start up new ventures.

89. There are striking differences in government regulations concerning start-ups.

90. Compared to underdeveloped countries, governments in developed economies impose more procedures and a higher total cost for new start-ups.

91. Selling out can be a viable exit strategy.

92. Transaction costs are qualitatively higher in international markets.

93. The numerous differences in formal institutions and informal cultures/norms are not barriers to internationalization.

94. Neither large nor small firms decide not to internationalize because of high transactions costs.

95. Direct exporting involves selling products made in domestic market to customers in foreign markets.

96. One downside to licensing/franchising is that the licensor/franchisor may lose control over how their technology and brand are used.
97. As a general rule, entrepreneurs’ previous international experience differentiates rapid internationalization from slow/no internationalization.
98.
99. FDI lowers firm performance more than other forms of entry (over the long term).

100. Indirect exporting can be achieved through trading companies.
101. Purchasing established local firms is the fastest route to establishing a presence in a foreign market.
102. The personal traits of entrepreneurs have been the primary motivating force in China and Southeast Asia, not the environments that set formal and informal rules.

103. Children from wealthy families are less likely to start new businesses.
104. Most scholars now agree that entrepreneurship is a result of both nature and nurture.
105. There are no hard and fast rules on whether entrepreneurial firms should internationalize rapidly or slowly.
106. It is much easier for entrepreneurs to walk away from debts incurred in failed/bankrupt ventures in Germany and Japan than in the United States.
107. One problem for failed entrepreneurs is that many will not acknowledge failure and thus avoid exiting the business despite escalating losses.
108. Harsh bankruptcy laws become exit barriers but not significant barriers to entry.
109. Entrepreneurs and their firms are engines of the creative destruction process.
110. Personal traits of entrepreneurs are no different than non-entrepreneurs.
111. Behavior of entrepreneurs differs from non-entrepreneurs.

MULTIPLE CHOICE QUESTIONS
79. Which best describes entrepreneurs?
j. Those who identify and exploit previously unexplored opportunities.
k. Founders and owners of new businesses.
l. Managers of small existing firms (i.e. those with fewer than 500 employees).
m. All of the above.
n. None of the above.

80. Which of the following are NOT true in regards to small and medium-sized enterprises (SMEs).
k. They create approximately 50% of total value added in the world.
l. They generate 60-90% of employment, depending on where they are located.
m. Each year 4-6% of adult working population in North America, Western Europe, Central and Eastern Europe attempt to start a new venture.
n. Around the world, a majority of entrepreneurial firms (including 60% of start-ups in the US) succeed within 6 years.
o. Entrepreneurship is not the exclusive domain of small, young firms.

81. Which would tend to result in a greater level of entrepreneurship?
k. Fewer numbers of incumbents.
l. Capital-intensive industries.
m. Weak bargaining power of suppliers.
n. Ability to reduce the bargaining power of buyers.
o. Lack of threat to incumbents from substitute products/ and services.

82. Cautions that should be acknowledged by entrepreneurs is that it may be difficult to:
k. Predict consumer preferences.
l. Effectively price innovative products/services.
m. Build sufficient capacity.
n. All of the above.
o. None of the above.

83. To achieve success, entrepreneurial resources must be:
k. Of low value so as to reduce cost.
l. Common.
m. Non-core competencies that are hard to imitate.
n. Organizationally embedded.
o. All of the above.

84. Which of the following would be least likely to enhance the credibility of a SME?
k. Specialize in standardized commodities such as books and airline tickets.
l. Use E-commerce sites.
m. Deal in products in which quality is an issue with consumers.
n. Form strategic alliances with larger firms.
o. Willingness to take ownership of intermediated goods and services.

85. One general conclusion that we can reach regarding entrepreneurship is that:
k. Regulatory burdens on new start-ups are much easier in poorer countries.
l. The less entrepreneur-friendly a country’s formal institutional requirements are the more likely entrepreneurship will contribute to economic development.
m. Informal institutions do not affect entrepreneurships.
n. Individualistic and low uncertainty-avoidance societies tend to foster relatively more entrepreneurship.
o. Collectivistic societies may result in relatively higher levels of entrepreneurship.

86. Which of the following is NOT an example of one of the five entrepreneurial strategies?
k. Use speed and stealth to disrupt and pre-empt competitors.
l. Emphasize analysis over action.
m. Less novel, but substantially new ways of doing business can also be innovative.
n. Centrally located network positions are most helpful.
o. Selling an equity stake to outside investors.

87. A potential benefit of an initial public offering (IPO):
a. Can increase firm’s financial stability.
b. Focus on short-term results.
c. Fiduciary duty.
d. Entrepreneurs’ freedom of action.
e. Increased scrutiny by stakeholder groups.

88. In recent years, the country with the least number of bankruptcies was:
f. Japan.
g. France.
h. Great Britain.
i. Germany.
j. The United States.

89. Indirect, subtle attacks that large rivals may not immediately recognize as competitive challenges are hallmarks of which of the following five entrepreneurial strategies?
f. Growth.
g. Innovation.
h. Network.
i. Financing and Governance.
j. Harvest and Exit.

90. Which of the following is true regarding internationalizing firms?
k. Only large MNEs are able to internationalize successfully.
l. SMEs do not operate solely in domestic markets.
m. Start-ups are unable to do business in foreign markets from the very beginning – they cannot be “born global.”
n. Transaction costs do not prevent large firms from internationalizing.
o. Opportunism is easy to detect and remedy in international markets.

91. Suppose you are an SME with limited financial resources. In view of that, your best choice for entering foreign markets would be:
k. Foreign direct investment.
l. Licensing or franchising.
m. Direct exporting.
n. None of the above.
o. Any of the above.

92. In a manufacturing setting, the purchase of the right to use another firm’s proprietary technology is referred to as:
k. Direct exporting.
l. Licensing.
m. Franchising.
n. Exporting.
o. Importing.

93. Exporting only after receiving unsolicited foreign inquiries is best described as:
a. Direct exporting.
b. Indirect exporting.
c. Passive or sporadic exporting.
d. Inactive exporting.
e. None of the above.

94. Which of the following best describes Foreign Direct Investment (FDI)?
k. Avoiding the use of financial intermediaries such as brokers.
l. Firm invests directly in production or service activities in another country.
m. Traveling to a country to invest instead of using the Internet.
n. Citizens of a foreign country invest in their own country with their own resources.
o. The use of cash instead of credit.

95. “Greenfield ventures” are:
k. Examples of international grain corporations.
l. Environmentally friendly MNEs.
m. Wholly owned subsidiaries that are built from scratch in a foreign country.
n. Irrigation projects in areas stricken by famine.
o. Joint ventures in agriculture between governments and private firms.

96. Which of the following involves the most complexity?
k. Direct exporting.
l. Direct importing.
m. Direct investment.
n. Licensing.
o. Franchising.

97. Which normally provides the most control over technology and brand?
k. Direct investment.
l. Licensing.
m. Franchising.
n. B and C above.
o. There is no difference in any of the above.

98. Which of the following traits would tend to prevent entrepreneurs from establishing new firms?
a. Strong desire for achievement.
b. Strong locus of control.
c. Willingness to take risks and tolerate ambiguity.
d. The tendency to be a serial entrepreneur.
e. None of the above.

SHORT ANSWER ESSAY QUESTIONS
21. Innovation is at the heart of an entrepreneurial mindset and important to success. However, what if a person does not tend to be creative? Should that person not consider forming an SME? Are there approaches that one can follow which will likely enable such a person to be more innovative than would otherwise have been the case?

22. Suppose you have formed a company that is pursuing a product or service that is the current hot fad among investors and it appears that you could quickly enhance your personal wealth as well as quickly provide funds for your company through an IPO. It seems like an awesome opportunity. However, why might you wish to turn it down?
23. Suppose you are convinced that you have a product/service that has a huge overseas potential but your funds are very limited and you do not wish to seek partners, investors, or creditors to exploit the opportunity. What can you do?
You may not have the resources to undertake exporting by yourself but you may be able to do so through a foreign trade intermediary such as a trading company.
24. How many people have you known who established an SME because he/she wanted to “be his/her own boss?” How many of them actually worked more hours and had less vacation time than if they worked for someone else? How many had to make sacrifices for at least the first few years in terms of income and time with their family as compared to what their situation would likely have been otherwise? What appears to have motivated them? If you have not known anyone like that, what do you think would drive otherwise rational people to “become their own boss?”
25. What were the four implications for action by the savvy entrepreneur listed in the text? Which is the most important for the entrepreneur? Which is the easiest and fastest for that person to implement?

CHAPTER 6 – ENTERING FOREIGN MARKETS
TRUE/FALSE QUESTIONS
112. The Liability of Foreignness is the inherent disadvantage foreign firms experience in host countries because of their nonnative status.
113. An underlying reason for firms to NOT go abroad is the size of the firm.
114. An underlying reason for firms to NOT go abroad is the size of the domestic market.
115. In regards to industry-based considerations, the higher the entry barriers, the more intensely firms will attempt to compete abroad.
116. Backward vertical integration refers to vertical integration that has not been updated.
117. The bargaining power of suppliers may prompt backward vertical integration.
118. The bargaining power of buyers may lead to forward vertical integration.
119. The market potential of substitute products may encourage firms to bring them abroad.
120. Currency risks can be reduced by speculation and hedging.
121. Under the Stage Model school of thought firms will enter culturally similar countries during their first stage of internationalization.
122. One of the drawbacks of large-scale entries is limited strategic flexibility.
123. MNEs that enter foreign markets through foreign direct investment do not have OLI advantages.

124. For small volume of exports, direct export is not optimal.
125. Indirect exports avoids exporting through domestically based intermediaries.
126. Turnkey projects reduce the competitiveness of foreign clients and increase their dependence when selling state of the art technology.
127. Acquisition adds no new capacity.
128. Entry strategies may change over time.
129. Some foreignness is never an asset.
130. MNEs are firms that are truly global.
131. International agreements have established whose “rules of the game” e-commerce follow.

MULTIPLE CHOICE QUESTIONS
99. The differences in formal and informal institutions that govern the rules of the game in different countries include _______ differences.
o. Regulatory
p. Language
q. Cultural
r. All of the above
s. None of the above

100. As firms expand into more countries, they should recognize:
p. Foreign firms are still often discriminated against.
q. Foreign firms primarily deploy overwhelming resources and capabilities that offset the liability of foreignness.
r. Foreign firms are able to offset the liability of foreignness and still have some competitive advantage.
s. All of the above.
t. None of the above.

101. Small firms in a large domestic market are referred to as:
p. Enthusiastic internationalizers.
q. Follower internationalizers.
r. Slow internationalizers.
s. Occasional internationalizers.
t. Domestic internationalizers.

102. The lower the value of firm-specific resources and capabilities such as________ the more likely firms will aggressively leverage them overseas.
p. Tangible assets
q. Know-how
r. Software
s. All of the above
t. None of the above

103. Firms may choose not to enter certain countries if:
p. They possess rare firm-specific assets.
q. The transaction costs are be too low.
r. There are dissemination risks.
s. There is an authorized diffusion of firm-specific assets.
t. All of the above.

104. Organizing firm-specific resources and capabilities as a bundle:
p. Favors firms with strong complementary assets.
q. Prevents having assets integrated s a system.
r. Discourages using them overseas.
s. Is counterproductive.
t. Occurs only in domestic markets.

105. Which of the following are not regulatory risks?
p. An obsolescing bargain.
q. Deals that have been struck by MNEs and host governments.
r. Nationalization.
s. Recent trends among host governments regarding their relationships with MNEs.
t. B and C above.

106. Which of the following exemplify trade barriers?
p. Tariffs.
q. Local content requirements.
r. Restrictions on certain entry modes.
s. A and C above.
t. All of the above.

107. Which of the following is not a location specific advantage?
a. Agglomeration.
b. Knowledge spillovers.
c. A skilled labor force.
d. A pool of specialized suppliers and buyers.
e. All of the above are location advantages.

108. The strategic goal of __________ involves going after countries that offer the highest price.
k. Natural resources-seeking
l. Market-seeking
m. Efficiency-seeking
n. Innovation-seeking
o. Profit-seeking

109. Institutional Distance involves all of the following except that which is:
k. Regulatory.
l. Normative.
m. Cognitive.
n. Cultural.
o. B and C above.

110. First mover advantages do not include:
p. Developing proprietary, technological leadership.
q. Preempting scarce assets.
r. Establishing entry barriers.
s. Successful clashes with dominant firms in domestic markets.
t. Creating good relationships with key stakeholders.

111. Late mover advantages do not include:
p. Taking a free ride on first movers’ investments.
q. Joining the game with massive firepower when some of the uncertainties are removed.
r. Preempting scarce assets.
s. Taking advantage of first movers’ inflexibility by leapfrogging over them.
t. Choice of Strategy.

112. Large-scale entries do which of the following?
p. Benefit from a strategic commitment.
q. Assure local customers and suppliers.
r. Deter potential entrants.
s. A and B above.
t. All of the above.

113. Small-scale entries normally benefit by their:
a. Focus on accumulating experience.
b. Emphasis on “learning by doing.”
c. Strong strategic commitment.
d. First mover advantages.
e. A and B above.

114. Non-equity modes of entry typically involve:
p. Exports and contractual agreements.
q. Larger, harder-to-reverse commitments.
r. Establishing independent organizations overseas.
s. Joint ventures (JVs).
t. Wholly owned subsidiaries.

115. All of the follow are true of direct exports except:
p. Most basic mode of entry.
q. Capitalizes on economies of scale in production concentrated in the home country.
r. Affords better control over distribution.
s. The agendas and objectives of the intermediaries and exporters are the same.
t. Designs and productions geared for the domestic market first and foremost.

116. Selling the rights to intellectual property for a royalty fee is involved in:
p. Licensing/franchising.
q. Turnkey projects.
r. R&D contracts.
s. Comarketing.
t. All of the above.

117. Which is not true of joint ventures?
p. They are jointly owned by two or more parent companies.
q. They share risks with local partners.
r. They gain access o the local partner’s knowledge about the host country.
s. They are politically less acceptable than wholly owned subsidiaries.
t. The goals of partners may diverge.

118. Greenfield operations refers to:
a. Licensing/franchising.
b. Turnkey projects.
c. R&D contracts.
d. Co marketing.
e. Wholly owned subsidiaries.

SHORT ANSWER ESSAY QUESTIONS
1. Is “foreignness” a liability or an asset? What causes it to be one or the other?
2. Schmaltz argues: “If a company wishes to be a global corporation it should truly globalize, not just operate within the so-called Triad.” What might Schmaltz be overlooking?
3. J. Lee disagrees with M. Schmaltz (above): “If a company wishes to be a global corporation, it does not need to locate in every continent – it should focus on those locations that are most profitable.” What do you think?
4. The text points out that from a resource-based view, you and your firm need to develop overwhelming capabilities to offset the liability of foreignness. However, how does a small firm do that?

5. Discussion of strategies for MNEs focus on growth and global expansion. Under what circumstances can downsizing and withdrawing from countries make sense? Why might some firms fail to withdraw or downsize?