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Question 1:

A firm wishing to become global must consider how many national markets to enter. A firm should enter fewer national markets when

A. Communication adaptation costs are low.

B. The product need not be adapted.

C. Entry costs are low.

D. The first countries chosen are heavily populated and have high incomes.

Correct Answer: D

According to Ayal and Zif, the following are factors indicating that few national markets should be entered:


entry costs are high;


market control costs are high;


product adaptation costs are high;


communication adaptation costs are high;


the first countries selected have large populations, high incomes, and high income growth;


a dominant firm can erect high entry barriers.

Question 2:

The least risky method of entering a market in a foreign country is by

A. Indirect exports.

B. Licensing.

C. Direct exports.

D. Direct investments.

Correct Answer: A

An indirect export strategy operates through intermediaries, such as home-country merchants who buy and resell the product, home-country agents who negotiate transactions with foreign buyers fora commission, cooperatives that represent groups of sellers, and export-management firms that receive fees for administering the firm\’s export efforts. Indirect export requires lower investment than direct export and is less risky because of the intermediaries\’ expertise.

Question 3:

Which strategy for a global marketing organization balances local responsiveness and global integration?

A. Global.

B. Multinational.

C. Glocal.

D. Transnational.

Correct Answer: C

A glocal strategy combines some elements of local responsiveness or adaptation with some elements of global integration. Successful telecommunications firms are examples of balancing these elements. Local responsiveness is indicated when local product tastes and preferences, regulations, and barriers are significant. Global integration is indicated when demand is homogeneous and economies of productive scale are large.

Question 4:

A firm sold the same product in many foreign countries but changed the ad copy to allow for language and cultural differences. According to teegan\’s model of adaptation strategies, the firm adopted a strategy of:

A. Product adaptation.

B. Communication adaptation.

C. Dual adaptation.

D. Straight extension.

Correct Answer: B

Communication adaptation is a strategy that does not change the products, but advertising and marketing campaigns are changed to reflect the local culture and beliefs. For example, a firm may use one message but with changes in language, name, and colors. It may use a consistent theme but change the ad copy in each market. Another option is for a firm to devise a group of ads from which each market may choose the most effective. Still another option is to develop promotion campaigns locally.

Question 5:

Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. A polycentric attitude is indicated by

A. An identification with the nationality of the owner.

B. Evaluation and control standards that are both local and global.

C. High information flow in multiple directions.

D. Relatively little decision making by the central administrative authority.

Correct Answer: D

A polycentric attitude assumes that cultural differences require local managers to make most decisions because they are more knowledgeable about local conditions than are central administrators. Thus, development of local managerial talent is crucial. Another result is that foreign operating performance is primarily evaluated based on results. As a consequence,methods, training, and incentives vary significantly among subsidiaries. Furthermore, control is predominantly local, the firm is identified with the nationality of the host nation, and relatively little communication occurs with central administration or among subsidiaries. One disadvantage is that local operations may have inefficiencies because of duplication of activities. Another disadvantage is loss of goal congruence between local entities and the firm as a whole. Advantages are more capable and motivated local managers, better results in local markets, local development of new product ideas, and stronger support by host governments.

Question 6:

According to research on the international contingency model of leadership, which path- goal leadership style is most likely to be accepted around the world as culturally appropriate?

A. Directive.

B. Participative.

C. Supportive.

D. Achievement-oriented.

Correct Answer: B

A participative style entails consultation with employees and serious attention to their ideas. The participative style, although not always the best, is the most widely accepted internationally. Every country surveyed found it to be culturally acceptable.

Question 7:

In some regions of the world, business is conducted more often through personal relationship building than through legal contracts. This is an example of a

A. Cultural factor.

B. Commercial factor.

C. Technical factor.

D. Legal factor.

Correct Answer: A

In high-context cultures (e.g., Japanese, Chinese, Arabic, and Korean), much meaning is transmitted by nonverbal cues and situational circumstances. Thus, a person\’s status in a firm, rank in society, and reputation convey the primary message. In low-context cultures (e.g., Northern Europe and North America), primary messages are transmitted verbally. Hence, precise written contractual agreements are highly valued. In contrast, social events aremore highlyvalued in a high-context culture. Attitudes, tastes, behavior, and social codes are culturalfactors. Accordingly, a preference for personal relationships rather than precise writtencontracts is a cultural factor.

Question 8:

A starting point for developing competitive strategies is customer value analysis (CVA). According to theCVA approach.

A. Customer value equals customer benefits.

B. Bad competitors rather than good competitors should be targeted.

C. Strong competitors should be avoided even when they have exploitable weaknesses.

D. Distant competitors are the usual threats.

Correct Answer: B

Bad competitors should be targeted rather than good competitors. The former disturb the competitive equilibrium, e.g., by excessive expansion of capacity or overly risky behavior. The latter make sound business decisions that promote the long-term health of the industry, e.g., about prices, entry into newsegments, and pursuit of market share.

Question 9:

A firm has a strategic business unit (SBU) that has a low market share in a high growth market. To maintain even this low share of the market requires the firm to commit a significant amount of cash. The firm might successfully adopt a build strategy for this unit if the:

I. SBU shows a strong potential to grow and obtains a significant share of the market.

II. Firm can finance its growth.

III. Firm expects a short-term increase in cash flow.


Firm is willing to forgo short-term earnings.


I only.


II and Ill only.


Ill and IV only.


I, II, and IV only.

Correct Answer: D

One of the two portfolio models most frequently used for competitive analysis was created by the Boston Consulting Group (BCG). This model, the growth-share matrix, has two variables. The market growth rate (MGR) is on the vertical axis, and the firm\’s relative market share (RMS) is on the horizontal axis. The growth-share matrix has four quadrants. The firm\’s SBUs are commonly represented in their appropriate quadrants by circles. The size of a circle is directly proportional to the SBU\’s sales volume. Question marks (low RMS, high MGR) are weak competitors in high-growth markets. They need large amounts of cash not only to finance growth and keep pace with the market but also to increase RMS, but do poorly in cash generation. If RMS increases significantly, a question mark may become a star. If not, it becomes a dog. A build strategy is necessary for a question mark with the potential to be a star. Consequently, a firm may adopt a build strategy for this type of SBU if it shows a strong potential to grow, if the firm is willing to forgo short- term earnings and cash flow, and if the firm is willing and has the capacity to finance its growth. However, a firm that expects only a short-term increase in cash flow may adopt either a divest or a harvest strategy but not a build strategy. This type of SBU needs a lot of cash flow to finance its growth.

Question 10:

The General Electric (GE) portfolio model for competitive analysis of strategic business units (SBUs) should be compared with the Boston Consulting Croup\’s growth-share matrix. The GE model:

A. Is a matrix with two variables:relative market share and market growth rate.

B. Calculates an index for each of its two variables.

C. Considers such factors for business strength as market size, growth rate, and price levels.

D. Considers such factors for market attractiveness as market share, growth rate, and marketing skills.

Correct Answer: B

The GE model is a multifactor portfolio matrix with two variables. Business strength or competitive position (BUS) is on one axis, and market attractiveness (MAT) is on the other. BUS is classified as strong, medium, or weak, and MAT is classified as high, medium, or low. Thus, the matrix in this model is 3 x 3 and has nine cells. SBUs are shown in the matrix as circles. Circle size is directly proportional to the size of the related market, with a shaded portion in the circle that represents the SBU\’s market share. To measure BUS and MAT, the firm must isolate the multiple factors affecting each, quantify them, and create an index. Factors will vary with each business. The measurements will provide the values on the axes of the matrix.

Question 11:

Which of the following statements is true with regard to a vertically integrated acquisition?

A. A grocery store chain that purchases a dairy and begins to make milk-based products under its own brand is forward integrated.

B. A movie producer that acquires a chain of theaters is backward integrated.

C. A clothing manufacturer that acquires a chain of clothing stores is forward integrated.

D. A soda maker that purchases its leading competitor is backward integrated.

Correct Answer: C

Vertical integration occurs upstream (backward) by acquiring suppliers or downstream (forward) by acquiring wholesalers and retailers. An example of forward integration is a clothing manufacturer\’s acquisition of a chain of clothing stores in which to sell its products.

Question 12:

The retail petroleum industry consists of a few large firms that sell a standardized product.Which of the following best describes this industry?

A. Monopoly.

B. Oligopoly.

C. Monopolistic competition.

D. Pure competition.

Correct Answer: B

An oligopoly consists of a few large firms. If products are standardized, competition may be based solely on price. If products are partially differentiated, each firm may attempt to lead the industry regarding a given attribute, e.g., price, quality, service, or features. The retail petroleum industry is dominated by a small number of firms that control a vast majority of the market. Furthermore, it is an example of an industry that sells a standardized product, with competition based primarily on price.

Question 13:

A corporation produces uniforms that it sells and rents to businesses. The corporation recently acquired a textile mill that produces synthetic cloth. This acquisition is an example of:

A. Horizontal integration Forward integration

B. Horizontal integration Backward integration

C. Vertical integration Forward integration

D. Vertical integration Backward integration

Correct Answer: D

The degree of backward and forward vertical integration along the value chain varies with the industry. The corporation acquired one of its suppliers, which is on a different level of the value chain. Thus, the combination involved vertical integration. Moreover, the acquisition of a supplier is characteristic of backward integration.

Question 14:

A firm considering entry into a fragmented industry may be able to eliminate the factors preventing concentration in which ways?

I. Recognizing that the industry is “stuck” for noneconomic reasons.

II. Adding value to products that cannot be significantly differentiated.

III. Specialization by customer type.

IV. Acquisitions of local firms.

A. I and II only.

B. I and IV only.

C. II, III, and IV only.

D. I, II, Ill, and IV.

Correct Answer: B

Overcoming fragmentation has significant strategic payoffs given that entry is not costly and competitors are weak. If the factor(s) preventing consolidation can be eliminated, industry structure will change. For example, industries may be “stuck” in a fragmented state for reasons other than underlying economic factors. Firms in the industry lack the resources, skills, awareness, or ambition to make the strategic moves needed for consolidation. Outside firms do not recognize the opportunity offered by an industry 皊tuck” in a fragmented state, for example, because it is new, small, or obscure. Also, acquisitions may enable a firm to expand when competing with local firms is difficult because of their contacts or image. However, adding value to products that cannot be significantly differentiated and specialization by customer type are methods of coping with, not overcoming, fragmentation.

Question 15:

A structural characteristic of an emerging industry is:

A. Strategic uncertainty.

B. Customers are sophisticated.

C. Technological uncertainty has been overcome.

D. Industry development is unlimited.

Correct Answer: A

Strategic uncertainty arises because effective strategies have not yet been identified. Hence, firms are experimenting with product features, production methods, marketing approaches, etc. Moreover, competitive intelligence is necessarily poor because competitors have not been identified and industry sales and other data are not available.

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