1.

B Companies opt to expand into foreign markets for such reasons as to

A) boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape having to deal
with strong labor unions.B) gain access to new customers, achieve lower costs and enhance the company's competitiveness,
capitalize on core competencies, and spread business risk across a wider market base.C) grow sales faster than the industry
average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances.D)
avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of
a global strategy instead of a multicountry strategy. E) raise the entry barriers for industry newcomers, neutralize the
bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.

2 E Which one of the following is not a factor that a company must contend with in competing in the markets of
foreign countries?

A) Variations in market growth rates from country to country and important country-to-country differences in consumer
buying habits and buyer tastes and preferences B) Country-to-country variations in host government policies and trade
requirements C) The fact that product designs suitable for one country are sometimes inappropriate in another D)
Vulnerability to adverse shifts in currency exchange rates E) A need to convince shippers to keep cross-country
transportation costs low

3 C Which one of the following statements concerning the effects of fluctuating exchange rates on companies
competing in foreign markets is true

A) Domestic companies trying to combat competition from foreign imports are hurt even more when their government's
currency grows weaker in relation to the currencies of the countries where the imported goods are being made. B)
Fluctuating foreign exchange rates greatly reduce the risks of competing in foreign markets?the big problem occurs when
exchange rates are fixed at unreasonably low levels. C) Domestic companies under pressure from lower-cost imports are
benefited when their government's currency grows weaker in relation to the currencies of the countries where the imported
goods are being made. D) Manufacturers that are exporting much of what they produce are benefited when their country's
currency grows stronger relative to the currencies of the countries that the goods are being exported to. E) If the exchange
rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has
grown stronger.

4 D One of the biggest strategy issues confronting a company competing in the international arena is

A) whether to enter country markets where competitive forces are relatively strong or whether to only enter country
markets where competition is relatively weak. B) whether to charge the same price in all country markets. C) whether to
license a select few or a large number of foreign firms to produce and distribute the company's products. D) whether to
offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country
market to match the preferences and requirements of local buyers. E) how many strategic alliances to form with foreign-
based firms.

5 B Which one of the following is not among the major reasons a company might choose to enter foreign markets?

A) To build profit sanctuaries necessary to wage guerrilla offensives against challengers invading its home market. B) To
spread business risk across a wider geographic market base. C) To gain access to more buyers for the company's
products/services. D) To capitalize on company competencies and capabilities E) To achieve lower costs and enhance the
firm's competitiveness.

6 A Which of the following is/are not "valid" strategy options for entering and/or competing in foreign markets?

A) An import strategy, a strategic alliance strategy, a profit sanctuary strategy, and a cross-market subsidization strategy B)
A global strategy where a company uses essentially the same competitive strategy approach in all country markets where it
has a presence.C) A multicountry strategy D) An export strategy and using strategic alliances or joint ventures with foreign
companies as the primary vehicle for entering foreign markets E) A franchising strategy and a strategy of licensing foreign
firms to use the company's technology or to produce and distribute the company's products

7 E Once a company decides to expand beyond its borders it has which of the following strategic options?
A) To maintain a domestic production base and export goods to foreign markets. B) To rely on strategic alliances or joint
ventures to partner with foreign companies. C) To license foreign firms to produce and distribute its products or use the
company's technology. D) Employ a franchising strategy E) All of the above.

8 B Profit sanctuaries

A)are markets where prices and competitive conditions are strongly linked across country markets to form a world market.
B) are country markets in which a company derives substantial profits because of its protected market position or
unassailable competitive advantage. C) are markets where the risk of fluctuating exchange rates is very high. D) are not
valuable competitive assets, providing financial weaknesses and hinder a company's race for world-market leadership. E)
are markets where competitive conditions make it infeasible to employ a profit strategy and an export strategy.

9 A Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the
circumstances of emerging country markets?

A) Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways
unmatched by rivals B) Prepare to compete on the basis of low price C) Be prepared to modify aspects of the company's
business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale
and global branding) D) Try to change the local market to better match the way the company does business elsewhere E)
Stay away from those emerging markets where it is impractical or uneconomic to modify the company's business model to
accommodate local circumstances

10 A The strategy options for local companies in competing against global challengers include

A) develop business models that exploit the shortcomings of local distribution networks and infrastructure, utilize keen
understanding of local customer needs and preferences, and transferring company expertise to cross-border markets. B)
employing defensive rather than offensive strategies, entering into strategic alliances with other local companies to defeat
the challengers, and not using an import strategy. C) licensing the company's technology to industry participants competing
in foreign markets. D) developing a core competence in as many value chain activities as possible, and pursuing a
multicountry strategy to quickly build new profit sanctuaries. E) Using an export strategy to gain economies of scale,
forming strategic alliances with global giants, using home-run strategies to enter nearby foreign markets, and relying on
patriotic themes in local advertising to defeat global challengers trying to enter their home markets.

CHAPTER 8

1. E. A company becomes a prime candidate for diversifying under the following circumstances ______

A) When it spots opportunities for expanding into industries whose technologies and products complement its present
business. B) When it has a powerful and well-known brand name that can be transferred to the products of other businesses
and thereby used as a lever for driving up the sales and profits of such business. C) When diversifying into additional
businesses opens new avenues for reducing costs via cross-business sharing or transfer of competitively valuable resources
and capabilities. D)When can leverage its collection of resources and capabilities by expanding into businesses where these
resources and capabilities are valuable assets. E) All of these.

2 D To judge whether a particular diversification move has good potential for building added shareholder value, the
move should pass the following tests:

A) the attractiveness test, the barrier-to-entry test, and the growth test. B) the strategic fit test, the resource fit test, and the
profitability test. C) the barrier-to-entry test, the growth test, and the shareholder value test. D) the attractiveness test, the
cost-of-entry test, and the better-off test. E) the resource fit test, the strategic fit test, the profitability test, and the
shareholder value test.

3 A The better-off test for evaluating whether a particular diversification move is likely to generate added value for
shareholders involves

A) evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different
businesses perform better together than apart and the whole ends up being greater than the sum of the parts. B) assessing
whether the diversification move will make the company better off by increasing its resource strengths and competitive
capabilities. C) evaluating whether the diversification move will make the company better off by making it less subject to
the bargaining power of customers and/or suppliers. D) assessing whether the diversification move will make the company
better off by increasing its profit margins and returns on investment. E) All of these.
4 B Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a
joint venture?

A) The big dilemma of entering an industry via acquisition of an existing company is whether to pay a premium price for a
successful company or to buy a struggling company at a bargain price. B Acquisition is generally the most profitable way
to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification
strategy, and usually requires less capital than entering an industry via internal start-up. C) Acquisition is the most popular
means of diversifying into another industry, has the advantage of being quicker than trying to launch a brand-new
operation, and offers an effective way to hurdle entry barriers. D) Joint ventures are an attractive way to enter new
businesses when the opportunity is too complex, uneconomical, or risky for one company to pursue alone, when the
opportunities in a new industry require a broader range of competencies and know-how than a company can marshal on its
own, and/or when it aids entry into a foreign market. E) The big drawbacks to entering a new industry via internal start-up
include the costs of overcoming entry barriers, building an organization from the ground up, and the extra time it takes to
build a strong and profitable competitive position.

5 A The strategic appeal of related diversification is that

A) it allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope),
cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive
capabilities. B) it is less capital intensive than unrelated diversification because related diversification emphasizes getting
into cash cow businesses (as opposed to cash hog businesses). C) it involves diversifying into industries having the same
kinds of key success factors. D) it is less risky than unrelated diversification because it avoids the acquisition of cash hog
businesses. E) it facilitates the achievement of greater economies of scale since the company only enters those businesses
that serve the same types of buyer groups and/or buyer needs.

6 C Economies of scope

A) stem from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic
area. B) have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain.
C) stem from cost-saving strategic fits along the value chains of related multiple businesses. D) refer to the cost-savings
that flow from being able to combine the value chains of different businesses into a single value chain. E) are like
economies of scale and arise from being able to lower costs via a larger volume operation.

7 B The defining characteristic of unrelated diversification (as opposed to related diversification) is

A) the presence of cross-business resource fit (whereas the defining characteristic of related diversification is the presence
of cross-business strategic fit). B) that the value chains of different businesses are so dissimilar that no competitively
valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no
opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a
powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities). C) the presence of
cross-business strategic fit (whereas the defining characteristic of related diversification is the presence of cross-business
resource fit). D) that the company's businesses are in different industries. E) the presence of cross-business financial fit.

8 D Calculating quantitative attractiveness ratings for the industries a company has diversified into involves

A) determining the strength of the five competitive forces in each industry, calculating the ability of the company to
overcome or contend successfully with each force, and obtaining overall measures of the firm's ability to compete
successfully in each of its industries. B) determining each industry's average profit margins, calculating how far the firm's
profit margins are above/below the industry averages, and then using these values to draw conclusions about industry
attractiveness. C) rating the attractiveness of each industry's strategic and resource fits, summing the attractiveness scores,
and determining whether the overall scores for the industries as a group are appealing or not. D) selecting a set of industry
attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each
industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted
rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall
industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group. E)
identifying each industry's average price, rating the difficulty of charging an above-average price in each industry, and
deciding whether the company's prospects for being able to charge above-average prices make the industry attractive or
unattractive.
9 D The 9-cell industry attractiveness-competitive strength matrix

A) is a valuable tool for ranking a company's different businesses from best to worst based on strategic fit. B) shows which
of a diversified company's businesses have good/poor resource fit. C) indicates which businesses have the highest/lowest
economies of scale and which have the highest/lowest economies of scope. D) uses quantitative measures of industry
attractiveness and competitive strength to plot each business's location on the matrix?the thesis underlying the matrix is that
there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive
positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with
relatively weak competitive positions in industries with relatively low attractiveness. E) pinpoints which of a diversified
company's businesses are resource-rich cash cows and which are resource-poor cash hogs.

10 B Once a firm has diversified and established itself in several different businesses, then its main strategic
alternatives include all but which one of the following?

A) Broadening the firm's business scope by diversifying into additional businesses. B) Shifting from a multi-country to a
global strategy. C) Restructuring the company's business line-up with a combination of divestitures and new acquisitions to
put a whole new face on the company's business makeup. D) Pursuing multinational diversification and striving to
globalize the operations of several of the company's business units. E) Divesting some businesses and retrenching to a
narrower base of business operations.

CHAPTER 9

1 D Ethical principles in business

A) concern the behavioral guidelines a company's top management and board of directors set for company personnel
regarding "what is right" and "what is wrong" in conducting the company's business. B) deal chiefly with the actions and
behaviors required to operate companies in a socially responsible manner. C) are arrived at by picking and choosing among
the consensus ethical standards of society to come up with a set of ethical standards that apply directly to operating a
business. D) are not materially different from ethical principles in general and have to be judged in the context of society's
standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct. E)
involve behavioral guidelines for balancing the interests of non-owner stakeholders (customers, employees, suppliers, and
the communities in which the company has operations) against the interests of company shareholders.

2 E According to the school of ethical universalism,

A) what behaviors are "ethically right" and "ethically wrong" vary across religions, but the boundaries of what is ethical or
not are universal within religions. B concepts of right and wrong universally apply to all business situations within a given
country but can vary across countries or cultures. C) ethical guidelines exist only when there is universal agreement as to
what behaviors are "ethically right" and "ethically wrong"; anything not universally viewed as unethical is thus within the
bounds of what is ethically permissible. D) all societies and countries have some definition of what is ethically
permissible (in this sense ethics are universal); however, the definitions of what is ethically permissible vary according to
the prevailing religious doctrines in each country. E) The most important concepts what is right and what is wrong are
universal and transcend culture, society, and religion.

3 A If one adopts the thinking of the school of ethical relativism, then

A) there are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social
mores and can vary from one culture or nation to another. B) there is a "one-size-fits-all" set of authentic ethical standards.
C) the preferred set of ethical standards is the one which society at large has put in place in the form of laws and
regulations. D) the prevailing ethical standards are the product of a system of "integrated social contracts." E) no ethical
standards are ever truly "authentic"?they exist only to the extent that there is a temporary shared conviction among
company managers and company personnel that a particular behavior is either ethically permissible or ethically
impermissible.

4 B Paying bribes and kickbacks to expedite winning orders from customers or to facilitate business transactions

A) is ethically acceptable according to both the school of ethical relativism and the school of ethical universalism, provided
the payment of such bribes and kickbacks is permitted by local laws. B) is a thorny ethical issue for multinational
companies because in some countries such payments are considered unethical whereas in other countries the payment of
bribes and kickbacks is very much in accord with local customs and social mores (which makes such payments "ethically
acceptable" according to the school of ethical relativism). C) is a clear violation of ethical principles in all countries. D) is
ethically acceptable according to "integrated social contract theory." E) is a clear violation of ethical standards only if one
accepts the arguments and reasoning of the school of ethical relativism.

5 B According to integrated social contracts theory,

A) the views and principles of the school of ethical universalism are definitely wrong; the correct view is that ethics is a
matter of personal responsibility not a matter of management concern. B) universal ethical principles based on the
collective views of multiple societies form a social contract that all individuals and organizations have a duty to observe in
all situations. C) the standards of what is ethically permissible and what is not should be based on a code of ethical
and moral conduct which each society/country/culture adopts and then enacts into law. D) the standards of what is ethically
permissible should be determined by the terms of an "ethics contract" which each company employee signs as a condition
of employment. E) the only valid ethical standards are those which are universal?and then only if the standards are not
absolute and provide some wiggle room according to the circumstances of the each situation.

6 A Unethical managerial behavior tends to be driven by such factors as

A) overzealous or obsessive pursuit of personal gain, wealth, and other selfish interests; a company culture that puts the
profitability and good business performance ahead of ethical behavior; and heavy pressures on company managers to meet
or beat performance targets. B) the lack of a company code of ethics. C) a lack of training in what is ethical and what is not.
D) confusing differences between what is ethical behavior in one's personal life and what is ethically permissible in
business. E) All of the above factors.

7 D The business case for an ethical strategy

A) relates to the company's business model and business-level strategy. B) must be articulated by the company's senior
managers and reinforced by pronouncements from the board of directors. C) starts with managers who understand
there is big difference between adopting values statements and codes of ethics that serve merely as window dressing and
those that truly paint the white lines for a company's actual strategy and business conduct. D) emphasizes that pursuing
unethical strategies not only damages a company's reputation but can also have costly consequences that are wide ranging.
E) can be effectively made by executives subscribing to the damage control approach to managing a company's ethical
conduct.

8 B Which one of the following is not a key trait of the ethical culture approach to managing ethical conduct?

A) The ethical culture approach is favored at companies where top managers are very concerned about gaining employee
buy-in to the company's ethical standards, business principles, and corporate values and see the company's code of ethics
and/or its statement of corporate values as integral to the company's identity and ways of operating. B) The ethical culture
approach is especially well-suited for companies that favor a light approach to ethics compliance. C) There are strong peer
pressures from coworkers to observe ethical norms. D) Compliance procedures need to be an integral part of the ethical
culture approach to help send the message that management takes the observance of ethical norms seriously and that
behavior that fall outside ethical boundaries will have negative consequences. E) The integrity of the ethical culture
approach depends heavily on the ethical integrity of the executives who create and nurture the culture.

9 A The notion of social responsibility as it applies to businesses concerns

A) a company's duty to operate in an honorable manner, provide good working conditions for employees, be a good
steward of the environment, and actively work to better the quality of life in the local communities where it operates and in
society at large. B) a company's duty to put the public interest ahead of shareholder interests. C) societal expectations
that all company stakeholders will be treated equally and fairly. D) a company's duty to establish socially acceptable core
values and to have a strictly enforced code of ethical conduct. E) the responsibility that top management has for ensuring
that the company's actions and decisions are in the best interest of society at large.

10 C An environmental sustainability strategy consists of a company's deliberate actions to

A) provide good working conditions for employees and to actively work to enhance the quality of life in the local
communities where it operates and in society at large. B) redesign products and alter production practices to satisfy the
expectations of various environmental protection groups. C) meet the current needs of customers, suppliers,
shareholders, employees and other stakeholders in a manner that protects the environment, provides for the longevity of
natural resources, maintains ecological support systems for future generations, and guards against ultimate endangerment of
the planet. D) apply universal norms regarding the protection of the environment to its everyday operations. E) balance
commonly held views about what constitutes environmentally appropriate actions against its ability to make a profit.