CHAPTER 6

Which one of the following is not a factor that makes an alliance "strategic" as
opposed to just a convenient business arrangement?
The alliance involves joint contribution of resources and is mutually beneficial.

Companies are motivated to enter into strategic alliances or cooperative arrangements

A) to expedite the development of promising new technologies or
products.
B) to bring together the personnel and expertise needed
to create desirable new skill sets and capabilities to
improve supply chain efficiency, and/or gain
economies of scale in production and/or marketing.
C) to acquire or improve market access through joint
marketing agreements.
D) to help win the race against rivals for global market
leadership or to seize opportunities on the frontiers of
advancing technology and build the resource
strengths and business capabilities to compete
successfully in the industries and product markets of
the future.
E) All of these.

The best strategic alliances

are highly selective, focusing on particular value chain activities and on obtaining a particular
competitive benefit.

Mergers and acquisitions are a much used strategy because they are an effective
means of
gaining quick access to new technologies or other resources and competitive capabilities and;
plus creating a more cost-efficient operation, expanding a company's geographic coverage, and
extending a company's business into new product categories.

Which one of the following statements about merger and acquisition strategies is
true?
Merger and acquisition strategies often do not produce the hoped-for outcomesexamples of
mergers/acquisitions where the results have been disappointing include the merger of AOL and
Time Warner, the merger of Daimler Benz and Chrysler, Hewlett-Packard's acquisition of
Compaq Computer, Ford's acquisition of Jaguar, and Best Buy's acquisition of Musicland

Which of the following is typically the strategic impetus for forward vertical
integration?
To gain better access to end users and better market visibility

Which of the following is not a strategic disadvantage of vertical integration?

It greatly reduces the opportunity for capturing maximum scale economies and achieving the
lowest possible operating costs.

Which of the following is not an advantage of outsourcing the performance of certain

value chain activities to outsiders?
Being able to reduce distribution costs by eliminating the use of wholesale distributors and retail
dealers and, instead, selling direct to end-users at the company's Web site.
A blue ocean type of offensive strategy
is based on discovering or inventing new industry segments that create altogether new demand,
thereby positioning the firm in uncontested market space offering superior opportunities for
profitability and growth.

In which of the following situations is being first to initiate a particular

move not likely to result in a positive payoff?
When late movers can copy a successful pioneer's moves quickly and at lower cost

CHAPTER 7
Companies opt to expand into foreign markets for such reasons as to
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.

Which one of the following is not a factor that a company must contend with in
competing in the markets of foreign countries?
A need to convince shippers to keep cross-country transportation costs low

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

One of the biggest strategy issues confronting a company competing in the

international arena is
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.

The essential difference between multidomestic competition and global competition is

that
in multidomestic competition the markets of different countries are not closely linked and rivals
battle for "national market championships" whereas in global competition the markets of
different countries are closely linked and form a world market, thus pitting rivals in a battle for
the "world market championship."
Which of the following is/are not "valid" strategy options for entering and/or
competing in foreign markets?
An import strategy, a strategic alliance strategy, a profit sanctuary strategy, and a cross-market
subsidization strategy

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.

Profit sanctuaries
are country markets in which a company derives substantial profits because of its protected
market position or unassailable competitive advantage.

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?
Develop new sets of core competencies that allow a company to offer value to consumers of
emerging markets in ways unmatched by rivals

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

CHAPTER 8
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.

To judge whether a particular diversification move has good potential for building
added shareholder value, the move should pass the following tests:
he attractiveness test, the cost-of-entry test, and the better-off test.

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

Which of the following is not accurate as concerns entering a new business via
acquisition, internal start-up, or a joint venture?
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.

The strategic appeal of related diversification is that

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.

Economies of scope
stem from cost-saving strategic fits along the value chains of related multiple businesses.

The defining characteristic of unrelated diversification (as opposed to related

diversification) is
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).

Calculating quantitative attractiveness ratings for the industries a company has

diversified into involves
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.

The 9-cell industry attractiveness-competitive strength matrix

uses quantitative measures of industry attractiveness and competitive strength to plot each
business's location on the matrixthe 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.

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?
Shifting from a multi-country to a global strategy