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Multiple Choice
2. The Walt Disney Company generates about ______of its revenues from the
United States and Canada.
a. 17 percent
b. 37 percent
c. 53 percent
d. 78 percent
e. 97 percent
(d; difficult; p. 297; AACSB: Globalization)
4. Which of the following is not a question that must be answered when a firm
develops its international strategy?
a. How does the firm expect to outperform its competitors?
b. Where and how will the firm sell its product or service?
c. In what currency and at what price will the product be sold?
d. Where and how will the necessary resources be acquired?
e. What products does the firm intend to sell?
(c; moderate; p. 300; AACSB: Globalization)
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5. Coca-Cola and McDonald’s both earn about ______ of their revenue outside the
United States.
a. one-quarter
b. one-third
c. one-half
d. two-thirds
e. three-quarters
(d; difficult; p. 297; AACSB: Globalization)
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10. Which of the following provides international firms with a source of global
efficiency?
a. location efficiencies
b. economies of scale
c. multinational flexibility
d. both a and b
e. both a and c
(d; moderate; p. 300; AACSB: Globalization)
11. International firms capture _____ by locating their facilities anywhere in the
world that yields the lowest production or distribution costs.
a. multinational flexibility
b. economies of scale
c. location efficiencies
d. economies of scope
e. all of the above
(c; easy; p. 300; AACSB: Globalization)
12. Which of the following factors does not increase the complexity of international
strategy?
a. multiple computer systems
b. multiple political systems
c. multiple legal systems
d. multiple accounting systems
e. multiple languages
(a; moderate; p. 300; AACSB: Globalization)
13. International firms capture _____ by building factories to serve more than one
country and lowering production costs.
a. multinational flexibility
b. economies of scale
c. location efficiencies
d. economies of scope
e. all of the above
(b; easy; p. 300; AACSB: Globalization)
14. What form of efficiency did Mercedes-Benz capture by initially producing its
sport utility vehicle in Alabama?
a. multinational flexibility
b. economies of scale
c. location efficiencies
d. economies of scope
e. all of the above
(b; moderate; p. 300; AACSB: Globalization)
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15. When firms broaden their product lines in each of the countries they enter, what
type of efficiency do they enjoy?
a. multinational flexibility
b. economies of scale
c. location efficiencies
d. economies of scope
e. all of the above
(d; moderate; p. 300; AACSB: Globalization)
16. _____ occur(s) when firms broaden their product lines in each country they enter.
a. Multinational flexibility
b. Economies of scale
c. Location efficiencies
d. Economies of scope
e. All of the above
(d; easy; p. 300; AACSB: Globalization)
17. _____ occur(s) when firms build factories that serve more than one country and
lower their production costs.
a. Multinational flexibility
b. Economies of scale
c. Location efficiencies
d. Economies of scope
e. All of the above
(b; easy; p. 300; AACSB: Globalization)
18. Nike achieved _____ by centering its manufacturing in countries where labor
costs are relatively low.
a. multinational flexibility
b. economies of scale
c. location efficiencies
d. economies of scope
e. all of the above
(c; moderate; p. 300; AACSB: Globalization)
19. _____ is/are enhanced when firms delegate responsibility to the managers of local
subsidiaries.
a. Multinational flexibility
b. Economies of scale
c. Location efficiencies
d. Economies of scope
e. All of the above
(a; moderate; p. 301; AACSB: Globalization)
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20. _____ is/are minimized when too much power is centralized in one unit of the
firm.
a. Multinational flexibility
b. Economies of scale
c. Location efficiencies
d. Economies of scope
e. All of the above
(a; moderate; p. 301; AACSB: Globalization)
21. What effect does multinational flexibility have on a firm’s global efficiencies?
a. It reduces ability to achieve global efficiencies.
b. It increases ability to achieve global efficiencies.
c. It has no effect on a firm’s ability to achieve global efficiencies.
d. all of the above
e. none of the above
(a; difficult; p. 302; AACSB: Globalization)
22. McDonald’s decision, after taking the advice of a Japanese associate, to open
restaurants inside other buildings rather than only as free-standing units is an
example of
a. capturing location efficiencies
b. worldwide learning
c. achieving global efficiencies
d. exploiting economies of scope
e. implementing multinational flexibility
(b; difficult; p. 302; AACSB: Globalization)
23. Pursuit of global efficiency may _____ a firm’s attempts to promote worldwide
learning.
a. reduce
b. increase
c. have no impact on
d. fluctuate with
e. eliminate
(a; moderate; p. 302; AACSB: Globalization)
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25. Which of the following steps is necessary for firms wishing to promote worldwide
learning?
a. Utilize an organizational structure designed to transfer knowledge.
b. Create appropriate incentive structures.
c. Motivate managers at headquarters to acquire, disseminate, and act upon
worldwide learning opportunities.
d. Motivate managers at subsidiaries to acquire, disseminate, and act upon
worldwide learning opportunities.
e. all of the above
(e; moderate; p. 302; AACSB: Globalization)
26. When using a(n) _____, a firm utilizes the core competency or firm-specific
advantage it developed at home as its main competitive weapon in the foreign
markets it enters.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(b; moderate; p. 305; AACSB: Globalization)
28. What type of strategy is utilized when a firm takes what it does well at home and
attempts to duplicate it in foreign markets?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(b; moderate; p. 305; AACSB: Globalization)
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29. When Mercedes-Benz relies on its brand name and reputation for well-
engineered, luxurious cars to succeed in foreign markets, what strategy is it
utilizing?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(b; moderate; p. 305; AACSB: Globalization)
30. What type of strategy is used when a firm views itself as a collection of relatively
independent operating subsidiaries, each of which focuses on a specific domestic
market?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(a; moderate; p. 306; AACSB: Globalization)
32. What type of strategy allows subsidiaries in each country to customize its
products, communications, and operations to best suit that country’s customers?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(a; moderate; p. 306; AACSB: Globalization)
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33. Firms using the _____ rely on their subsidiaries to be responsive to the local
market.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(a; moderate; p. 306; AACSB: Globalization)
34. Which approach is most appropriate when economies of scale for production,
distribution, and marketing are low?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(a; difficult; p. 306; AACSB: Globalization)
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37. A firm following the _____ views the world as a single marketplace.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(d; moderate; p. 306; AACSB: Globalization)
38. The primary goal of a(n) _____ is the creation of standardized goods and services
that will address the needs of customers worldwide.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(d; moderate; p. 306; AACSB: Globalization)
41. Firms using a _____ conduct business the same way anywhere in the world.
a. home replication strategy
b. transnational strategy
c. global strategy
d. both a and b
e. both a and c
(c; difficult; p. 307; AACSB: Globalization)
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42. The _____ combines the benefits of global scale efficiencies and local
responsiveness.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; moderate; p. 307; AACSB: Globalization)
44. Microsoft locates most of its product development efforts in the United States but
delegates marketing to its foreign subsidiaries. Microsoft follows a(n) _____.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; difficult; p. 307; AACSB: Globalization)
45. IKEA attempts to capture global efficiencies while remaining responsive to local
conditions. IKEA follows a(n) _____.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; moderate; p. 307; AACSB: Globalization)
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46. Firms using a(n) _____ may locate responsibility for one product line in one
country and responsibility for a second product line in another.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; moderate; p. 307; AACSB: Globalization)
47. When pressures for global integration and the need for local responsiveness are
low, the ________ strategy is often adopted.
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(a; moderate; p. 309; AACSB: Globalization)
48. When the need to respond to local conditions is high, but the pressure for global
integration is low, the _________ is used.
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(d; moderate; p. 309; AACSB: Globalization)
49. Companies like Kraft and Cadbury Schweppes that are concerned with meeting
the specific needs of local customers more than reducing manufacturing costs use
the
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(d; difficult; p. 309; AACSB: Globalization)
50. When pressures for global integration are high, but the need for local
responsiveness is low, the ________ makes sense.
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(c; moderate; p. 309; AACSB: Globalization)
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51. Companies like Sony and Matsushita that design their products with a global
market in mind usually adopt a
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(c; difficult; p. 309; AACSB: Globalization)
52. When pressures for global integration and local responsiveness are both high,
firms often adopt the
a. home replication strategy
b. transnational strategy
c. global strategy
d. multidomestic strategy
e. both a and c
(b; moderate; p. 310; AACSB: Globalization)
53. The need for _____ is low when firms are able to differentiate their products.
a. global integration
b. local responsiveness
c. centralization
d. both a and b
e. both a and c
(a; moderate; p. 309; AACSB: Globalization)
54. Which of the following situations is consistent with a low need of global
integration?
a. differentiated products
b. strong brand name
c. after-sales support services
d. high quality
e. all of the above
(e; easy; p. 309; AACSB: Globalization)
55. _____ require(s) the transfer of information and experiences from the parent to
each subsidiary, from each subsidiary to the parent and among subsidiaries.
a. Global efficiencies
b. Economies of scope
c. Multinational flexibility
d. Worldwide learning
e. Transnational strategies
(d; easy; p. 310; AACSB: Globalization)
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56. Which strategy is likely the best for promoting global learning?
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; moderate; p. 310; AACSB: Globalization)
57. A firm using a ______ strategy might have a matrix structure, project teams,
and/or informal management networks to transfer knowledge among subsidiaries.
a. multidomestic strategy
b. home replication strategy
c. transnational strategy
d. global strategy
e. international strategy
(c; moderate; p. 310; AACSB: Globalization)
58. Which of the following is not one of the components of strategy development?
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(b; moderate; p. 310; AACSB: Globalization)
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61. Disney’s name, image, and portfolio of characters are examples of which
component of international strategy?
a. distinctive competence
b. scope of operations
c. resource deployment
d. synergy
e. core competence
(a; moderate; p. 310)
62. _____ answers the question, “Where are we going to conduct business?”
a. Distinctive competence
b. Differential advantage
c. Scope of operations
d. Resource deployment
e. Synergy
(c; moderate; p. 311)
63. Which of the following could be a source of distinctive competence for a firm?
a. well-respected brand name
b. superior organizational practices
c. cutting-edge technology
d. efficient distribution networks
e. all of the above
(e; easy; p. 310)
64. The compatibility of software programs with the Windows operating system is an
example of Microsoft’s _____.
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(a; moderate; p. 310)
65. _____ may be defined in terms of geographic regions, markets, or product niches.
a. Distinctive competence
b. Differential advantage
c. Scope of operations
d. Resource deployment
e. Synergy
(c; moderate; p. 311)
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66. Disney operates theme parks in Japan, the United States, and France. This refers
to Disney’s _____.
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(c; moderate; p. 311; AACSB: Globalization)
67. _____ answers the question, “Given that we are going to compete in these
markets, how will we allocate our resources to them?”
a. Distinctive competence
b. Differential advantage
c. Scope of operations
d. Resource deployment
e. Synergy
(d; moderate; p. 311)
69. When Disney decides to make a low investment in its Tokyo park, a higher
investment in Disneyland Paris, and a similar investment in Hong Kong’s theme
park, Disney is working which component of international strategy?
a. distinctive competence
b. scope of operations
c. resource deployment
d. synergy
e. core competence
(c; moderate; p. 311; AACSB: Globalization)
70. Although DaimlerChrysler’s newest plant is in Alabama, nine out of ten Mercedes
are still German built. This is an example of DaimlerChrysler’s _____.
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(d; moderate; p. 312; AACSB: Globalization)
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71. _____ answers the question, “How can different elements of our business benefit
each other?”
a. Distinctive competence
b. Worldwide learning
c. Scope of operations
d. Resource deployment
e. Synergy
(e; moderate; p. 312; AACSB: Globalization)
72. The goal of _____ is to create a situation where the whole is greater than the sum
of the parts.
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(e; easy; p. 312)
73. Disney’s ______ is evident in the fact that people recognize its characters from
television and movies, visit Disney theme parks, and buy merchandise featuring
the Disney characters.
a. distinctive competence
b. differential advantage
c. scope of operations
d. resource deployment
e. synergy
(e; moderate; p. 312; AACSB: Globalization)
75. In _____, the firm establishes it goals and its strategic plan.
a. strategy development
b. strategy formulation
c. strategy implementation
d. strategy execution
e. strategy evaluation
(b; easy; p. 312)
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76. When managers develop, refine, and agree on which markets to enter or exit and
how to best compete in each, the managers are engaged in the ______ process.
a. strategy development
b. strategy formulation
c. strategy implementation
d. strategy execution
e. strategy evaluation
(b; moderate; p. 312)
77. In _____, the firm develops the tactics for achieving the formulated international
strategies.
a. strategy development
b. strategy formulation
c. strategy implementation
d. strategy execution
e. strategy evaluation
(c; easy; p. 312)
80. When firms gather data about economic, financial, political, and competitive
changes in the various markets the firm serves, it is trying to identify _____.
a. strengths
b. opportunities
c. threats
d. weaknesses
e. both b and c
(e; easy; p. 313)
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81. A(n) _____ is a systematic collection of data about all elements of the firm’s
external and internal environments.
a. environmental scan
b. strategic analysis
c. strategic formulation
d. situation analysis
e. SWOT analysis
(a; moderate; p. 313)
82. A(n) _____ calls for a firm to rely on a single business, product, or service for all
its revenue.
a. corporate strategy
b. single-business strategy
c. related diversification strategy
d. functional strategy
e. unrelated diversification strategy
(b; moderate; p. 316)
83. A(n) _____ calls for the firm to operate in several different but fundamentally
related businesses, industries, or markets at the same time.
a. corporate strategy
b. single-business strategy
c. related diversification strategy
d. functional strategy
e. unrelated diversification strategy
(c; moderate; p. 316)
84. Firms using a(n) _____ operate in several unrelated industries and markets.
a. corporate strategy
b. single-business strategy
c. related diversification strategy
d. functional strategy
e. unrelated diversification strategy
(e; moderate; p. 317)
85. Which strategy attempts to establish and maintain the image that an SBU’s
product or services are fundamentally unique from other products or services in
the same market segment?
a. corporate strategy
b. differentiation strategy
c. related diversification strategy
d. functional strategy
e. unrelated diversification strategy
(b; moderate; p. 318)
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86. Firms using a(n) _____ operate in several unrelated industries and markets.
a. corporate strategy
b. single-business strategy
c. related diversification strategy
d. functional strategy
e. unrelated diversification strategy
(e; moderate; p. 317)
87. Which strategy calls for a firm to focus on achieving highly efficient operating
procedures so that its costs are lower than its competitors?
a. corporate strategy
b. single-business strategy
c. related diversification strategy
d. overall cost leadership strategy
e. unrelated diversification strategy
(d; easy; p. 319)
88. Which strategy calls for a firm to target specific types of products for certain
customer groups or regions?
a. focus strategy
b. single-business strategy
c. related diversification strategy
d. overall cost leadership strategy
e. unrelated diversification strategy
(a; moderate; p. 319)
True/False
89. There are many similarities between developing a strategy for competing in a
single country and developing one for competing in multiple countries.
(T; easy; p. 299; AACSB: Globalization)
91. Global efficiencies are harder to obtain when a single unit of the firm is given
world-wide responsibility for the task.
(F; difficult; p. 300; AACSB: Globalization)
92. It is typically fairly easy for a firm to exploit worldwide learning, multinational
flexibility, and global efficiencies simultaneously.
(F; moderate; p. 302; AACSB: Globalization)
93. A decentralized structure is ideal for transferring learning from one subsidiary to
another.
(F; moderate; p. 304)
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94. Companies selling brand-name food frequently adopt the multidomestic approach.
(T; difficult; p. 309; AACSB: Globalization)
95. The goal of synergy is to create a situation where the whole is greater than the
sum of the parts.
(T; moderate; p. 312)
96. International strategic management is carried out in two broad stages, strategy
formulation and strategy development.
(F; easy; p. 312; AACSB: Globalization)
97. Planning team members must scan the external environment to identify
weaknesses affecting the firm.
(F; moderate; p. 313)
99. A firm’s value chain is a breakdown of a firm’s most important product lines. (F;
moderate; p. 314)
100. The major objectives the firm wants to accomplish through pursuing a particular
course of action are tactics.
(F; easy; p. 315)
102. Specific goals and plans in strategic planning are referred to as tactics.
(T; easy; p. 315)
103. A control framework is the set of managerial and organizational processes that
keep the firm moving toward its strategic goals.
(T; moderate; p. 32/324)
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107. The low cost of coordinating the operations of related divisions is a primary
advantage of related diversification.
(F; difficult; p. 317)
108. A single business strategy increases the firm’s vulnerability to its competition and
to changes in the external environment.
(T; moderate; p. 316)
109. A conglomerate refers to the term used for firms comprising unrelated businesses.
(T; easy; p. 318)
110. The three basic forms of business strategy are differentiation, overall cost
leadership, and focus.
(T; moderate; p. 318)
112. A focus strategy calls for a firm to target specific types of products for certain
customer groups or regions.
(T; easy; p. 319)
Short Answer
114. What are the three sources of competitive advantage available to international
businesses?
Answer: Global efficiencies, multinational flexibility, and worldwide
learning. (moderate; p. 300; AACSB: Globalization)
116. What is an important difference between the home replication strategy and the
global strategy?
Answer: The home replication strategy has a home-country bias–it assumes
that a firm’s domestic strategy will work in foreign markets. A global
strategy has no such home-country bias. (difficult; p. 305; AACSB:
Globalization)
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117. What strategic approach seeks to achieve local responsiveness and global
efficiency?
Answer: The transnational strategy seeks to achieve both local
responsiveness and global efficiency. (easy; p. 307; AACSB: Globalization)
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127. What are the three levels of international strategy for MNCs?
Answer: Corporate, business, and functional. (easy; p. 316; AACSB:
Globalization)
128. What are the three types of corporate strategies an MNC might choose to follow?
Answer: Single-business strategy, related diversification, and unrelated
diversification. (moderate; p. 316; AACSB: Globalization)
131. What is the difference between an overall cost leadership strategy and a focus
strategy?
Answer: The overall cost leadership strategy calls for a firm to focus on
achieving highly efficient operating procedures so that its costs are lower
than its competitors. The focus strategy calls for the firm to target specific
types of products for certain customer groups or regions. (moderate; p.
319)
Essay
132. What differences exist between the strategic management process for domestic
operations and international operations? Identify five differences and explain
each one.
Answer: There are 15 factors students could identify for this answer. They
are all listed in Table 11.1 on page 301. Some possible answers include
language, culture, politics, economy, governmental interference, and labor.
In domestic operations, English is universally used, while in international
operation the use of local language is required in many situations. In
domestic operations, culture is relatively homogeneous, while it is quite
diverse in international operations. Politics are stable and somewhat
unimportant domestically but could be volatile internationally. The
economy is uniform domestically but varies internationally. Finally,
governmental interference is extensive and subject to change in
international operations but minimal in domestic operations. (moderate; p.
301; AACSB: Globalization)
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133. What are the three sources of competitive advantage that are unavailable to
domestic businesses that international business can exploit?
Answer: The three sources of competitive advantage are global efficiencies,
worldwide learning, and multinational flexibility. Global efficiencies can
be captured through location efficiencies, or locating facilities anywhere in
the world that yields the lowest production or distribution costs, or that
best improves the quality of service. Global efficiencies can also be
captured through economies of scale and economies scope. Worldwide
learning is accomplished by working within the diverse operating
environments of an MNC. A firm can learn from differences in one country
and transfer the learning to operations in other countries. Multinational
flexibility means that international businesses respond to a change in one
country by implementing a change in another country. (moderate; p. 300;
AACSB: Globalization)
134. Multinational corporations may adopt one of four strategic alternatives in their
attempt to balance the three goals of global efficiencies, multinational
flexibility, and worldwide learning. What are these four alternatives? Describe
each one. What determines which strategy is appropriate?
Answer: The four strategies are home replication, multidomestic, global,
and transnational. A home replication strategy means that the organization
simply replicates what has worked in the home market, in its markets
abroad. A multidomestic strategy suggests that a firm operates differently
in its various markets based on local market characteristics. A global
strategy means that the firm attempts to develop global efficiencies by
standardizing its activities from country to country. A transnational
strategy suggests that the firm attempts to respond to local market
preferences while achieving global efficiencies. The appropriate strategy is
based on a firm’s need for local responsiveness and its need for global
efficiencies. (moderate; pp. 305; AACSB: Globalization)
135. What are the four basic components of strategy development? Explain the
meaning of each component.
Answer: The four basic components of strategy development are distinctive
competence, scope of operations, resource deployment, and synergy.
Distinctive competence answers the question, “What do we do exceptionally
well especially as compared to our competitors?” Scope of operations
answers the question, “Where are we going to conduct business?” Resource
deployment answers the question, “Given that we are going to compete in
these markets, how will we allocate our resources to them?” Synergy
answers the question, “How can different elements of our business benefit
each other?” (moderate; p. 310)
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137. Describe the SWOT analysis. What is its purpose? What are its components?
Answer: A SWOT analysis is an analysis of a firm’s strengths, weaknesses,
opportunities, and threats. When managers scan the external environment,
they try to identify opportunities and threats confronting the firm.
Managers also try to assess the firm’s internal environment, or its strengths
and weaknesses. Information gained from the SWOT analysis is then used
in strategy formulation. Effective strategies are those that exploit
opportunities and strengths, neutralize threats, and protect or overcome
weaknesses. (moderate; p. 313)
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