Test bank of fred r david – strategic management, 13th edition ch5

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Exam Name _ TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false 1) Firms face complex and challenging factors in competing globally 1) _ 2) Arab-based companies have been aggressively venturing abroad for 30 years now 2) _ 3) Governments in various parts of the world have relaxed market regulations and accelerated privatization of state-owned companies 3) _ 4) In recent years, Arab executives have not considered international and global business involvement to be a strategic choice essential for growth and development 4) _ 5) Arab executives from Morocco to Oman have intended to expand their business to international markets 5) _ 6) Market expansion allows companies to realize an economy of scale 6) _ 7) Despite their accessibility to capital or a greater amount of liquidity, the companies in the Gulf region fail to seize opportunities 7) _ 8) Increasing competition, and the willingness of many Arab executives, has induced many companies to expand overseas 8) _ 9) One of the reasons why Arab executives have set their eyes on expanding beyond domestic and regional markets is to capitalize on core competencies 9) _ 10) Major Arab companies have recognized the need to sustain their competitiveness and meet their competitors on similar fronts 10) 11) In 2009, Advanced Technology Investment Company of Abu Dhabi acquired Singapore’s Chartered Semiconductor Manufacturing 11) 12) Planet Food World, a Saudi based company, has invested heavily in agriculture products, mainly industrial farms, in Turkey 12) 13) Arab countries rarely vary in their commitment to international expansion and activities 13) 14) Up to the early 1970s, most Arab business people served as representatives of, and/or distributors for major multinational corporations 14) 15) The globalization focus ignores the global market as the platform for action 15) 16) In the process of globalization, the activities and involvement of the firms are determined by opportunities 16) 17) Both internationalization and global approaches have been essential in enabling Arab business to leave their mark on the world economy 17) 18) Arab companies are confronted with various issues as part of their global expansion 18) 19) The methods of tackling various issues due to global expansion are product of a single factor 19) 20) In today’s business, executives have ample access to information provided by various sources 20) 21) The World Factbook includes information related to the history, people, government, economy, geography, communications, transportation, military, and transnational issues of 266 nation states 21) 22) It is not so important for Arab executives to monitor global trends as long as they are familiar with general and economic conditions of the target country or region 22) 23) Regardless of which country a company chooses to operate in, its executives must understand that differences exist and must be approached with an open mind 23) 24) Demographically, while some countries have experienced an acute shortage in youth population, the Arab world has a high ratio of youth 24) 25) The IMF divides the world into three major groups advanced economies, old economies, and emerging/developing economies 25) 26) The share of the United States in world exports of goods and services is 9.9 percent, while that of subSaharan Africa (44 countries) is over 20 percent 26) 27) The economic growth in China and India, along with other emerging economies, especially Russia and Brazil, is expected to fuel world economic growth 27) 28) With 60 percent of the world's population spread out over three continents, BRIC already accounts for 35 percent of global GDP 28) 29) The growth of other emerging and developing economies was impressive as economically advanced countries struggled with the 2008 financial crisis 29) 30) Emerging economies are becoming less and less important as they no longer offer attractive investment opportunities for global retailers 30) 31) The Global Retail Development Index 2009 suggests that many Arab states have joined the ranks of the major emerging market countries 31) 32) As cultural and economic differences always exist among countries, Arab executives have had to give-up surveillance and alert systems 32) 33) In a world where global presence has become essential, Arab firms have no choice but to position themselves strategically 33) 34) There are hundreds of markets, but which markets to focus on is a strategic decision that should top the marketing manager's list of priorities 34) 35) Gupta and Govindarajan suggested that companies should engage in "directed opportunism" or opportunism led by a systematic and logical framework 35) 36) When companies have multiproduct or multiple business units, the market might be attractive for a particular product or business but not for others 36) 37) Market entry strategies rarely differ across industries and target markets 37) 38) Angela Martins, international director of Banco ABC Brasil, states that Brazil's growth is easy for Arab realestate investors to ignore 38) 39) Export is the newest and possibly the least risky approach to foreign market expansion 39) 40) Modern Arab firms in the early twentieth century, especially from Syria and Lebanon, were pioneers in export business 40) 41) Under a franchising agreement, McDonalds or Hilton might supply a local businessman in Cairo with its intangible property and operational knowledge 41) 42) Unlike licensing, franchising gives the franchiser more say in how the business should operate 42) 43) Contract manufacturing gives the company the opportunity to increase its foreign investment 43) 44) In 2005, UNESCO reported that the Arab world has spent U.S $1,000 billion on turnkey projects in the past three decades 44) 45) Joint ventures with governments are often a good way to establish efficient operations 45) 46) Companies utilize different modes for entering into a market and, depending on the situation, can use multiple modes simultaneously 46) 47) Trade openness and the liberalization process, along with increasing numbers of MNCs from the nonWestern world, have changed the nature of competition in the world market 47) 48) In the global marketplace, strategy is not a vital instrument for competitively positioning a company 48) 49) Multidomestic strategy is a strategic approach where the subsidiary company allows its parent company to decide how to compete in various markets 49) 50) As companies operate globally, they utilize their production capacity and achieve lower production costs 50) 51) Arab firms have many global brands 51) 52) Recently, Saudi Arabia took the initiative in establishing several knowledge cities across the country 52) 53) A global strategy is simply the leveraging of benefits of the firm’s country of origin 53) 54) Porter argues that the scale of a firm used to be important for Arab firms to compete globally but this is no longer the case in a globalized market 54) 55) Achieving superior performance relative to competitors requires an establishment and sustained comparative position over rivals, including domestic firms 55) 56) The key to successful global strategy is to manage the interactions between the different goals and means 56) 57) Companies are endowed with various different capabilities and resources, and when they operate overseas they are confronted with complex factors and demands 57) 58) Instead of making efforts to adjust to differences in foreign markets, companies will often exploit those differences in order to create opportunities 58) 59) The expansion of Arab companies into global markets constitutes an opportunity for growth and learning 59) 60) The expansion of Arab companies into global markets eases prevailing management practices 60) 61) There are many very large Arab firms operating globally 61) 62) In the near future, more Arab corporations will expand their markets into Asia, Africa, Europe, and other regions 62) 63) Arab corporations have to rethink their roles globally and embark on strategic initiatives to seize global opportunities 63) 64) Arab corporations should not study the strategic approaches of their counterparts in emerging countries because those counterparts have found it hard to acheive success 64) MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 65) Prior to the last twenty years, the involvement of Arab firms in the global market place were primarily limited to specific sectors that include 65) A) energy, petrochemicals, and trade B) energy, petrochemicals, and transportation C) energy, trade, and transportation D) energy, transportation, and space 66) The various reasons why Arab executives from Morocco to Oman are interested in expanding beyond domestic and regional markets include 66) A) new market exploration B) technology advancement C) accessibility to low cost materials D) market expansion E) B) Franchising C) Licensing D) Turnkey operations 89) Which type of agreement has increased steadily in the Arab world since governments in the region have embarked on liberalization programs? 89) A) Turnkey operations B) Export C) Licensing D) Franchising E) Both B and D 90) Which type of business involves a contractual agreement for a company to provide management services and expertise to another company for a determined period? 90) A) licensing B) franchising C) management contract D) export E) None of the above 91) Which option gives the company the opportunity to reduce its foreign investment and in the process enables it to have control over its product? 91) A) Licensing B) Franchising C) Contract manufacturing D) Turnkey operations E) Both A and B 92) In March 2010 the Egypt-based Eastern Company, a cigarette manufacturer, signed a contract with Jordan's Tag Company to produce, market, and distribute Eastern's products in Jordan This is an example of 92) A) exportation B) franchising C) licensing D) contract manufacturing 93) When a company constructs an entire project for the host country organization, this is called 93) A) franchising B) licensing C) contract manufacturing D) a turnkey operation 94) Which type of operation enables clients to have access to hard-to-get skills and technology? 94) A) Turnkey operation B) Franchising C) Licensing D) Contract manaufacturing 95) In the global marketplace, joint ventures are established for various reasons, including 95) A) gaining access to new technology or resources B) reducing risk and achieving a competitive position C) ease in entering and gaining knowledge of foreign markets D) complying with government regulations E) all the above 96) In 2006, Dubai Ports World bought the British shipping and logistics firm, Peninsular and Oriental Steam Navigation Company What is this an example of? 96) A) Establilshing a wholly owned subsidiary B) A joint venture C) Licensing D) A turnkey operation 97) When a firm utilizes its entire worldwide system of production and market position against competition, it is using a 97) A) global strategy B) international strategy C) transnational strategy D) multidomestic strategy 98) Companies are influenced by which two primary factors in deciding what strategy should be chosen? 98) A) Global market position and national responsiveness B) National market position and global responsiveness C) National integration and global responsiveness D) Global integration and national responsiveness 99) Whichof the following is not a mechanism for achieving competitive advantage? 99) A) Scale economies B) Economies of scope C) National differences D) National economies 100) Which of the following is not a type of global strategy? 100) _ A) Arbitrage B) Aggregation C) Agitation D) Adaptation 101) The global strategy that seeks to boost revenues and market share by maximizing the company's local importance is called 101) _ A) arbitrage B) agitation C) aggregation D) adaptation 102) The global strategy that attempts to achieve economies of scale by creating regional or sometimes global operations is called 102) _ A) arbitrage B) aggregation C) agitation D) adaptation 103) Which of the following is not something that a company should consider before pursuing a particular strategy? 103) _ A) Whether the new elements of a strategy are a good fit for the organization B) Internalization of segregation C) How to apply integration mechanisms in order to match people to jobs D) Externalization of integration ESSAY Write your answer in the space provided or on a separate sheet of paper 104) What are the two trends that help pave the way for emerging Arab firms to navigate world markets? 105) How The World Factbook and various publications of the UN agencies provide assistance to businesses towards global expansion and orientation? 106) List the ten global trends specified by the global consulting firm, McKinsey & Company, in their 2006 study 107) Explain why executives must understand the differences between individual countries 108) What are the choices available for Arab firms when selecting strategic markets? 109) Describe the market entry strategies 110) What are the activities that Arab companies have to undertake to build sound foundations, expand market share, and best face the global challenge? 111) Explain how Arab firms can approach global integration 1) TRUE 2) FALSE 3) TRUE 4) FALSE 5) TRUE 6) TRUE 7) FALSE 8) TRUE 9) TRUE 10) FALSE 11) TRUE 12) TRUE 13) FALSE 14) TRUE 15) FALSE 16) TRUE 17) TRUE 18) TRUE 19) FALSE 20) TRUE 21) TRUE 22) FALSE 23) TRUE 24) TRUE 25) FALSE 26) FALSE 27) TRUE 28) FALSE 29) TRUE 30) FALSE 31) TRUE 32) FALSE 33) TRUE 34) FALSE 35) TRUE 36) TRUE 37) FALSE 38) FALSE 39) FALSE 40) TRUE 41) TRUE 42) TRUE 43) FALSE 44) TRUE 45) FALSE 46) TRUE 47) TRUE 48) FALSE 49) FALSE 50) TRUE 51) FALSE 52) TRUE 53) FALSE 54) TRUE 55) FALSE 56) TRUE 57) TRUE 58) TRUE 59) TRUE 60) FALSE 61) FALSE 62) TRUE 63) TRUE 64) FALSE 65) A 66) E 67) D 68) D 69) C 70) D 71) C 72) C 73) A 74) B 75) C 76) D 77) C 78) E 79) D 80) E 81) A 82) B 83) D 84) C 85) D 86) B 87) C 88) B 89) D 90) C 91) C 92) D 93) D 94) A 95) E 96) A 97) A 98) D 99) D 100) C 101) D 102) B 103) B 104) In the last twenty years, Arab-based companies have begun venturing abroad aggressively, as governments in various parts of the Arab world have relaxed market regulations and accelerated privatization of state-owned companies These developments have enabled Arab investors and executives to look for opportunities overseas and engage actively in the global markets Both internationalization and globalization have been essential in enabling Arab businesses to leave their mark on the world economy and to pave the way for emerging Arab firms to navigate world markets It is possible to recognize two general trends here the first is that the Arab Gulf states, along with Egypt and Morocco, are, by virtue of their wealth, size, or geography, more inclined than others toward a global focus Not all companies, however, are expected to be global in their activities, as various factors, including management orientation and experience, play a role in shaping involvement in the world markets The second trend is that companies from Syria, Jordan, Lebanon, Algeria, and Tunisia have, in recent years, generally focused on nearby markets, especially the Gulf and Iraqi markets 105) UN agencies, along with other world organizations, provide detailed and relevant information about conditions in many countries, and this information enables managers to formulate a general opinion of countries where they have or plan to have operations One key publication is the World Factbook (published by the CIA ), which includes information related to the history, people, government, economy, geography, communications, transportation, military, and transnational issues of 266 world entities Likewise, the World Bank has several publications (Global Economic Prospects, World Development Report, and Global Development Finance) each year, and the IMF publishes an annual report, Global Economic Outlook 106) Growing numbers of consumers in emerging economies Shift of economic activity between and within regions (e.g to Asia or within the EU) Greater ease of obtaining and developing knowledge Increasingly global labor and talent markets Increasing constraints in supply or usage of natural resources Increasing communication/interaction in business and social realms Shifting industry structures Application of scientific techniques and approaches to business management More social backlash against business 10 Growth of public sector 107) Regardless of which country a company chooses to operate in, its executives must understand that differences exist and must be approached with an open mind These include cultural, demographic, economic, and technological differences, and are apparent not only in religious beliefs but also in dress, eating habits, personal interaction, and regard for time and work As cultural and economic differences always between countries, Arab executives have to develop surveillance and alert systems There is a need to be familiar with fluctuations in financial conditions, exchange rates, and national sentiments These are dynamic and their impact on business operations can be direct and devastating Both the 1997 financial crisis in Thailand, and the 2008 world financial crisis, have had an adverse impact on many companies and left them captive to changing market conditions Executives should be familiar with the political environment in foreign countries Some political systems are business-friendly while others are not Furthermore, it is advantageous to know not only the nature of the political systems but also to acquire and nurture political and diplomatic skills These are considered political capital, the benefits of which are unlimited Even in advanced countries, nationalistic sentiments can either block Arab businesses from entering a market or create unnecessary difficulties [Students may use other examples from pages 145-148 to support their answers] 108) In a world where global presence has become essential, Arab firms have no choice but to position themselves strategically In doing so, there are a variety of options to choose from There are hundreds of markets, but which markets they should focus on is a strategic decision that should top the list of senior executives’ priorities This strategic decision should not be left to chance or random action as trial and error can be costly Gupta and Govindarajan argued that two factors influence a company in determining which markets to enter the strategic importance of the market, and the firm’s ability to exploit the market The first factor, the strategic importance, encompasses elements such as current and future size and learning opportunities Political stability and economic potential should be considered, and other considerations, like population and the population growth rate, along with the potential of the market to grow and the population’s chance to have prosperity, should not be overlooked The learning opportunity is characteristically linked to the sophistication and the demands of customers Customers who are demanding and sophisticated usually stimulate competition for improving quality, and thus also innovativeness and flexibility The second factor, the ability to exploit the market, may be inadequate for many Arab companies With the exception of petrochemical and energy-related firms, most Arab companies are either new to competing globally or probably have an overwhelming majority of talent resources who are not nationals, especially in the GCC states These firms lack a competitive advantage to positioning themselves strategically and outflanking competitors Their best option, therefore, is to establish an adequate place in foreign markets and gradually make their presence noticeable Thus what is important at this stage is not to aggressively exploit the foreign market, but to take the initiative to navigate it 109) Market entry strategies differ across industries and target markets However, the entry modes can be divided into three categories Exporting The selling and sending out of goods or services to other countries Contractual Approaches These include licensing (a producer giving the rights of their intellectual property for a license, in return for royalties), franchising (a firm grants rights to another entity to run its business in a specified manner and provide assistance during the contract duration), management contract (a contractual agreement where a company agrees to provide management service and expertise to another company for a determined period), contract manufacturing (an alternative to licensing involving a company contracting a manufacturer in the host market to produce its entire product or a part of the product), and turnkey operations (when a company constructs an entire project - such as a dam, a highway, or a chemical plant for the host country organization) Investment This includes equity participation, joint ventures (which are independent entities created and owned by two or more companies to achieve mutual objectives), and wholly-owned subsidiaries (a venture that is 100 percent owned and controlled by a company, and allows the company to have full control of its operations) [For a more in depth essay, students could also be asked to provide further explanation or examples from pages 149 to 154 of the textbook] 110) Answers should be based on the points below with some discussion of the points made on pages 160161 of the book Design and implement effective governance models Rethink the existing portfolio Create performance-based meritocracies to attract and advance the best talent Apply rigorous discipline to evaluating new investment Build management capabilities Separate business and family activities Empower employees Additionally, Arab corporations should learn from others that have ventured abroad earlier Likewise, they should study the strategic approaches of their counterparts from emerging countries (e.g Turkish, Indian, Malaysian, Indonesian, Brazilian, South African, etc.) 111) Generally, companies are endowed with varied capabilities and resources, and when they operate overseas they are confronted with complex factors and demands which differ across countries and regions This makes it imperative for companies to be prudent in choosing what strategy to pursue There are three types of global strategies available to Arab firms • Adaptation seeks to boost revenues and market share by maximizing the company’s local importance For example, a firm may establish local units in each national market that performs well in carrying out all the steps in the supply chain • Aggregation attempts to achieve economies of scale by creating regional or sometimes global operations; firms standardize their products and services and bring together the development and production processes • Arbitrage is the recognition of and capitalization on differences between national or regional markets, often by locating separate parts of the supply chain in different areas Before an Arab company pursues any of these strategies, it should take note of the following Make sure the new elements of a strategy are a good fit for the organization A company that employs more than one strategy should be creative in applying integration mechanisms, especially in matching people to opportunities Consider externalizing integration that is, not all integration which is supposed to add values across the border should be done within the organization ... near future, more Arab corporations will expand their markets into Asia, Africa, Europe, and other regions 62) 63) Arab corporations have to rethink their roles globally and embark on strategic. .. market might be attractive for a particular product or business but not for others 36) 37) Market entry strategies rarely differ across industries and target markets 37) 38) Angela Martins,... of agreement represents a producer giving the rights of their intellectual property in return for royalties? 86) A) Turnkey operations B) Licensing C) Franchising D) Export 87) Which of the
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