Global Enterprise and Competition
66.511-202
Final Examination
Instructions:
Answer following questions and attach your answers to an email to
Ashwin_Mehta@UML.edu.
Answers to essay questions must be complete and concise.
You must submit your responses by 5PM December 20, 2007
(Questions 1 through 15 are T/F or multiple choice and one (1) point each. Q 16 to 22 are
essay questions and points are shown with questions)
Q 1. What makes an international business a multinational corporation?
a.
b.
c.
d.
e.
Having a global vision
Serving customers in multiple countries
Having operations or distribution facilities in multiple countries
Being vertically integrated along the value chain
Coordinating purchasing and sales across many country borders
Q 2. Which one of the following statements best describes the main point emphasized by
the course in the discussion of the BP case?
a.
The merger wave involving BP and other major oil companies was driven
by high oil prices in the international oil industry.
b.
BP’s acquisitions of Amoco and later of Arco were driven by other major
oil company mergers (such as Exxon’s acquisition of Mobil).
c.
BP and other major oil companies pursued international mergers to gain
market power in crude oil markets.
d.
BP and other major oil companies pursued vertical integration in part as a
means of coordinating production and procurement transactions in many
supplier countries.
e.
BP and other major oil companies tried to increase their scale of
operations to achieve competitive advantage over independent refinery
companies.
Q 3. Lenovo’s acquisition of IBM brought all of the following benefits to Lenovo except
which one?
a.
Access to a valuable new brand name
b.
Access to a new manufacturing and procurement supplier country
c.
A new home country for the company’s personal computer business
d.
Access to new technology, particularly for laptop computers
e.
Significant growth in customer installed base and market share
Q 4. All of the following statements except which one apply to the star analysis.
a.
The star analysis is intended for any type of international transaction, that
is, for any cross-border business activity.
b.
The star analysis is intended for companies that do business internationally
whether or not they operate facilities abroad.
c.
The international business manager examines the features of the
company’s home country, supplier countries, partner countries, and
customer countries, and the features of competitor countries.
d.
The star analysis applies to the current supplier and customer countries
and not to potential supplier and customer countries associated with
projected changes in the company’s strategies.
e.
A company’s supplier countries includes those countries where the
company operates its own production facilities as well as those countries
where production facilities run by the company’s suppliers are located.
f.
The star analysis is designed for use by business managers evaluating their
company’s potential competitive advantages over rivals.
Q 5. Answer the following question based on the model of monopolistic competition.
What is the likely effect of increasing the size of the European Union from 15 countries
to 25 countries?
a.
Increased scale and greater variety will be accompanied by lower prices.
b.
Prices will not change in comparison to autarky.
c.
The effect of greater scale and variety on prices is ambiguous since scale
and variety have different effects on prices.
d.
Prices will differ across goods as a result of product differentiation in the
monopolistic competition model.
Q 6. The advantages of vertical integration for the international business typically include
all except which one of the following?
a.
b.
c.
d.
e.
Achieving greater internal coordination across international operations.
Avoiding market transaction costs.
Increasing flexibility and responsiveness to changing market conditions.
Avoiding double marginalization.
Transferring technology internally to the company.
Q 7. According to the course, the main point of the Renault-Nissan case corresponds
most closely with which one of the following?
a.
b.
c.
d.
e.
The Renault-Nissan alliance was an attempt to transfer advanced
technology
within an international business.
The Renault-Nissan alliance was an attempt to reduce international
business risk
through ownership of a joint venture and geographic diversification.
The Renault-Nissan alliance was motivated by the wave of mergers and
consolidations in the international automobile industry.
The Renault-Nissan alliance illustrated the difficulties associated with
merging
companies with different corporate cultures.
The Renault-Nissan alliance was an attempt to achieve economies of scale
by combining production and providing greater product variety by
combining product lines and distribution.
Q 8. Which one of the statements is correct?
a.
b.
c.
d.
e.
Marginal revenue exceeds price because when prices rise some consumers
will switch to rival brands.
If the elasticity of demand is less than one, a price increase lowers
revenue.
Elasticity of demand faced by a company depends on both customer
demand responses to price and competitor responses to price.
Price cuts always increase revenue because the quantity sold increases.
Lower cost of trade may enhance the ability of a company to price to
market.
Q 9. According to the course, which one of the following statements best describes the
P&G in Japan (SK-II) case?
a.
b.
c.
d.
e.
The organizational issues a large international company faced when
selecting supplier countries for the production of a premium cosmetics
brand.
The organizational issues a large international company faced when
selecting which customer countries to target in the expansion of a
premium cosmetics brand.
The organizational issues a large international company faced in
identifying innovative products in cosmetics.
The organizational issues a large international company faced in avoiding
distribution costs, counterfeit products, tariffs and other nontariff trade
barriers.
The organizational issues a large international company faced in
overcoming budget pressures that limited marketing and sales.
Q 10. Consider the model of monopolistic competition. Recall the graph with scale on the
vertical axis and variety on the horizontal axis. All of the following statements are correct
except which one?
a.
b.
c.
d.
e.
The market outcomes relationship arises from the combination of the
pricing equation for a representative company with market power and a
zero-profit condition that assumes competition via free-entry into the
marketplace.
A market’s size (e.g. the size of a country in autarky, such as Spain prior
to EU integration) pins down a point along the market outcomes curve.
The scale-variety trade-off results from the fact that a given level of
national income that represents a given size of economy can be employed
to produce either many different products each at a small scale or a few
different products each at a larger scale.
The market outcomes curve describes a positive relationship between the
number of firms in the market and the quantity sold by each individual
firm.
If the market outcomes curve shifts down, the resulting intersection with
the scale-variety tradeoff is greater scale and less variety.
Q 11. The discussion of modes of entry identified all except which one of the following
as methods of reducing political risk?
a.
b.
c.
d.
e.
Managers should understand the limits the host government places on the
market power of the international business.
Managers should understand the concerns of local partners when forming
contracts in the host country.
Managers should forecast potential changes in the international relations
of the host country.
Managers should understand the objectives of the host government
including attracting technology and local control of investment.
Managers should understand differences in the ways a host country treats
the domestic business and the foreign business.
Q 12. Companies have the greatest difficulty in overcoming home country limitations in
which one of the following situations?
a.
b.
a.
c.
d.
Government regulations that restrict the international trade of the home
country
Limits on the capabilities of suppliers and partners in the home country
Constraints on supplies of natural resources and technology in the home
country
Perceptions by international customers of the nationality of brands that are
managed by the international business
Limited knowledge and sophistication of customers in the home country
Q 13. One of the ways to lower transaction costs is international arbitrage.
T
F
Q 14. Competitive environment is ideal when rivalry is only moderate, entry barriers are
relatively low, and suppliers & customers are in a weak bargaining position
T
F
Q 15. Lenovo’s acquisition of IBM PC business is an example of a corporate growth
strategy of diversification
T
F
Q 16. Why are demand side partnerships critical in global competitive advantage?
Provide an example to illustrate your comments. (Be complete and concise) 10 points
Q 17. What are the major benefits of a Global Platform Strategy for a global business?
Are there any risks in such a strategy? If so, discuss each. 15 points
Q 18. What are key components in a successful Global Network Strategy? 15 points
Q 19. What is Horizontal FDI and how is Mittal Steel implementing this strategy? 10
points
Q 20. Why have a holding company at all if all the member companies operate
independently? 10 points
Q 21. When is a competitive environment ideal? What are its implications? 10 points
Q 22. Why is a market-based divisional organization the best way to implement the
company’s global strategy? 15 points