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International Management, 8e (Deresky)

Chapter 7 Global Alliances and Strategy Implementation

1) ________ are partnerships between two or more firms that decide they can better pursue their
mutual goals by combining their resources as well as their existing distinctive competitive
advantages.
A) Greenfield investments
B) Strategic alliances
C) Foreign subsidiaries
D) Turnkey operations
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

2) Alliances are also known as ________.


A) competitive strategies
B) cooperative strategies
C) relational strategies
D) virtual strategies
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

3) ________ are transition mechanisms that propel the partners' strategies forward in a turbulent
environment faster than would be possible for each company alone.
A) Cooperative strategies
B) Entry strategies
C) Options strategies
D) Competitive strategies
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

1
Copyright © 2014 Pearson Education, Inc.
4) A ________ is a new independent entity that is collectively created and owned by two or more
parent companies.
A) subsidiary
B) joint venture
C) greenfield investment
D) turnkey operation
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

5) SoftCorp and TechGig, upcoming software companies in San Diego, have decided to create a
new and independent telecommunications company, ST-source. Each parent firm has agreed to
have 50 percent equity in the new company. This is an example of a(n) ________.
A) e-business
B) subsidiary
C) franchise
D) joint venture
Answer: D
Diff: 3
Chapter: 7
Skill: Application
Objective: 1
AACSB: Analytic skills

6) A(n) ________ refers to a JV among companies in different countries.


A) international joint venture
B) equity joint venture
C) global joint venture
D) transnational joint venture
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

2
Copyright © 2014 Pearson Education, Inc.
7) Which of the following is the most beneficial aspect of an international joint venture?
A) the international partner receives the entire profit
B) the responsibility of risks is solely taken by the international partner
C) the partner's local contacts and markets will be utilized
D) the entire cost of production will be borne by the local partner
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

8) Trout Corp., Kirgo Ltd., and Sturgeon Inc., three of the leading construction companies in the
U.S., have decided to join hands and create a new cement manufacturing company. According to
their agreement, Trout Corp. will have 50 percent equity, Kirgo Ltd. will have 20 percent equity,
and Sturgeon Inc. will have 30 percent equity. In this given scenario, Sturgeon Inc. is referred to
as a(n) ________.
A) minority JV partner
B) majority JV partner
C) sole proprietor
D) franchisor
Answer: A
Diff: 3
Chapter: 7
Skill: Application
Objective: 1
AACSB: Analytic skills

9) Alliances in which two or more partners have different relative ownership shares in the new
venture are called ________.
A) cultural strategic alliances
B) equity strategic alliances
C) non-equity strategic alliances
D) transmodal strategic alliances
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

3
Copyright © 2014 Pearson Education, Inc.
10) France's Thomson Electronics combined with China's TCL to form TCL-Thomson
Electronics. Thomson owns 33% and TCL owns the remaining 67% of TCL-Thomson
Electronics. This is best described as a(n) ________.
A) turnkey operation
B) acquisition
C) international licensing agreement
D) equity strategic alliance
Answer: D
Diff: 3
Chapter: 7
Skill: Application
Objective: 1
AACSB: Analytic skills

11) Alliances that are carried out through contract rather than ownership sharing are called
________.
A) cultural strategic alliances
B) equity strategic alliances
C) non-equity strategic alliances
D) transmodal strategic alliances
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

12) Runnerz Inc., a leading manufacturing and retail company that designs and develops
footwear and apparel, has signed a contract with a particular courier service for managing the
delivery process. The courier service is required to deliver goods from the factory to the
warehouse, to customers, and also to collect customer payments for the goods. This is a typical
example of a(n) ________.
A) non-equity strategic alliance
B) turnkey operation
C) greenfield investment
D) international licensing agreement
Answer: A
Diff: 3
Chapter: 7
Skill: Application
Objective: 1
AACSB: Analytic skills

4
Copyright © 2014 Pearson Education, Inc.
13) Which of the following types of alliances can be formed between a company and a foreign
government?
A) international joint venture
B) equity strategic alliance
C) non-equity strategic alliance
D) global strategic alliance
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

14) Which of the following is NOT a typical reason for forming cross-border alliances?
A) to avoid import barriers
B) to share R&D costs and risks
C) to gain access to specific markets
D) to test marketing campaigns overseas
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

15) Which of the following motivates a company to form cross-border alliances?


A) to regulate and favor domestic companies
B) to gain rapid entry into a new and consolidating market
C) to remove exporting barriers for domestic companies
D) to allow local companies to gain access to international products and services
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

5
Copyright © 2014 Pearson Education, Inc.
16) Globe Cars, a leading automobile ancillary firm in China, has decided to form a global
alliance with Fulda, a German tire manufacturing company. Which of the following is a primary
challenge that Globe Cars is most likely to face in this alliance?
A) existing competitors
B) risk of investment
C) extreme trade barriers in China
D) differences in national cultures
Answer: D
Diff: 3
Chapter: 7
Skill: Application
Objective: 2
AACSB: Analytic skills

17) Which of the following is a pitfall of cross-border alliances?


A) increase in the number of existing competitors
B) disputes over management
C) convincing expatriates
D) finding local skilled employees
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

18) Which of the following factors has the maximum influence on the success of multinational
firm alliances?
A) form of governance chosen
B) introduction of new competition
C) differing national cultures
D) cumulative learning of partner
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

6
Copyright © 2014 Pearson Education, Inc.
19) Joint ventures are often the chosen form of multinational firm alliances because they
________.
A) provide greater control of proprietary technology
B) increase the level of competition between partner firms
C) enhance the specific skills of the personnel
D) enhance the rewards of the firm
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

20) According to David Lei, the single greatest impediment managers face when seeking to learn
or renew sources of competitive advantage is that ________.
A) good venture partners are hard to find
B) technologies change very rapidly
C) partners can become competitors
D) governments can be fickle
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2

21) Cross-border allies often have difficulty collaborating effectively, especially in competitively
sensitive areas. This generally leads to ________.
A) mistrust and secrecy
B) limitation of investment
C) short-term corporate restructuring
D) lowering of exit barriers
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

7
Copyright © 2014 Pearson Education, Inc.
22) The dual role of strategic alliance refers to the ________.
A) constant requirement of resources and markets
B) process of finding skilled personnel and training them to work efficiently
C) conflict between cooperation and competition
D) differences between home and host governments
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

23) All of the following are cooperative aspects of strategic alliances EXCEPT ________.
A) creating economies of scale in tangible assets
B) forming upstream–downstream divisions of labor
C) limiting investment risks through shared resources
D) learning new intangible skills from alliance partners
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

24) Which of the following is a competitive aspect of strategic alliances?


A) sharing resources to limit investment risk when entering new markets or uncertain
technological fields
B) lowering exit barriers in mature industries, therefore, assisting short-term corporate
restructurings
C) accelerating diffusion of industry standards and new technologies to create barriers to entry
D) creating a critical mass to develop new technologies to protect domestic, strategic industries
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

8
Copyright © 2014 Pearson Education, Inc.
25) Which of the following is a cooperative aspect of strategic alliances?
A) creating economies of scale in tangible assets
B) accelerating diffusion of industry standards to erect barriers to entry
C) learning new intangible skills from alliance partners
D) denying technological and learning initiative to partners
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

26) MNCs often partner with local SMEs in order to ________.


A) capture new innovations and ideas
B) reduce the potential risks of the company
C) ensure international expansion
D) maximize the autonomy of the partners
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

27) According to Dovev Lavie, which of the following is a value-creation strategy?


A) setting organizational buffers between competing partners
B) allying with multiple partners in one industry to limit power
C) assimilating network resources to acquire new skills and capabilities
D) aligning organizational units to create coherent interfaces
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

28) According to Dovev Lavie, which of the following is a caution given to global companies by
value capture strategies?
A) Set organizational and technological buffers between competing partners.
B) Avoid partners that compete in your industry if they enjoy superior bargaining power.
C) Learn and assimilate network resources in order to develop new skills and capabilities.
D) Align organizational units and create a coherent interface with each partner in the alliance.
Answer: B
Diff: 1
Chapter: 7
9
Copyright © 2014 Pearson Education, Inc.
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

29) In order to minimize potential problems in alliances, companies should most likely choose
partners with ________.
A) competitively sensitive technology
B) complementary products and skills
C) significant control of the target market
D) superior bargaining power in the same industry
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

30) Which of the following is NOT a characteristic of strategic implementation of the


McDonald's corporation?
A) minimizing autonomy
B) hiring locals whenever possible
C) forming paradigm-busting arrangements with suppliers
D) making minor changes to the standard menu based on location
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

31) Which of the following is a strategic implementation used by McDonald's?


A) keeping prices low to build market share
B) altering menu items significantly to match cultural norms
C) using American managers to run international franchises
D) forming joint ventures with foreign restaurants to enter new markets
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

10
Copyright © 2014 Pearson Education, Inc.
32) Which of the following most likely provides a strategic advantage during the implementation
of a global alliance?
A) non-collaboration in competitively sensitive areas
B) unified technology infrastructure
C) centralized decision making by one partner
D) high levels of competition between the partners
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

33) Which of the following factors most significantly affects all other variables necessary for the
successful implementation of a global alliance?
A) organizational policies
B) organizational structure
C) employee leadership
D) product performance
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

34) Which of the following terms suggests that global sourcing can produce gains in efficiency,
productivity, quality, and profitability by fully leveraging talent around the world?
A) transformational outsourcing
B) business process reengineering
C) inverted sourcing
D) lean integration
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

11
Copyright © 2014 Pearson Education, Inc.
35) Barton & Green is an MNC based in the U.S. that provides a wide range of software
development products. Executives at the firm are considering the idea of outsourcing the
company's IT infrastructure. Which of the following best supports the argument that Barton &
Green should outsource its IT infrastructure to TMC Enterprises, one of the best IT infrastructure
maintenance firms in India?
A) The main competitor of Barton & Green outsources all IT functions.
B) Outsourcing will enhance Barton & Green's competitiveness.
C) Barton & Green's employees frequently need IT support, so it is best to outsource the IT
infrastructure.
D) Barton & Green has proprietary technology and processes.
Answer: B
Diff: 3
Chapter: 7
Skill: Critical Thinking
Objective: 3
AACSB: Reflective thinking skills

36) Barton & Green is an MNC based in the U.S. that makes a wide range of software
development products. Executives at the firm are considering the idea of outsourcing the
company's IT infrastructure. Which of the following questions is the most relevant to Barton &
Green's decision to outsource its IT infrastructure to TMC Enterprises, a firm in India?
A) Which type of operating system is primarily used by TMC Enterprises?
B) What is the attitude of U.S. consumers about TMC Enterprises?
C) What is the financial health of TMC Enterprises?
D) Which other firms have outsourced their processes to TMC Enterprises?
Answer: C
Diff: 3
Chapter: 7
Skill: Critical Thinking
Objective: 3
AACSB: Reflective thinking skills

37) Opening its own subsidiaries in the host country may be better than contracting with an
outside firm in the host country, if it is crucial for the firm to ________.
A) produce gains in efficiency, productivity, and quality
B) keep control of proprietary technology and processes
C) minimize job losses in the home country
D) market its products in the host country
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

12
Copyright © 2014 Pearson Education, Inc.
38) The initial challenge in implementing strategies in emerging markets is likely to be how to
________.
A) compete with other emerging markets
B) allocate responsibilities between the partners
C) set up new policies and regulations
D) navigate poor infrastructures
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 5
AACSB: Dynamics of the global economy

39) Parent companies use the IJV control process in order to ensure that the management of the
joint venture conforms to ________.
A) international accounting standards
B) qualitative standards
C) its own interests
D) industry standards
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

40) Organizational design as a mechanism for factoring international joint venture control refers
to the ________.
A) human resource plans and policies of the joint venture
B) market share and profitability ratios of the organization
C) geographic location of the joint venture's facilities
D) amount of decision-making power that the joint venture holds
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

13
Copyright © 2014 Pearson Education, Inc.
41) ________ refers to the processes that management puts in place in order to direct the success
of the joint venture's goals.
A) IJV control
B) Knowledge management
C) Turnkey operations
D) Offshoring
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

42) The most important single factor determining IJV success or failure is the ________.
A) percentage of equity share held by each partner
B) choice of a partner
C) proprietary technologies held by a partner
D) amount of decision-making control given to each firm
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

43) International joint ventures are like a marriage because ________.


A) the firms cannot be separated into single entities after the merging
B) each firm will have access to all of the others' proprietary technologies and competitively
sensitive information
C) the more issues that can be settled before the merger, the less likely it will be to break up
D) each firm will have equal decision-making powers
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

14
Copyright © 2014 Pearson Education, Inc.
44) International joint ventures are less likely to break up when ________.
A) issues are settled before the merger
B) new policies are created after the merger
C) one partner has all the decision-making autonomy and the other has none
D) each firm explicitly states its actions and requirements after the merger
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

45) Which of the following human resource problems can be simplified by increasing the
autonomy of the IJV?
A) workplace deviance
B) employment discrimination
C) staffing friction
D) employee silence
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

46) In spite of the potential problems with local partners, many firms rush the process of partner
selection because ________.
A) they want to reduce the amount spent on establishing subsidiaries abroad
B) they want to take advantage of the local partner's technological innovations
C) they mostly aim at increasing the number of equity shares within a short period of time
D) they are anxious to get into an attractive market
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

15
Copyright © 2014 Pearson Education, Inc.
47) With regard to less-developed countries, most problems with international joint ventures
involve ________.
A) the parent corporation
B) the local partner
C) differences in accounting standards between nations
D) differences in control system information management between nations
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

48) Where ownership is divided among several partners, the parent organizations are more likely
to delegate the operational running of the IJV to ________.
A) local IJV management
B) parent company management
C) middle managers at the parent company level
D) management teams from the largest company in the joint venture
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

49) All of the following are examples of international joint venture control mechanisms used by
parent firms EXCEPT ________.
A) staffing policies
B) legal contracts
C) regional authorities
D) organizational design
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

16
Copyright © 2014 Pearson Education, Inc.
50) Which of the following primarily determines the extent of control exercised over an IJV by
its parent company?
A) staffing choices for top IJV positions
B) policies of the smaller firm
C) cultural background
D) IJV industry
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

51) The need for knowledge management in IJVs primarily stems from ________.
A) employee concerns regarding job security and benefits
B) cultural and system differences between partners
C) local government regulations and restrictions
D) proprietary information legalities
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

52) Which of the following terms refers to the process by which the firm integrates and benefits
from the experiences and skills learned by its employees?
A) knowledge management
B) employee value proposition
C) employee retention
D) business process outsourcing
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

17
Copyright © 2014 Pearson Education, Inc.
53) ________ is the conscious and active management of creating, disseminating, evolving, and
applying facts, information, or skills acquired through experience or education, to strategic ends.
A) Business continuity management
B) Employee value proposition
C) Knowledge management
D) Employee retention
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

54) According to Berdrow and Lane, the process of transfer can be defined as ________.
A) managing the flow of existing knowledge between parents and from the parents to the IJV
B) managing the transformation and creation of knowledge within the IJV through its
independent activities
C) managing the flow of transformed and newly created knowledge from the IJV back to the
parents
D) capturing and keeping knowledge confidential that exists among the local partners
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

55) According to Berdrow and Lane, the process of harvest can be defined as ________.
A) managing the flow of existing knowledge between parents and from the parents to the IJV
B) managing the flow of transformed and newly created knowledge from the IJV back to the
parents
C) capturing knowledge of local partners and keeping it confidential
D) managing the transformation and creation of knowledge within the IJV through its
independent activities
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

18
Copyright © 2014 Pearson Education, Inc.
56) According to Berdrow and Lane, the process of transformation can be defined as ________.
A) transforming the existing knowledge of parents and managing the flow of this transformed
knowledge between parents
B) managing the transformation and creation of knowledge within the IJV through its
independent activities
C) capturing and keeping knowledge that exists within the local partners confidential
D) managing the flow of transformed and newly created knowledge from the IJV back to the
parents
Answer: B
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

57) Which of the following is NOT a knowledge management process?


A) transferring existing knowledge
B) transforming and creating of knowledge
C) harvesting knowledge from the IJV to the parents
D) distributing knowledge to clients and media outlets
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

58) Which of the following represents government influence on IJVs?


A) copyright protection
B) partnership of firm
C) organization structure
D) negotiation practice
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

19
Copyright © 2014 Pearson Education, Inc.
59) Which of the following is an area where the host government influences the strategic choices
and implementations of foreign firms?
A) level of taxation
B) equity share in joint venture
C) knowledge management
D) partnership of target firms
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

60) Which of the following variables is frequently overlooked when deciding on entry strategies
and alliances, particularly when the target country is perceived to be similar to the home
country?
A) political stability
B) culture
C) currency stability
D) competition
Answer: B
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

61) Overlooking cultural differences in cross-border alliances can create a negative impact when
________.
A) target country has similar views on organizational formality
B) target country and host country equally participate in decision making
C) target country is technologically superior to the host country
D) target country has conflicting practices and systems
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

20
Copyright © 2014 Pearson Education, Inc.
62) In a cross-border alliance, cultural differences can be overlooked when ________.
A) the target country is similar to the home country
B) when there is a considerable difference in practices of the target country
C) the target country has a high number of domestic mergers
D) the target country insists on participating in the decision-making processes
Answer: A
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

63) Which of the following is a cultural difference that can significantly affect cross-border
alliances?
A) use of e-commerce enablers
B) emergence of market firms in the host country
C) organizational formality
D) protectionist legislation
Answer: C
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

64) Which of the following terms refers to a bond between specially connected firms that
generates preferential treatment to members of the network?
A) kanban
B) kaizen
C) guanxihu
D) guanxi
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

21
Copyright © 2014 Pearson Education, Inc.
65) Which of the following terms refers to company specialists who provide other companies
with services such as Web site translation?
A) e-commerce enablers
B) virtual global teams
C) e-businesses
D) born globals
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Use of information technology

66) Which of the following best describes the role of e-commerce enablers?
A) They facilitate multinational companies to collaborate with medium-sized organizations.
B) They allow innovative transnational companies to gain entry into foreign markets.
C) They help small- and medium-sized companies to go global without the internal capabilities
to carry out global activities.
D) They reduce the risks involved in joint venture and other forms of alliances.
Answer: C
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Use of information technology

67) Which of the following is a typical task performed by e-commerce enablers?


A) evaluating skill sets of personnel
B) conducting performance appraisals
C) establishing criteria for partnership
D) screening orders
Answer: D
Diff: 2
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Use of information technology

22
Copyright © 2014 Pearson Education, Inc.
68) NextLinx Corporation provides a wide range of strategic implementation services for small-
and medium-sized organizations. It allows all trading partners to collaborate in a single online
location, using the same information and processes. Therefore, NextLinx is an example of a(n)
________.
A) e-commerce enabler
B) knowledge management firm
C) IJV controller
D) outsourcing company
Answer: A
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Use of information technology

69) Alliances can be formed for various purposes, e.g., sharing technology, marketing, or
production joint ventures.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

70) A de-merger is a transition mechanism that propels the partner's strategies forward in a
turbulent environment faster than would be possible for each company alone.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

71) A joint venture is a situation in which two or more partners have different relative ownership
shares in the new venture.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

23
Copyright © 2014 Pearson Education, Inc.
72) Agreements are carried out through contract rather than ownership sharing in an international
joint venture.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

73) An equity strategic alliance is a new independent entity jointly created and owned by two or
more parent companies.
Answer: FALSE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

74) Working partnerships between two or more companies across national boundaries and
increasingly across industries are referred to as global strategic alliances.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy

75) A major drawback of global and cross-border alliances is that they do not share the cost and
risk of research and development of new products.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

76) In a highly competitive environment, alliances are a slow and risky route to globalization,
and therefore, are likely to be avoided.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

24
Copyright © 2014 Pearson Education, Inc.
77) Cross-border allies usually collaborate effectively, and are most often associated with long
lasting trust and loyalty.
Answer: FALSE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

78) A major benefit of cross-border alliances is that they facilitate the access to specific markets
where regulations favor domestic companies.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

79) Cross-border alliances are used to gain rapid entry into a new or consolidating industry and
to take advantage of synergies.
Answer: TRUE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

80) One major disadvantage of cross-border alliances is that there is a potential loss of a
company's technology and knowledge.
Answer: TRUE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

81) MNCs often partner with local small enterprises to capture new ideas and innovations.
Answer: TRUE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

25
Copyright © 2014 Pearson Education, Inc.
82) Transformational outsourcing refers to the view that global sourcing can produce gains in
efficiency and profitability by fully leveraging talent around the world.
Answer: TRUE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

83) The initial challenge in implementing strategies in emerging markets is likely to be the
navigation of poor infrastructures, supply chains, and distribution networks.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 5
AACSB: Dynamics of the global economy

84) The most important single factor determining IJV success or failure is the choice of a
partner.
Answer: TRUE
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

85) The term IJV control refers to the processes that management puts in place so as to direct the
success of the firm's goals.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

86) The conscious and active management of creating, disseminating, evolving, and applying
knowledge to strategic ends is known as a strategic alliance.
Answer: FALSE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

26
Copyright © 2014 Pearson Education, Inc.
87) E-commerce enablers help small and medium-sized companies to go global without the
internal capabilities to carry out global e-commerce functions.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Use of information technology

88) Guanxihu refers to a bond between specially connected firms that generates preferential
treatment for members of the network.
Answer: TRUE
Diff: 1
Chapter: 7
Skill: Concept
Objective: 6
AACSB: Dynamics of the global economy

89) Why should a company seek a global alliance over other forms of market entry?
Answer: Alliances have advantages over other entry forms, such as exporting. For example, an
alliance will give faster market access than exporting and will avoid entry barriers such as tariffs.
In addition, while an exporting strategy requires the firm to find customers, the alliance partner
may already have a customer base. Further, an alliance is a means of spreading risk over a larger,
more diversified enterprise than a single domestic firm. In large technological firms, an alliance
is often a way to share costs and share technology.
Diff: 3
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

90) What motivates a company to develop a cross-border alliance?


Answer: The commonly noted motivations for developing a cross-border alliance include: to
avoid import barriers, licensing requirements, and other protectionist legislation; to share the
costs and risks of the research and development of new products and processes; to gain access to
specific markets where regulations favor domestic companies; to reduce political risk while
making inroads into a new market; to gain rapid entry into a new or consolidating industry; and
to take advantage of synergies.
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

27
Copyright © 2014 Pearson Education, Inc.
91) What are some of the challenges in implementing global alliances?
Answer: Problems relate to shared ownership, differences in national cultures, the integration of
widely different structures and systems, the distribution of power between the companies
involved, and the conflicts in their relative locus of decision making and control.
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

92) What is the "dual nature" of strategic alliances?


Answer: Alliances serve both a cooperative and a competitive role. Ventures start on the surface
as cooperative agreements. There is a dynamic tension under the surface, as venture partners
have the potential to become new competitors––competitors with significant knowledge of their
partner's operations and strategy.
Diff: 3
Chapter: 7
Skill: Application
Objective: 2
AACSB: Dynamics of the global economy

93) What are the benefits of outsourcing abroad? What should firms do when implementing a
global sourcing strategy?
Answer: Outsourcing abroad can produce gains in efficiency, productivity, quality, and
profitability by fully leveraging talent around the world. A firm should do the following:
1. Examine its reasons for outsourcing
2. Evaluate the best outsourcing model
3. Gain the cooperation of its management and staff
4. Consult its alliance partners
5. Invest in the alliance
Diff: 2
Chapter: 7
Skill: Concept
Objective: 3
AACSB: Dynamics of the global economy

28
Copyright © 2014 Pearson Education, Inc.
94) What is international joint venture control? Why is it important?
Answer: International joint venture control refers to the processes that management puts in place
so as to direct the success of the firm's goals. Most of a firm's objectives can be achieved by
careful attention to control features at the outset of the joint venture, such as the choice of a
partner, the establishment of a strategic fit, and the design of the IJV organization. IJV control is
an important issue because at least one parent is headquartered outside the venture's country of
operations thus requiring unique measures of control. Lack of attention to specific control
requisites of IJVs can limit the parent company's ability to utilize its resources efficiently,
coordinate its activities, and implement its strategy.
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

95) Why is an international joint venture referred to as a marriage between venture partners?
Answer: International Joint Ventures are like a marriage because the more issues can be settled
and agreed upon before the merger, the less likely it will be to break up. This agreement should
specify the rights and responsibilities of each partner. There is also the issue of compatibility.
Incompatible ventures dissolve as do incompatible marriages. To become and remain
compatible, venture partners need to appreciate the cultural heritage of their partner.
Diff: 3
Chapter: 7
Skill: Application
Objective: 4
AACSB: Dynamics of the global economy

96) Describe the process of knowledge management in international joint ventures.


Answer: Knowledge management is the conscious and active management of creating,
disseminating, evolving, and applying knowledge to strategic ends. The process consists of
several components:
1. Transfer: managing the flow of existing knowledge between parents and from parents to IJV.
2. Transformation: managing the creation of knowledge and transformation within the IJV.
3. Harvest: managing the flow of the transformed and newly created knowledge back to parent.
Diff: 2
Chapter: 7
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy

29
Copyright © 2014 Pearson Education, Inc.
97) What are some of the complexities of managing and implementing a global alliance? How
can e-commerce enablers assist the process?
Answer: IJVs and other global alliances require unique controls for proper management.
Ignoring these specific control requisites can limit the parent company's ability to use its
resources efficiently, coordinate its activities, and implement its strategy. With subsidiaries,
suppliers, distributors, manufacturing facilities, carriers, brokers, and customers all over the
globe, global trade is complicated and fragmented. Global trade is extremely complicated.
Deciding on a global strategy is one thing, but implementing it through all the necessary parties
and intermediaries around the world presents a whole new level of complexity. Because of that
complexity, many firms decide to implement their global e-commerce strategy by outsourcing
the necessary tasks to e-commerce enablers, companies that specialize in providing the
technology to organize transactions and follow through with the regulatory requirements. These
specialists can help companies sort through the maze of different taxes, duties, language
translations, and so on—specific to each country. Such services allow small and medium-sized
companies to go global without the internal capabilities to carry out global e-commerce
functions. These kinds of Web-based services allow a company to manage an entire global trade
operation, including automation of imports and exports by screening orders and generating the
appropriate documentation, paying customs charges, and complying with trade agreements.
Diff: 3
Chapter: 7
Skill: Synthesis
Objective: 4, 7
AACSB: Dynamics of the global economy

98) How can firms increase the likelihood of forming a successful global alliance?
Answer: (1) Choose a partner with compatible strategic goals and objectives and with whom the
alliance will result in synergies through the combined markets, technologies, and management
cadre; (2) seek alliances where complementary skills, products, and markets will result; (3) work
out with the partner how proprietary technology or competitively sensitive information will be
handled; and (4) recognize that most alliances last only a few years and will probably break up
once a partner feels that it has incorporated the skills and information it needs to go it alone.
Diff: 2
Chapter: 7
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy

30
Copyright © 2014 Pearson Education, Inc.