Chapter 14

Question 1

Global strategies:

Answer 1

Strategies utilising resources and operations spread across the world

Question 2

Types of advantages for global firms

Answer 2

• Global scale
• Global arbitrage
• Global knowledge integration
• Global clients
• Risk diversification

Question 3

Global scale (advantage)

Answer 3

Reduce costs in product development, production, procurement and distribution

Question 4

Global Arbitrage (advantage)

Answer 4

Access a wider range of inputs, including labour, natural resources, and capital

Question 5

Global knowledge integration (advantage)

Answer 5

Engage innovation boy tapping unto and integration knowledge resources

Question 6

Global clients (advantage)

Answer 6

Deliver consistent services for clients operating in multiple countries

Question 7

Risk diversification (advantage)

Answer 7

Reduce the corporate risk profile

Question 8

Economies of scale:

Answer 8

Reduction in unit costs achieved by increasing volume

Question 9

Arbitrage:

Answer 9

Exploitation of differences in prices in different markets

Question 10

Overseas listing:

Answer 10

Raising capital by listing on a stock exchange abroad

Question 11

Centres of excellence:

Answer 11

Specialized centres for innovation that serve the entire MNE

Question 12

Global key accounts:

Answer 12

Customers served at multiple sites around the world, based on a centrally
negotiated contract

Question 13

Risk diversification:

Answer 13

Reduction of the risk profile of a company by investing in different countries
and industries

Question 14

Organic growth:

Answer 14

Setting up new operations by relying primary on the existing resources of the
firm

Question 15

Organic growth (opportunity and challenge)

Answer 15

Opportunity: Growing and sharing the firmÄs internal resources

Challenge: Speed of growth limited by existing resources

Question 16

Growth via partnership: (opportunity and challenge)

Answer 16

Opportunity: Access to wide range of complementary resources

Challenge: Coordination across divers partnerships

Question 17

Growth via acquisition (opportunity and challenge)

Answer 17

Opportunity: Control over acquired resources

Challenge: Integration of acquired units and across them

Question 18

Partnerships:

Answer 18

Collaborations with other firms offering complementary resources

Question 19

Operational collaboration:

Answer 19

A firm of strategic alliance that includes collaboration in operations,
marketing or distribution

Question 20

R&D JV:

Answer 20

Joint venture aiming to develop next generation technologies

Question 21

Business unit JV:

Answer 21

A JV in which existing business units from two firms are merged

Question 22

M&A:

Answer 22

Popular shorthand for ‘merges and acquisitions’

Question 23

Acquisition:

Answer 23

The transfer of the control of operatives and management from one firm (target) to
another (acquirer), the former becoming a unit of the latter

Question 24

Merger:

Answer 24

The combination of operations and management of two firms to establish a new legal
entity

Question 25

Cross-border M&As:

Answer 25

M&As involving companies based in different countries

Question 26

Carve-out acquisitions:

Answer 26

Acquisitions of parts of another company that previously were not clearly defined organisational units => selling non-essential divisions helps companies to focus and improve efficiencies as well as profitability

Question 27

Motives for acquisitions:

Answer 27

Synergistic motives Hubris motives Managerial motives

Question 28

Synergistic motives

Answer 28

- Leverage superior organizational capabilities - Enhance market power - Reduce costs by eliminating duplicate units and exploiting scale economies - Access to complementary resources - Tax avoidance effects, for example by moving the company to a location with lower corporate taxation => Value created by combining two organizations that together are more valuable than the two organizations separately

Question 29

Hubris motives

Answer 29

Managers' overconfidence in their own capabilities

Question 30

Managerial motives

Answer 30

Self- interested actions, such as prestige, empire building and bonuses

Question 31

Due diligence:

Answer 31

The assessment of the target firm’s financial status, resources and strategic fit => investigating, verifying and analyzing a deal, before finalising it

Question 32

Strategic fit:

Answer 32

The effective matching of complementary strategic capabilities

Question 33

Organizational fit:

Answer 33

The similarity in cultures, systems and structures

Question 34

Post-acquisition integration:

Answer 34

The process that aims to integrate two formerly independent firms after an acquisition

Question 35

Input foreclosure:

Answer 35

Practice of a vertically integrated form to cut off a competitor from key suppliers

Question 36

Output foreclosure:

Answer 36

Practice of a vertically integrated firm to cut off a competitor from key customers

Question 37

Acquisition premium:

Answer 37

The difference between the acquisition price and the market value of target firms

Question 38

Divestments:

Answer 38

Sales or closure of business units or assets Divestment (or divestiture) involves a company reducing its scope by getting rid of parts of its business

Question 39

Globalfocusing:

Answer 39

A strategic shift from diversification to specialisation which increases the international profile

Question 40

Static efficiency:

Answer 40

Benefit to consumer without considering technological change or new entities => Good services are produced at minimum cost while consumer welfare is maximised without focusing on long-term innovation or technological changes

Question 41

Dynamic efficiency:

Answer 41

Benefits created in the long run considering technological change and new entries