IIA-CIA-PART4 Online Practice Questions and Answers

Correct Answer: A

An indirect export strategy operates through intermediaries, such as home-country merchants who buy and resell the product, home-country agents who negotiate transactions with foreign buyers fora commission, cooperatives that represent groups of sellers, and export-management firms that receive fees for administering the firm's export efforts. Indirect export requires lower investment than direct export and is less risky because of the intermediaries' expertise.

Correct Answer: A

A global strategy regards the world as one market. The product is essentially the same in all countries. Central control of the production process is relatively strong. Faster product development and lower production cost are typical.

Correct Answer: D

In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries. These activitiesclearly lower the profits in some markets of the multinational firm that was the initial seller. One response is to monitor the practices of distributors and retaliate if necessary. A second response is to charge higher prices to the low-cost distributors to reduce their incentives to participate in a gray market. A third response is to differentiate products sold in different countries, e.g., by adapting the product or offering distinct service features.

Correct Answer: C

An ethnocentric attitude assumes that the home country's people, practices, and ideas are superior to all others. Thus, the firm's identification is with the owner's nationality. Authority and decision making are centralized, so communication is likely to involve a high volume of information flow in the form of orders and advice to subsidiaries. Moreover, home-country standards are apt to be used for performance evaluation of entities and individuals. Also, this ethnocentric attitude is perpetuated by recruiting and developing home-country individuals for key posts throughout the firm. The advantages of an ethnocentric attitude are simplicity and close control. The disadvantages are social and political problems in foreign countries, poor feedback, ineffective planning, lack of flexibility and innovative thinking, and higher turnover of managers in foreign subsidiaries.

Correct Answer: B

Evaluating a competitor's market position is necessary to judge how and whether to challenge it. A firm in a strong competitive position can act independently and sustain its long-term status irrespective of the behavior of others.

Correct Answer: A

A risk averse leader will avoid risky situations, make decisions more slowly, and seek more information than a person who is described as a risk taker.

Correct Answer: A

Commitment to a group depends on the group's attractiveness and cohesiveness. A lack of commitment may lead to members joining other groups and bad experiences with the group.

Correct Answer: B

Strategic controls should be established to monitor progress, isolate problems, identify invalid assumptions, and take prompt corrective action. As plans are executed at each organizational level, control measurements are made to determine whether objectives have been achieved. Thus, objectives flow down the organizational hierarchy, and control measures flow up. One category of strategic control measures relates to external effectiveness. At the business- operating-system level, these measures concern satisfaction and flexibility.

Correct Answer: C

Management's lack of formal communication regarding possible downsizing caused the employees to draw their own negative conclusions based on a manager's actions. Management should formally communicate the reasons for eliminating the use of temporary employees or refute the rumor about downsizing.

Correct Answer: B

Upstream (backward) or downstream (forward) integration is the acquisition of a capability that otherwise would be performed by external parties that are suppliers or customers, respectively, of the firm. Whether integration should occur depends on the firm's volume of transactions with the external parties (throughput) and the magnitude of the capability required to achieve necessary economies of scale. If the integrating firm's need is for a capability less than the efficient scale, one of its options is to acquire a capability with a cost inefficient scale. The other option is to acquire an efficient capability that provides excess output (in the upstream case) orcreates excess demand (from, for example, a distribution capability in the downstream case). This option will require the integrated firm to sell or buy in the open market. Thus, the second option carries the risk of having to deal with competitors.