Strategies in MNEs Exam Questions and Answers Rated 100%
Corporate Governance - Answers The role of a corporation's executive staff (CEO) and board of directors
in ensuring that the firm's activities meet the goals of the firm's stakeholders
Consumers, Companies - Answers Customers of the firm
Employees, Supplies, Creditors - Answers Sources of supply for the firm
working conditions, environmental issues, shareholder issues, governmental issues - Answers
Multinationality adds 4 more considerations for the firm in terms of stakeholder management
Zone of Acceptance (ZoA) - Answers What stakeholders tolerate in terms of actions and outcomes
Managerial Discretion (MD) - Answers The intersection of managerial awareness and zone of
acceptance, has support of stakeholders and describes latitude of action
Managerial Awareness (MA) - Answers describes potential actions of a manager
Resource availability - Answers internal environment factor that positively affects ZoA
Inertial forces (size, age, forces) - Answers internal environment factor that negatively affects ZoA
industry structure, quasi-legal constraints - Answers task environment factors that negatively affect ZoA
product differentiability, market growth, demand instability - Answers task environment factors that
positively affect ZoA
Porsche - Answers Example of powerful stakeholders that influenced ZoA
True (ex: Adidas) - Answers T/F: ZoA can change over time?
Success and Objectives - Answers What do CEOs aim for?
own past performance, past performance of others, unexpected events - Answers Aspiration level is
function of 3 things:
threshold (profit of, etc.) - Answers aspiration levels aim to meet a...
political process - Answers how does top management determine the objectives of the firm?
company level (aspiration level), stakeholder level, top management political process - Answers timeline
of how objectives are formed
financial value increased - Answers what determines if financial success exists?
financial value - Answers how much is someone willing to pay to become a company's owner?
,Gross Value Added - Opportunity Costs - Answers If the result of this simple formula is positive, financial
success was reached
cash- based, profit-based - Answers the two general alternatives to evaluating financial value:
FCF principle, Discounting principle, Cost of Capital and opportunity cost principle - Answers 3 principles
that determine cash-based evaluation of financial value:
Capital productivity and efficiency principle, economic value add principle, ROI and profit concepts -
Answers 3 principles that determine profit-based evaluation of financial value:
cash that is potentially paid to debt and shareholders and is excessively created in a period - Answers
FCF principle
market data - Answers The total shareholder return (TSR) concept is based on...
makes payments out of different periods comparable, addable, substitutable - Answers Discounting
Principle
FCFt / (1 + interest rate)^t - Answers discounting formula
What interest rate to choose in order to discount future payments? - Answers Question of cost of capital
and opportunity cost principle
Cost of Capital - Answers represents the opportunity cost of investing in a company
WACC - Answers Solution interest rate for the cost of capital and opportunity cost principle:
Does capital income exceed cost of capital? - Answers Question of EVA principle:
Equity + Debt - Answers Capital =
WACC * Invested Capital (IC) - Answers Cost of Capital =
Does capital productivity exceed cost of capital rate (WACC)? - Answers Question of capital productivity
and efficiency principle?
NOPAT / Invested Capital (IC) - Answers Capital Productivity / ROI =
WACC - Answers Cost of Capital rate
capital income exceeds cost of capital - Answers EVA exists, if...
Absolute Perspective - Answers EVA = NOPAT (Capital Income) - Cost of Capital
Relative perspective - Answers EVA = Return spread (excess return rate) * invested capital (IC)
profit management, tax management, asset management, financial management - Answers 4 financial
value management components
, profit management - Answers attributes include product, price, process efficiency, administrative costs
tax managment - Answers attributes include balancing procedure, corss-subsidization
asset management - Answers attributes include down payments, liquidity management
financial management - Answers attributes include risk management, capital structure, financing
operating income (EBIT) - Answers profit management measure for increasing financial value
Taxes - Answers tax management measures for increasing financial value
invested capital (IC) - Answers asset management measure for increasing financial value
WACC - Answers financial management measure for increasing financial value
EBIT - Taxes - Answers NOPAT =
profitability, growth, financing - Answers 3 measures by which the financial value of corporations can be
created:
increases ROCE (ROI) - Answers how does profitability increase EVA?
increases capital base - Answers how does growth increase EVA?
decreases WACC - Answers how does financing increase EVA?
risk equivalent alternative rate of return - Answers what is the TSR compared to, to determine
failure/success of financial strategy?
when lacking market data - Answers when should you use EPoE?
Competitive Advantage - Answers created if a company's service to its customers is superior to that of
its competitors
Value / Price - Answers company creates value for its customers if this ratio is greater than 1, and it is
superior to this ratio of other competitors
realized price - Answers competitive advantage is created if ______________ is above company's costs
perceived by customers, important to customers, defendable against competitors - Answers 3 important
characteristics of the competitive advantage area where the company provides superior value:
Corporate Advantage - Answers advantage at corporate level
Corporate Advantage across product areas - Answers advantage at product area level
competitive advantage - Answers advantage at product/region level
Corporate Governance - Answers The role of a corporation's executive staff (CEO) and board of directors
in ensuring that the firm's activities meet the goals of the firm's stakeholders
Consumers, Companies - Answers Customers of the firm
Employees, Supplies, Creditors - Answers Sources of supply for the firm
working conditions, environmental issues, shareholder issues, governmental issues - Answers
Multinationality adds 4 more considerations for the firm in terms of stakeholder management
Zone of Acceptance (ZoA) - Answers What stakeholders tolerate in terms of actions and outcomes
Managerial Discretion (MD) - Answers The intersection of managerial awareness and zone of
acceptance, has support of stakeholders and describes latitude of action
Managerial Awareness (MA) - Answers describes potential actions of a manager
Resource availability - Answers internal environment factor that positively affects ZoA
Inertial forces (size, age, forces) - Answers internal environment factor that negatively affects ZoA
industry structure, quasi-legal constraints - Answers task environment factors that negatively affect ZoA
product differentiability, market growth, demand instability - Answers task environment factors that
positively affect ZoA
Porsche - Answers Example of powerful stakeholders that influenced ZoA
True (ex: Adidas) - Answers T/F: ZoA can change over time?
Success and Objectives - Answers What do CEOs aim for?
own past performance, past performance of others, unexpected events - Answers Aspiration level is
function of 3 things:
threshold (profit of, etc.) - Answers aspiration levels aim to meet a...
political process - Answers how does top management determine the objectives of the firm?
company level (aspiration level), stakeholder level, top management political process - Answers timeline
of how objectives are formed
financial value increased - Answers what determines if financial success exists?
financial value - Answers how much is someone willing to pay to become a company's owner?
,Gross Value Added - Opportunity Costs - Answers If the result of this simple formula is positive, financial
success was reached
cash- based, profit-based - Answers the two general alternatives to evaluating financial value:
FCF principle, Discounting principle, Cost of Capital and opportunity cost principle - Answers 3 principles
that determine cash-based evaluation of financial value:
Capital productivity and efficiency principle, economic value add principle, ROI and profit concepts -
Answers 3 principles that determine profit-based evaluation of financial value:
cash that is potentially paid to debt and shareholders and is excessively created in a period - Answers
FCF principle
market data - Answers The total shareholder return (TSR) concept is based on...
makes payments out of different periods comparable, addable, substitutable - Answers Discounting
Principle
FCFt / (1 + interest rate)^t - Answers discounting formula
What interest rate to choose in order to discount future payments? - Answers Question of cost of capital
and opportunity cost principle
Cost of Capital - Answers represents the opportunity cost of investing in a company
WACC - Answers Solution interest rate for the cost of capital and opportunity cost principle:
Does capital income exceed cost of capital? - Answers Question of EVA principle:
Equity + Debt - Answers Capital =
WACC * Invested Capital (IC) - Answers Cost of Capital =
Does capital productivity exceed cost of capital rate (WACC)? - Answers Question of capital productivity
and efficiency principle?
NOPAT / Invested Capital (IC) - Answers Capital Productivity / ROI =
WACC - Answers Cost of Capital rate
capital income exceeds cost of capital - Answers EVA exists, if...
Absolute Perspective - Answers EVA = NOPAT (Capital Income) - Cost of Capital
Relative perspective - Answers EVA = Return spread (excess return rate) * invested capital (IC)
profit management, tax management, asset management, financial management - Answers 4 financial
value management components
, profit management - Answers attributes include product, price, process efficiency, administrative costs
tax managment - Answers attributes include balancing procedure, corss-subsidization
asset management - Answers attributes include down payments, liquidity management
financial management - Answers attributes include risk management, capital structure, financing
operating income (EBIT) - Answers profit management measure for increasing financial value
Taxes - Answers tax management measures for increasing financial value
invested capital (IC) - Answers asset management measure for increasing financial value
WACC - Answers financial management measure for increasing financial value
EBIT - Taxes - Answers NOPAT =
profitability, growth, financing - Answers 3 measures by which the financial value of corporations can be
created:
increases ROCE (ROI) - Answers how does profitability increase EVA?
increases capital base - Answers how does growth increase EVA?
decreases WACC - Answers how does financing increase EVA?
risk equivalent alternative rate of return - Answers what is the TSR compared to, to determine
failure/success of financial strategy?
when lacking market data - Answers when should you use EPoE?
Competitive Advantage - Answers created if a company's service to its customers is superior to that of
its competitors
Value / Price - Answers company creates value for its customers if this ratio is greater than 1, and it is
superior to this ratio of other competitors
realized price - Answers competitive advantage is created if ______________ is above company's costs
perceived by customers, important to customers, defendable against competitors - Answers 3 important
characteristics of the competitive advantage area where the company provides superior value:
Corporate Advantage - Answers advantage at corporate level
Corporate Advantage across product areas - Answers advantage at product area level
competitive advantage - Answers advantage at product/region level
