Certified Internal Auditor - Part 4, Business Management Skills v5.0

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Exam contains 535 questions

A firm considering entry into a market abroad may make the selection based on many criteria.
For example, a Portuguese firm applying a psychic proximity criterion will most likely choose to enter which market?

  • A. Afghanistan.
  • B. China.
  • C. India.
  • D. Brazil.


Answer : D

Explanation:
Psychic proximity means the nearness of the market's culture, language, and laws to those of the firm's home country. For example, Portuguese is spoken in Brazil.

Developing brand equity in a foreign market may be desirable but is subject to considerable risk. A global firm launching a new product in a new market most likely should

  • A. Initially place most of the firm's emphasis on advertising geared to the local culture.
  • B. Fully decentralize control of the marketing process.
  • C. Avoid creating partnerships with local distribution channels to avoid dilution of the brand.
  • D. Balance standardization and customization of the product.


Answer : D

Explanation:
The firm should determine the ratio of standardization and customization. Products that can be sold virtually unchanged throughout several markets provide a greater profit opportunity for a global firm. However, cultural differences may require extensive customization to appeal to markets in different countries.

According to keegans model of adaptation strategies, a firm that decides to operate globally by changing its product and its promotion methods has chosen

  • A. A dual adaptation strategy.
  • B. The backward variant of a product invention strategy.
  • C. The forward variant of a product invention strategy.
  • D. A straight extension strategy.


Answer : A

Explanation:
Communication adaptation is a strategy that does not change the products, but advertising and marketing campaigns are changed to reflect the local culture and beliefs. In contrast, a dual adaptation strategy changes both the product and the promotion to provide the best chance of acceptance in a foreign market.

Distribution channels ensure that goods in international trade are transferred successfully to end users. Where are intermediaries, such as trading companies, most likely selected?

  • A. Channels within nations.
  • B. Export department of the seller.
  • C. International division of the seller.
  • D. Channels between nations.


Answer : D

Explanation:
Channels between nations carry goods to foreign borders. They include air, land, sea, or rail transportation channels. At this stage, in addition to transportation methods, intermediaries are selected (e.g., agents or trading companies), and financing and risk management decisions are reached.

Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. An ethnocentric attitude is indicated by:

  • A. An identification with the nationality of the host country.
  • B. Collaboration between the firm's subsidiaries and the firm's central administration.
  • C. A high volume of information flow in the form of orders and advice to subsidiaries.
  • D. A staffing emphasis on finding and developing the best people in the world for key positions anywhere in the firm.


Answer : C

Explanation:
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.

Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. A polycentric attitude is indicated by

  • A. An identification with the nationality of the owner.
  • B. Evaluation and control standards that are both local and global.
  • C. High information flow in multiple directions.
  • D. Relatively little decision making by the central administrative authority.


Answer : D

Explanation:
A polycentric attitude assumes that cultural differences require local managers to make most decisions because they are more knowledgeable about local conditions than are central administrators. Thus, development of local managerial talent is crucial. Another result is that foreign operating performance is primarily evaluated based on results. As a consequence,methods, training, and incentives vary significantly among subsidiaries.
Furthermore, control is predominantly local, the firm is identified with the nationality of the host nation, and relatively little communication occurs with central administration or among subsidiaries. One disadvantage is that local operations may have inefficiencies because of duplication of activities. Another disadvantage is loss of goal congruence between local entities and the firm as a whole. Advantages are more capable and motivated local managers, better results in local markets, local development of new product ideas, and stronger support by host governments.

Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. A geocentric attitude is indicated by

  • A. An identification with national perspectives even though the firm is genuinely international.
  • B. Control and evaluation methods that are locally determined.
  • C. Decision making concentrated in the central administrative authority.
  • D. Little communication among subsidiaries.


Answer : A

Explanation:
A geocentric attitude is truly internationally oriented while absorbing the best that various cultures offer. It is a completely balanced approach with full collaboration between central administrators and subsidiaries, control and evaluation methods that harmonize local and overall firm standards, and frequent communication in all directions (i.e., between central administrators and subsidiaries and among subsidiaries). Moreover, talent, not nationality, determines personnel decisions throughout the firm.

According to research on the international contingency model of leadership, which path- goal leadership style is most likely to be accepted around the world as culturally appropriate?

  • A. Directive.
  • B. Participative.
  • C. Supportive.
  • D. Achievement-oriented.


Answer : B

Explanation:
A participative style entails consultation with employees and serious attention to their ideas.
The participative style, although not always the best, is the most widely accepted internationally. Every country surveyed found it to be culturally acceptable.

Research on the common characteristics of leaders of global firms found that:

  • A. Ambition and relentless drive were more significant than honesty and trustworthiness.
  • B. The leaders tended to have multidisciplinary problem solving ability.
  • C. Being multilingual was unimportant.
  • D. Having traveled extensively before entering the working world was relatively uncommon.


Answer : B

Explanation:
A common characteristic of successful leaders of global firms is that they have effective problem- solving skills that draw from a multidisciplinary approach. The best candidates have varied backgrounds and can draw on a multitude of life experiences. They also tend to be flexible and adaptable, have good interpersonal skills, and communicate successfully.

For a multinational firm, which of the following is a disadvantage of an ethnocentric staffing policy in which all key management positions are filled by parent-company nationals?

  • A. An ethnocentric staffing policy significantly raises compensation, training, and staffing costs.
  • B. An ethnocentric staffing policy produces resentment among the firm's employees in host countries.
  • C. An ethnocentric staffing policy limits career mobility for parent-country nationals.
  • D. An ethnocentric staffing policy isolates headquarters from foreign subsidiaries.


Answer : B

Explanation:
An ethnocentric staffing policy has the advantage that expatriates may understand the objectives, policies, and procedures of the parent firm better than local employees do.
However, ethnocentrism in hiring has the following disadvantages, among others:(1)
Expatriate managers have difficulty in adapting to a new culture, language, and physical environment;
(2) training and relocation costs may be high;
(3) host-country governments prefer local control;
(4) the morale and performance of host-country employees will suffer.

Which of the following is a source of communication breakdown within an organization due to a sense of superiority by members of a particular culture?

  • A. Perceptual problem.
  • B. Stereotyping.
  • C. Ethnocentrism.
  • D. Uncertainty avoidance.


Answer : C

Explanation:
Ethnocentrism is the attitude that one's own group is superior. It is perpetuated through the value structures and nationalistic spirit of the people.

Which of the following management orientations is characterized by an organization's efforts to adapt the product and marketing program to each local environment?

  • A. Ethnocentric.
  • B. Polycentric.
  • C. Geocentric.
  • D. Fegiocentric.


Answer : B

Explanation:
A polycentric attitude assumes that cultural differences require local managers to make most decisions because they are more knowledgeable about local conditions than are central administrators. Thus, development of local managerial talent is crucial. Another result is that foreign operating performance is primarily evaluated based on results. As a consequence, methods, training, and incentives vary significantly among subsidiaries.
Furthermore, control is predominantly local, the firm is identified with the nationality of the host nation, and relatively little communication occurs with central administration or among subsidiaries. One disadvantage is that local operations may have inefficiencies because of duplication of activities. Another disadvantage is loss of goal congruence between local entities and the firm as a whole. Advantages are more capable and motivated local managers, better results in local markets, local development of new product ideas, and stronger support by host governments. Accordingly, the polycentric attitude adapts to each local environment.

According to research on path-goal leadership styles done in many countries, which styles are neither the most nor the least accepted internationally?

I. Directive -

II. Supportive -

III. Participative -

IV. Achievement-oriented -

  • A. land II.
  • B. land Ill.
  • C. II and IV.
  • D. Ill and IV.


Answer : C

Explanation:
The participative style, although not always the best, is the most widely accepted internationally. The directive style is the least accepted internationally. It was not deemed appropriate in the U.S., U.K., Canada, Australia, Germany, and Sweden. Theachievement orientedstyle was found unacceptable in such countries as Brazil, France, Italy, and Japan.
The supportive style was not accepted in such countries as Brazil, France, India, and
Sweden.

With the globalization of economies, many organizations have expanded their operations to international locations. As an advisor to management, an internal auditor will most likelyrecommend that a geocentric, or worldwide, attitude be adopted. Select the reason the geocentric attitude is preferred.

  • A. It promotes a simpler organizational structure.
  • B. It provides greater autonomy for host country managers.
  • C. It provides the best balance of local and worldwide objectives.
  • D. It promotes tighter organizational control.


Answer : C

Explanation:
According to Howard Perlmutter, the geocentric attitude toward international operations is world oriented. The intention is to balance local and worldwide objectives in all aspects of operations, to maintain global standards while permitting local managers to exercise appropriate discretion.

Cultures have been described as low-context or high-context. Which culture is high- context?

  • A. Germany.
  • B. Saudi Arabia.
  • C. Great Britain.
  • D. Swillerland.


Answer : B

Explanation:
Hall drew a distinction between high-context and low-context cultures. In high-context cultures (e.g., Japanese, Chinese, Arabic, and Korean), much meaning is transmitted by nonverbal cues and situational circumstances. Thus, a person's status in a firm, rank in society, and reputation convey the primary message. In low- context cultures (e.g.,
Northern Europe and North America), primary messages are transmitted verbally. Hence, precise written contractual agreements are highly valued. In contrast, social events are more highly valued in a highcontext culture.

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Exam contains 535 questions

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