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Question: A firm must decide whether to make


A firm must decide whether to make a component part in-house, or to contract it out to an independent supplier. Manufacturing the part requires a nonrecoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of
(a) manufacturing the component in-house and
(b) outsourcing manufacturing to an independent supplier? Which option would you recommend? Why?


> Your firm has an average collection period of 38 days. Current practice is to factor all receivables immediately at a discount of 1.75 percent. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.

> You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. If Stock X has an expected return of 10.28 percent and a beta of 1.20, and Stock Y has an expected

> Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the relationship between portfolio expected return and portfol

> Timothy Stange was twelve years old when his doctor prescribed Risperdal, an antipsychotic drug, to treat his Tourette’s syndrome. Stange subsequently developed female breasts, a condition known as gynecomastia. Surgery successfully removed Stange’s brea

> Kentucky Lottery Corporation (the Lottery) operates the state’s lottery. In one of the Lottery’s contests, a scratch-off ticket that revealed a “Final Top Prize” symbol could be entered into an online drawing to win $175,000. Individuals could register f

> Watson Laboratories, Inc., makes generic drugs, which are provided by pharmacies to Medicaid patients. In the state of Mississippi, a claim is submitted for the cost of the drug to Mississippi Medicaid. The claim is paid according to a percentage of the

> Twenty-First Century Bean Processing hired Anthony Lewis, a forty-seven-year-old African American male, for a warehouse position, subject to a thirty-day probationary period. At the end of the period, Twenty-First Century evaluated Lewis’s performance to

> Klipsch Group, Inc., makes sound equipment, including headphones. Klipsch filed a suit in a federal district court against ePRO E-Commerce Limited, a Chinese corporation. Klipsch alleged that ePRO had sold $5 million in counterfeit Klipsch products. ePRO

> South Dakota wants its citizens to conserve energy. To help reduce consumer consumption of electricity, the state passes a law that bans all advertising by power utilities within the state. What argument could the power utilities use as a defense to the

> One August morning, around 6:30 a.m., a fire occurred at Ray and Christine Nixon’s home in West Monroe, Louisiana, while the Nixons were inside the home. The Nixons told Detective Gary Gilley of the Ouachita Parish Sheriff’s Department that they believed

> Jason Smathers, an employee of America Online (AOL), misappropriated an AOL customer list with 92 million screen names. He sold the list for $28,000 to Sean Dunaway, who sold it to Braden Bournival. Bournival used it to send AOL customers more than 3 bil

> Eagle Corporation began marketing software under the mark “Eagle.” Ten years later, Eagle.com, Inc., a different company selling different products, begins to use eagle as part of its URL and registers it as a domain name. Can Eagle Corporation stop this

> Hanjuan Jin, a citizen of China, worked as a software engineer for Motorola for many years in a division that created proprietary standards for cellular communications. Contrary to Motorola’s policies, Jin also secretly began working as a consultant for

> The following situations are similar, but each represents a variation of a particular crime. Identify the crime involved in each of the following situations. (See Cyber Crime.) (a) Chen, posing fraudulently as being from Centell, the provider of Emily’s

> In Texas, Chigger Ridge Ranch, L.P., operated a 700-acre commercial hunting area called Coyote Crossing Ranch (CCR). Chigger Ridge leased CCR and its assets for twelve months to George Briscoe’s company, VPW Management, LLC. The lease identified all of t

> Brandy Austin used powdered infant formula manufactured by Nestlé USA, Inc., to feed her infant daughter. Austin claimed that a can of the formula was contaminated with Enterobacter sakazakii bacteria, causing severe injury to the infant. The bacteria ca

> Cybercrime costs consumers billions of dollars per year, and it costs businesses, including banks and other credit-card issuers, even more. Nonetheless, when cyber criminals are caught and convicted, they are rarely ordered to pay restitution or sentence

> Finjan, Inc., owns a patent—U.S. Patent No. 7,418,731, or “the ‘731 patent”—for a system and method that provide computer security from malicious software embedded in websites on the Internet. The system consists of a gateway that compares security profi

> The first group will outline Pfizer’s ethical responsibility under the corporate social responsibility doctrine. To whom does Pfizer owe duties? (b) The second group will formulate an argument on behalf of Pfizer that the company has not breached any of

> Assume that you are Dickman’s supervisor and have been informed that she is frequently away from her desk and often makes personal phone calls. The first step of using the IDDR method is inquiry, so you start asking questions. Several people tell you tha

> Jonathan Martin, an offensive lineman with the Miami Dolphins, abruptly quit the team and checked himself into a hospital seeking psychological treatment. Later, he explained that he left because of persistent taunting from other Dolphins players. The Na

> Bed Bath & Beyond Inc. sold a ceramic pot, called the “FireBurners” Pot, with a stainless steel fuel reservoir at its center and a bottle of gelled fuel called “FireGel.” A red sticker on the fire pot warned, “DON’T REFILL UNTIL FLAME IS OUT & CUP IS COO

> Mitsui Bank hired Ross Duncan as a branch manager in one of its Southern California locations. At that time, Duncan received an employee handbook informing him that Mitsui would review his performance and salary level annually. Mitsui later decided to cr

> How many U.S. residents have not heard of the pain relief drug Aleve? Not many, because the product is so heavily advertised. The same could be said about the painkiller Flanax in Mexico. In fact, Aleve and Flanax are the same drug, owned by the same com

> Pfizer, Inc., developed a new antibiotic called Trovan (trovafloxacinmesylate). Tests in animals showed that Trovan had life-threatening side effects, including joint disease, abnormal cartilage growth, liver damage, and a degenerative bone condition. Pf

> The acronym LoL generally means “laugh out loud.” But when it comes to the popular online video game League of Legends owned by Riot Games, Inc., LoL means something much different. More than 100 million people use this free multiplayer video game online

> An animal rights activist who worked at an Idaho dairy farm secretly filmed ongoing animal abuse. After being posted online, the film attracted national attention. The dairy owner fired the abusive employees, established a code of conduct, and undertook

> Social media have become the predominant means by which many Americans communicate, obtain news updates, and discover what is “trending.” At least one state, though, legislated a ban on the use of social media by convicted sex offenders. One of them chos

> Health Care Solutions Network, Inc. (HCSN), operated mental health centers to provide psychiatric therapy. HCSN organized its business around procuring, retaining, and readmitting patients to maximize billing potential, without respect to their health ne

> Lou Sisuphan was the director of finance at a Toyota dealership. His responsibilities included managing the financing contracts for vehicle sales and working with lenders to obtain payments. Sisuphan complained repeatedly to management about the performa

> David Bogenberger attended a pledge event at the Pi Kappa Alpha fraternity house at Northern Illinois University (NIU). The NIU chapter officers planned an evening of hazing, during which the pledges were required to consume vodka provided by the members

> Heather Reasonover opted to try Internet service from Clearwire Corp. Clearwire sent her a confirmation e-mail and a modem. When Reasonover plugged in the modem, an “I accept terms” box appeared. Without clicking on the box, Reasonover quit the page. She

> The Prince Hall Grand Lodge of Washington is a fraternal association incorporated in the state of Washington. The Grand Lodge Constitution provides that the Grand Master “shall decide all questions of . . . Masonic law.” Grand Master Gregory Wraggs suspe

> Airbnb, Inc., maintains a website that lists, advertises, and takes fees or commissions for property rentals posted on the site. To offer or book accommodations on the site, a party must register and create an account. The sign-up screen states, “By clic

> While replacing screws in a gutter, John Baugh fell off a ladder and landed headfirst on his concrete drive way. He sustained a severe brain injury, which permanently limited his ability to perform routine physical and intellectual functions. He filed a

> The first group will take the position of the manufacturer and develop an argument for why the court should grant the summary judgment motion and dismiss the strict product liability claim. (b) The second group will take the position of D’Auguste and fo

> Bentley Bay Retail, LLC, filed a suit in a Florida state court against Soho Bay Restaurant, LLC, and against its corporate officers, Luiz and Karine Queiroz, in their individual capacities. Bentley Bay claimed that the Queirozes had breached their person

> Wandering Dago, Inc. (WD), operates a food truck in Albany, New York. WD brands itself and the food it sells with language generally viewed as ethnic slurs. Owners Andrea Loguidice and Brandon Snooks, however, view the branding as giving a “nod to their

> Sandra White operated a travel agency. To obtain lower airline fares for her nonmilitary clients, she booked military-rate travel by forwarding fake military identification cards to the airlines. The government charged White with identity theft, which re

> Assume that you want to read the entire court opinion in the case of Ryan Data Exchange, Ltd. v. Graco, Inc., 913 F.3d 726 (8th Cir. 2019). Refer to the subsection entitled “Finding Case Law” in this chapter, and then explain specifically where you would

> Nearly every digital device today takes photos and videos at virtually no cost. Software allows the recording of conversations via Skype. Many couples immortalize their “private moments” using such digital devices. One partner may take a racy selfie and

> Vanity Fair contributing editor and Newsweek senior writer Kurt Eichenwald has epilepsy, and he writes about his battle with the disease on occasion. For many suffering from this illness, strobe lights can spark seizures. For instance, a Pokémon episode

> Supreme Court Justice Elena Kagan, in a recent decision involving Marvel Comics’ Spider-Man, ruled that, “What we can decide, we can undecided. But stare decisis teaches that we should exercise that authority sparingly.” Citing a Spider-Man comic book, s

> In 1949, Hasbro, Inc.—then known as the Milton Bradley Company— published its first version of Candy Land, a children’s board game. Hasbro is the owner of the trademark “Candy Land,” which has been registered with the U.S. Patent and Trademark Office sin

> To recruit and retain managers for its restaurants, Panera Bread Company created a program under which managers were eligible to receive a one-time bonus. A manager who signed an agreement to participate in the program would be paid the bonus five years

> Cox Communications, Inc., is an Internet service provider (ISP) with 4.5 million subscribers. Some of Cox’s subscribers used BitTorrent to share copyrighted files, including music files, without the copyright owners’ permission. (BitTorrent is a peer-to-

> John McAdams is a tenured professor of political science at Marquette University. McAdams posted a comment on his blog criticizing Cheryl Abbate, a philosophy instructor, for her interchange with a student in her Theory of Ethics class. Lynn Turner, also

> Under Washington state law, an out-of-state company cannot obtain a license to produce, process, or sell marijuana products in Washington. And a Washington-based business that obtains a license to produce, process, or sell marijuana products cannot permi

> Michael Mayfield, the president of Mendo Mill and Lumber Co., in California, received a “notice of a legal claim” from Edward Starski. The “claim” alleged that a stack of lumber had fallen on a customer as a result of a Mendo employee’s “incompetence.” T

> A chemical firm is considering how best to supply the world market for sulfuric acid. A manufacturing plant costs approximately $20 million to construct and requires a moderately skilled workforce. The total value of the world market for this product ove

> An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs approximately $500 million to construct and requires a highly skilled workforce. T

> How might a company make strategic use of countertrade schemes as a marketing weapon to generate export revenues? What are the risks associated with pursuing such a strategy?

> How do you explain the use of countertrade? Under what scenarios might its use increase still further by the year 2020? Under what scenarios might its use decline?

> An alternative to using a letter of credit is export credit insurance. What are the advantages and disadvantages of using export credit insurance rather than a letter of credit for exporting (a) a luxury yacht from California to Canada, and (b) machine t

> You are the assistant to the CEO of a small textile firm that manufactures quality, premium-priced, stylish clothing. The CEO has decided to see what the opportunities are for exporting and has asked you for advice as to the steps the company should take

> A firm based in California wants to export a shipload of finished lumber to the Philippines. The would-be importer cannot get sufficient credit from domestic sources to pay for shipment but insists that the finished lumber can quickly be resold in the Ph

> A small Canadian firm that has developed valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union market. Its choices are given below. The cost of investment in manufacturing facilitie

> Discuss how the need for control over foreign operations varies with firms’ strategies and core competencies. What are the implications of the choice of entry mode?

> Why is Shoprite’s wide product range important to its financial strategy?

> Licensing propriety technology to foreign competitors is the best way to give up a firm's competitive advantage. Discuss.

> Review the Management Focus on Tesco. Then answer the following questions: a. Why did Tesco’s initial international expansion strategy focus on developing nations? b. How does Tesco create value in its international operations? c. In Asia, Tesco has a h

> A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year-old girl to work on a factory floor, in violation of the company’s child labor prohibition. He tells the local manager to replace the child and tell her to

> Reread the Management Focus on Lincoln Electric; then answer the following questions: a. To what extent is the organizational culture of Lincoln Electric aligned with the firm’s strategy? b. How was the culture at Lincoln Electric created and nurtured ov

> Reread the Management Focus on Dow Chemical; then answer the following questions: a. Why did Dow first adopt a matrix structure? What were the problems with this structure? Do you think these problems are typical of matrix structures? b. What drove the s

> Reread the Management Focus on Walmart’s International Division and answer the following questions: a. Why did the centralization of decisions at the headquarters of Walmart’s international division create problems for the company’s different national op

> If all government subsidies went away worldwide to electrical cars, will Tesla be as successful in five years as it is now? (Will Tesla even exist in 10 years?)

> Tesla made a remarkable sales growth—from a startup (albeit with great financing) to $7 billion in sales with some $25 billion in assets. Does this mean that the Tesla business model was good and the market reacted positively, government subsidies were g

> Some governments are more likely to subsidize electrical cars (and many other products) than other governments. Denmark took a stand to not subsidize (for now) electrical cars. Should such subsidies be up to each country or region in a country (e.g., Cal

> Should companies like Tesla rely on government subsidies in selling their cars since they are better for the environment than traditional cars based on the old technology of traditional combustion engines? Basically, should the environmental issues be bu

> Gazprom recently formed a strategic alliance with China. Why is China important to the company? What prompted the alliance?

> What do you think about AstraZeneca's efforts to increase employee diversity? How might this benefit the company?

> Do you think the company is doing enough to limit the well-known risks and costs associated with high expatriate failure rates? Is there anything else it might do?

> What staffing policy is AstraZeneca adopting with regard to its subsidiaries in places like China? Is this an appropriate policy?

> Why does AstraZeneca limit this policy to just high-potential employees? Can you see a drawback in doing this?

> What does Marvel Studios gain by having the global branding connections of the characters across a multiple movie franchise?

> Many of Marvel Studios movies are connected to each other—like The Avengers and Iron Man movie franchises. Do you think the film-watching public can keep up with all these intricate connections? Does it even matter if people do keep up with the connectio

> Marvel Comics has drawn from more than 100 characters for its Avengers superheroes since 1963. Collectively, these characters have created a very successful franchise for Marvel Comics and Marvel Studios. What is their global marketing formula and why do

> From a global branding standpoint, why do you think Marvel Studios is a wholly owned subsidiary of the Walt Disney Company instead of just a part of Disney?

> What actions could Indonesia take to improve its economic performance? What impediments might make it difficult for the government to take these actions?

> Since Suharto was removed, Indonesia has grown its economy at a slower pace than two other large developing nations, India and China. Why do you think this has been the case?

> What makes Alibaba attractive to the suppliers and manufacturers that partner with the company?

> Under the leadership of Suharto, the Indonesian economy grew at a steady pace. Why was this ultimately not sustainable?

> Should Amazon, and companies like it, get into the supply chain and logistics business and start having their own shipping platforms? Do you think operating global supply chains can become one of Amazon’s core competencies, is it already a competency the

> Some people say that the prices for the product associated with Amazon Prime are always higher than if you buy the same product on Amazon or elsewhere without the guaranteed two-day shipping. But, what do you think customers are buying when they use Prim

> Do you think Amazon will become customers’ favorite retail shopping interaction, taking over the retail shopping from companies like Walmart and Target, for example, in the next few years? Will customers buying commodity products such as toothpaste and o

> Embraer imports a lot of these parts into Brazil—a country almost notorious for being difficult to clear its customs. Should Embraer consider developing more of its own parts, either by starting companies or subsidiaries in Brazil that can make these par

> Similar to automobile companies, aircraft manufacturers have a staggering number of suppliers that supply a staggering number of component parts that go into the production of an aircraft. While plane producers will likely need a large number of parts in

> Do you expect a company like Embraer to be able to compete long-term with the top aircraft manufacturers in the world today (Airbus, Boeing) by staying heavily oriented toward producing its products in Brazil?

> With the CEO and driver of the company—Howard Schultz—stepping down as the company’s unquestioned leader, do you expect Starbucks to change its foreign market entry strategy in any way?

> Do you expect that the growth of the number of Starbucks stores worldwide will continue into more countries or do you expect Starbucks to focus on more stores in the foreign markets in which the company already has at least some stores already establishe

> Starbucks has become a phenomenon worldwide with more than 24,000 stores in more than 60 countries. Sales are great even at relatively high prices for its products. This can perhaps be explained in the U.S. (and other wealthy markets) but how can Starbuc

> What does the decline in the value of the ruble against the dollar between 1992 and 1998 teach you about the relationship between inflation rates and currency values?

> Seventeen Sustainable Development Goals is a large set of goals for the world’s 260 countries and territories to achieve. Would it be better to focus on a smaller set of goals, or are the Sustainable Development Goals integrated enough that countries can

> Some would argue that the Sustainable Development Goals is not something that should be mandated on countries to achieve by 2030 or any other year. Countries should be free to set their own sustainability goals. What do you think?

> In the most recent ranking of how countries are doing in implementing the UN’s Sustainable Development Goals, Sweden ranked first in the world, followed by several other countries in Scandinavia. However, even Sweden had only achieved an 85 percent succe

> By consolidating and cutting 100 brands from its consumer portfolio of brands, does P&G run the risk of ultimately losing out on global market opportunities?

> P&G is cutting its marketing and advertising agency roster by 50 percent over the past three years from around 6,000 to 3,000 companies in a bid to increase its marketing productivity, efficiency, and effectiveness. At a $9 billion worldwide spend on adv

> Advertising is important for most companies, especially companies such as P&G that sells mostly to end customers. But, most people already know about P&G products like Charmin bathroom tissue and moist towelettes, Crest toothpaste, and so on. Does P&G re

> Strategically, having more than 1,000 suppliers results in a complex task of managing those suppliers, ensuring the quality of the products, and maintaining the IKEA brand. While we will address global supply chains later on, from a global strategy stand

> IKEA is also very “IKEA-centric.” For example, the IKEA store itself will be laid out as a maze that requires customers to walk through every department before they reach the checkout stations. This forced path can seem constraining to their customers wh

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