Deck 18: Global Opportunities for Small Business

Question 1

These days, the rival on the other side of the street from a firm may be a minor threat compared to an online competitor on the other side of the globe.

Answer 1

True

Question 2

Experience curve efficiencies refers to the savings that arise from spreading activity across more units of output and from acquiring more specialize plants, equipment, and employees.

Answer 2

False

Question 3

Most small firms choose to go global first by exporting.

Answer 3

True

Question 4

Efforts to exploit the competitive advantage of specialized products across international markets may be more important to small businesses than to their large competitors.

Question 5

In the past, firms tended to introduce new products in the United States first and then sell them in other developed nations, giving no attention to less-advanced countries because of their weak consumer purchasing power.

Question 6

The unique features of a local environment can yield benefits to small firms locating there.

Question 7

Today, companies tend to focus on developed countries as they search out international markets.

Question 8

Increasingly, small firms are going global in search of skilled labor.

Question 9

Startups that are based on complex technologies are more likely to gain benefits from learning effects and economies of scale.

Question 10

Learning effects are the direct result of economies of scale in operations.

Question 11

Entrepreneurs decide to go global to expand their opportunities, but sometimes they are forced to enter foreign markets to compete with firms that have already done so.

Question 12

The U.S. Department of Commerce publishes A Guide to Exporting, which outlines some of the important questions entrepreneurs should consider when deciding whether a firm is ready for the challenges of global business.

Question 13

International dissimilarities in language and culture, business practices, and government regulations are fading over time.

Question 14

More than 75 percent of the world's population lives outside of the United States.

Question 15

Products that sell at home usually require considerable adaptation to be well received in foreign markets.

Question 16

Internationalization is increasing among large firms, but this has not been the trend with small businesses in recent years.

Question 17

Increasingly, small firms find that they must locate their operations abroad if they are to keep their contracts as suppliers to large companies.

Question 18

The interest in international markets dates back at least as far as the 1200s when Marco Polo traveled to China to trade western goods for Oriental silk and spices.

Question 19

Taken together, China and India account for nearly 30 percent of the world's 4 billion inhabitants.

Question 20

IT Retail owner Martin Goodwin's decision to go global was because the american market was too small to ensure that he would recover development costs.

Question 21

Small businesses have many options when they choose to go global, but it is not a good idea for such firms to establish a sales or production facility abroad because of the resources this requires.

Question 22

Exporting involves the purchase of goods in the home country made by manufacturers in other countries.

Question 23

International firms often have to deal with the problem of counterfeit goods, but foreign licensing can help to shield the small business from this threat.

Question 24

Small firms can successfully open an overseas sales office, but this should only be done when sales in the local market are great enough to justify this expensive move.

Question 25

Globalization is the term used to explain the increasing similarity of markets around the world.

Question 26

When Howard Podolsky began to market his eco-friendly refrigeration technology he found that _____ markets were far more interested in it than their american counterparts.

A) African
B) Indian
C) European
D) Asian

Question 27

Born-global firms are small companies that begin with cross-border businesses around the globe.

Question 28

When a small firm is launched with cross-border activities in mind, some would say the business

A) is internationally diverse.
B) has been "born global."
C) is sure to succeed.
D) has no choice but to move forward with plans for internationalization.

Question 29

It is clear that a small firm can generate the greatest financial returns using international licensing strategies when these efforts involve the company's products.

Question 30

A revocable letter of credit is an agreement to honor a draft or other demand for payment when specified conditions are met and cannot be changed unless both the buyer and the seller agree to the change.

Question 31

Fortunately, small international businesses do not face trivial problems, such as content restrictions in television advertising, which allows these firms to focus their resources on greater risks, such as the government takeover of the firm's private assets.

Question 32

Trade missions can provide a useful means for a firm to explore the potential for international business.

Question 33

eBay makes selling your products around the world easy.

Question 34

The Internet has been helpful to small firm operations in the United States, but there are too few customers with Internet access in foreign markets to make this a powerful tool for going global.

Question 35

Economic risk is very different from political risk; indeed, these forms of risk are unrelated to one another.

Question 36

International business will never be as easy as doing business at home.

Question 37

International franchising is essentially an alternative form of exporting.

Question 38

Importing is the "flip side" of exporting.

Question 39

Perhaps the easiest way to break into international markets is to use a trade intermediary.

Question 40

Small firms are able to share risks and pool resources by using international strategic alliances.

Question 41

Economies of scale refers to

A) learning effects from manufacturing experience.
B) the incremental drop in costs that results from the doubling of output.
C) efficiencies that are most common in low-tech operations.
D) gains from the spreading of investment across more units of production.

Question 42

Prior to the 1990s, startups considered going global

A) only after they had established a solid position in the domestic market.
B) early in the firm life cycle.
C) from the beginning because market growth in the United States had stagnated.
D) when they recognized the wealth of support the government provided to expand abroad.

Question 43

Crumpton Industries reduced its unit costs when it expanded its productive capacity, indicating that it has benefited from

A) experience curve efficiencies.
B) learning effects.
C) economies of scale.
D) economies of scope.

Question 44

Long production runs at Bayshore Industries have steadily reduced its unit costs, indicating that it has benefited from

A) experience curve efficiencies.
B) learning effects.
C) economies of scale.
D) economies of scope.

Question 45

Because technologies are becoming increasingly sophisticated, expensive, and short-lived,

A) it is more important than ever to recover R&D costs quickly by expanding the market globally.
B) entrepreneurs struggle to compete in high-end technologies used in fast-paced markets.
C) only large corporations should attempt to compete in cutting-edge, high-tech industries.
D) the pace of innovation has started to show signs of deceleration.

Question 46

When a small business owner is thinking of going global, he or she should first decide whether

A) the firm has the necessary "deep pockets" to follow through.
B) domestic operations are capable of subsidizing overseas operations.
C) the firm has the technology necessary to get into the international game.
D) the company is up to the task.

Question 47

Lee Marine's attempt to extend the product life cycle of older models of its boats by selling them in international markets has not been effective strategy, in part, because

A) international delivery systems cannot handle the variety of company distribution systems.
B) of the increasing similarity of customer preferences around the world.
C) income levels in many countries are insufficient to support this strategy.
D) product life cycles have already been growing over the years.

Question 48

Seeking to extend the product life cycle by expanding into international markets has become a less effective strategy, in part, because

A) customer preferences have become more similar around the world.
B) international delivery systems cannot handle the variety of company distribution systems.
C) income levels in many countries are insufficient to support this strategy.
D) product life cycles have already been growing over the years.

Question 49

The major factors that have shaped cultural tastes throughout the world, easing the entry of small businesses into international markets are all of the following except

A) television programs
B) billboards
C) movies
D) print media

Question 50

Recent research has shown that globalizing early in a company's life tends to lead to

A) lower levels of firm risk.
B) a boost to the firm's reputation.
C) increased sales growth.
D) financial disaster.

Question 51

When american businesses access foreign labor by relocating their stateside operations abroad, the practice is called

A) outsourcing
B) offshoring
C) exporting
D) importing

Question 52

When it comes to gaining access to resources, a traditional motivation for going global has been to

A) take advantage of unique features of the local market.
B) find raw materials.
C) change the shape of the product life cycle.
D) serve the local community through the business.

Question 53

Manufacturers or service firms that distribute a second firm's product or service is called a _____.

A) piggyback marketer
B) remarketer
C) export agent
D) export trading company

Question 54

Salvatore intended from the start that his small pasta firm would sell its products in overseas market, some would say the business

A) was intentionally internationally diverse.
B) was sure to succeed.
C) was "born global."
D) had no choice but to move forward with plans for internationalization.

Question 55

When it comes to expanding the market, an emerging motivation for going global is to

A) take advantage of unique features of the local market.
B) find buyers for highly specialized products.
C) obtain tariff reductions.
D) extend the product life cycle.

Question 56

Newplant has the most experienced production employees and the lowest unit costs in its industry, indicating that it had benefited from

A) experience curve efficiencies.
B) learning effects.
C) economies of scale.
D) economies of scope.

Question 57

The established motivations behind global expansion include all of the following, except

A) promoting the independence of the enterprise.
B) gaining access to resources.
C) expanding markets.
D) cutting costs.

Question 58

When an American biotechnology startup establishes an office in Brazil to manage teams of biologists that search the rain forest to find new plants that may have undiscovered medicinal properties, the firm has globalized to

A) gain access to essential raw materials.
B) capitalize on special features of location.
C) expand its supply chain.
D) extend the life cycle of its products.

Question 59

It is becoming clear that international markets are demanding

A) the same products that are distributed to other national markets.
B) differentiated products that satisfy their unique needs and interests.
C) direct access to products sold elsewhere in the world.
D) more expensive products and fewer inexpensive products.

Question 60

When a business locates a production facility or sales office overseas by purchasing a foreign business from another firm, this is referred to as a _____.

A) greenfield venture
B) outsourcing
C) offshoring
D) cross-border acquisition

Question 61

Considering the nature of its products, a cement fabricator that specializes in the manufacture of bird baths is likely to go global to

A) gain access to critical raw materials.
B) capitalize on special features of location.
C) obtain specialized human resources.
D) cut costs.

Question 62

International franchising is a variation on the theme of

A) exporting.
B) importing.
C) foreign licensing.
D) international strategic alliances.

Question 63

When it comes to cutting costs, an emerging motivation for going global is to

A) obtain tariff reductions.
B) find raw materials.
C) follow large client firms that locate abroad.
D) find suppliers offering highly specialized products.

Question 64

The intent of the North American Free Trade Agreement (NAFTA) was to

A) duplicate government regulatory systems.
B) reduce tariffs to increase trade.
C) coordinate the currencies of included countries.
D) accommodate the demands of organized labor.

Question 65

From a company-owned plant in Pakistan, Howard Eden manufactures specialty apparel items for his small business, Garments of Eden. Because of overseas operations of the U.S. military in the region, Eden fears that his plant may be sabotaged or that the local government may attempt to take over the facility. Specifically, his fears are about

A) exchange rate risk.
B) economic risk.
C) societal risk.
D) political risk.

Question 66

With a foreign licensing strategy, the company granting the right to manufacture and sell a product in overseas markets is called the

A) royalty receiver.
B) licensor.
C) licensee.
D) license initiator.

Question 67

Regional free trade areas have been formed in order to

A) duplicate government regulatory systems.
B) reduce tariffs to increase trade.
C) coordinate the currencies of included countries.
D) accommodate the demands of organized labor.

Question 68

The export strategy option involves

A) the sale of goods from abroad in the home country.
B) the sale of products produced in the home country to customers in another country.
C) the purchase of the right to manufacture and sell a firm's product in overseas markets.
D) the authorized use of intellectual property.

Question 69

If an entrepreneur has decided to go global, the next step is to

A) begin to hire employees with international experience.
B) spend some time estimating the market potential of various countries.
C) join a trade mission.
D) plan a strategy that takes into account the potential of the firm.

Question 70

Forming from scratch a wholly-owned subsidiary in another country can be most accurately described as

A) a greenfield venture.
B) a cross-border acquisition.
C) an international transplant.
D) a duplication strategy.

Question 71

John Berryhill is interested in joining with a large corporation in a cooperative venture to share risks and pool resources for his small auto parts manufacturing business, so the strategy option he is exploring could best be described as

A) an international strategic alliance.
B) exporting.
C) importing.
D) international cost shifting.

Question 72

For small businesses, the ultimate incentive to go global is the following:

A) Purely domestic firms are less likely to stay in business over the long run.
B) Government programs are available to ensure success of global firms, but not domestic ones.
C) If you fail to seize an international market opportunity, someone else will.
D) Research shows that global firms experience more consistent gains in profitability.

Question 73

Crossborder Manufacturing USA has developed a new and wholly-owned subsidiary in another country that is most accurately described as

A) a greenfield venture.
B) a cross-border acquisition.
C) an international transplant.
D) a duplication strategy.

Question 74

Economic risk refers to the

A) risk that a startup will not generate the performance necessary to stay in business long term.
B) potential for loss of capital in a business deal.
C) probability that a government will change business conditions and hinder firm performance.
D) chance that an entrepreneur will not be financially successful.

Question 75

With a foreign licensing strategy, the company purchasing the right to manufacture and sell a product in overseas markets is called the

A) royalty receiver.
B) licensor.
C) licensee.
D) license initiator.

Question 76

Importing can be described as the

A) "flip side" of exporting.
B) sale of products produced in the home country to customers in another country.
C) purchase of the right to manufacture and sell a firm's product in overseas markets.
D) authorized use of intellectual property.

Question 77

If a small business sets up a design studio in Milan, Italy to create its line of specialty apparel, it is going global to

A) expand its market.
B) take advantage of special features of location.
C) seek protection for its design patents.
D) obtain critical raw materials.

Question 78

Part of the appeal of forming a regional trade area is that companies can then

A) gain access to more employees.
B) benefit from locational features unrelated to costs.
C) draw upon the advantages of a "fortress mentality."
D) acquire the potential to expand into international markets.

Question 79

Increasingly, small businesses are expanding internationally to

A) obtain raw materials.
B) gain access to skilled labor.
C) create job opportunities for domestic employees.
D) take advantage of government incentives.

Question 80

For most small businesses, the primary motivation for going global is to

A) develop new market opportunities.
B) reduce the costs of doing business.
C) gain access to resources that are important to the firm's operations.
D) capitalize on special features of location.