Deck 8: International Strategy

Question 1

The liability of foreignness has become an obsolete concern, as illustrated by the success of many U.S. firms overseas and the success of foreign companies in the U.S.

Answer 1

False

Question 2

Cemex, the Mexico-based cement maker, is very successful in emerging nations because it uses low-tech methods for coordinating its operations suitable to the conditions in these countries. This has allowed Cemex unusually strong economies of scale.

Answer 2

False

Question 3

Despite the growth and spread of an internationally diversified organization, the influence of the home country's culture remains an important source of competitive advantage.

Answer 3

True

Question 4

A traditional motive for internationalization has been to secure needed resources, especially minerals and energy.

Question 5

The example of General Motors' business in China and Europe vividly illustrates that a firm's home market, not international markets, is always responsible for the majority of profits.

Question 6

Companies wishing to gain cost efficiencies may choose to take advantage of low production costs found in countries such as Malaysia.

Question 7

Universal product demand has permeated all types of goods and services so thoroughly that firms rarely find they need to customize products for particular cultures or nations.

Question 8

Having substantial supplies of critical basic natural resources is a necessary condition for a country to support businesses which can successfully compete in international markets.

Question 9

Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's model of national competitive advantage.

Question 10

As a formerly innovative product becomes standardized, its production can be moved out of the U.S. to a country with low manufacturing costs, thus extending the product's life cycle.

Question 11

A global strategy assumes that the strategic business units operating in each country are interdependent.

Question 12

In order to achieve economies of scale, some manufacturing industries in nations (such as Korea) with small domestic markets must globalize.

Question 13

The requirement for local repair and service capabilities has discouraged manufacturers of household appliances, such as General Motors and Toyota, from diversifying internationally.

Question 14

To the extent that a firm is able to standardize products across country borders, use the same or similar production facilities, and coordinate critical resource functions, the more likely it is to achieve economies of scale.

Question 15

When a firm initially pursues an international business-level strategy, its home country of operation may be its most important source of competitive advantage.

Question 16

A major advantage of multidomestic strategies is the ability to customize for the specific market, although this sacrifices economies of scale.

Question 17

Part of Japan's success in the video game industry is derived from two related and support industries, cartoons and animation, and electronics.

Question 18

The threat posed by Chinese automakers is restricted to firms competing for the Chinese market as these firms do not export their product.

Question 19

It is generally easier to negotiate employee layoffs in Europe than in the United States because of the generous government-provided social services in Europe.

Question 20

A multidomestic strategy assumes that consumer needs, industry conditions, and social norms are homogeneous in every country.

Question 21

A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be minimal.

Question 22

When a firm establishes its first overseas operation, this is known as its "greenfield venture."

Question 23

The chief risks in the international environment are political and cultural.

Question 24

Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of the best ways for a firm to protect its technology from being appropriated by potential competitors.

Question 25

A transnational strategy is difficult to achieve because the multiple objectives involved are contradictory.

Question 26

The primary rational for a small firm to utilize exporting as a way of entering international markets is the potential for high rates of return.

Question 27

Although licensing is the least costly method to enter a foreign market, its disadvantages include high costs of transportation and low control over the marketing and distribution of goods.

Question 28

Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.

Question 29

Research has shown international diversification leads to lower firm performance if firms do not diversify in both products and geographic locations.

Question 30

While there are multiple means of entering new international markets, firms should use one method consistently with all of its various products and across its different markets in order to reduce administrative complexity.

Question 31

As a general rule of thumb, if a company cannot make a profit in its home market, it cannot make a profit in the international market.

Question 32

A global strategy is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by offices within the host markets served.

Question 33

International associations such as the European Union, the Organization of American States and the North American Free Trade Association encourage regionalization of competition rather than globalization.

Question 34

International diversification can help to reduce a firm's overall risk through the stabilization of returns.

Question 35

The greenfield venture option is useful when control of technology is important in an international expansion.

Question 36

International strategies are complex and can therefore produce greater uncertainty for the firm.

Question 37

The "liability of foreignness" will have a greater negative impact on a firm using a multi-domestic strategy than on a firm using a global strategy.

Question 38

Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm.

Question 39

Firms in developed countries benefit more from international (geographic) diversification than from product diversification, whereas firms in developing countries benefit more if they diversify both geographically and in products.

Question 40

Establishing a wholly-owned subsidiary provides the quickest access to a new market.

Question 41

Moving into international markets is a particularly attractive strategy to firms whose domestic markets

A) demand a differentiation strategy for success.
B) are limited in opportunities for growth.
C) have developed unfriendly business attitudes toward the industry.
D) have too much regulation.

Question 42

Which of the following is NOT a motive for firms to become multinational?

A) to take advantage of potential opportunities to expand the market for the firm's products
B) to secure needed resources
C) to avoid high domestic taxation on corporate income
D) increasing universal product demand

Question 43

The increased pressures for global integration of operations have been driven mostly by

A) new low cost entrants.
B) universal product demand.
C) increased levels of joint ventures.
D) the rise of governmental regulation.

Question 44

There is no "ideal" level of internationalization as the amount of international diversification that can be managed varies from firm to firm and according to the abilities of each firm's managers.

Question 45

Chinese firms are becoming more competitive globally due to all of the following EXCEPT

A) emerging technological capabilities gained from foreign partners.
B) the development of their own branded products.
C) greater ability to export product due to the weakening of their currency relative to the dollar and euro.
D) increased managerial capabilities.

Question 46

Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures.

Question 47

Shanghai Automotive Industry Corporation (SAIC) exports few cars outside of the Chinese market. Why might established automakers monitorSAIC closely?

A) SAIC is presently exporting cars to developing economies where these firms also compete.
B) SAIC is growing in the Chinese market where these firms also compete.
C) SAIC is expected to seek entry into these firms' home markets in the future.
D) All of the above reasons are accurate.

Question 48

Raymond Vernon states that the classic rationale for international diversification is to

A) pre-emptively dominate world markets before foreign companies can establish dominance.
B) avoid domestic governmental regulation.
C) extend the product's life cycle.
D) avoid international governmental regulation.

Question 49

Fluctuation in the value of different currencies is a major economic risk associated with international diversification.

Question 50

International strategy refers to a(an)

A) action plan pursued by American companies to compete against foreign companies operating in the United States.
B) strategy through which the firm sells products in markets outside the firm's domestic market.
C) political and economic action plan developed by businesses and governments to cope with global competition.
D) strategy American firms use to dominate international markets.

Question 51

Most R&D intensive industries are international because

A) of the need to make use of scientific talent in many nations.
B) large markets are necessary for earning above-average returns on investments.
C) of mandatory requirements by emerging economies that firms take part in joint ventures or direct investment in the country in order to sell their products in that country.
D) intellectual property is copied so rapidly that firms must move products into the international market immediately.

Question 52

The size of an international market affects a firm's willingness to invest in R&D. Larger markets usually offer ____ potential returns and pose ____ risk for a firm's investments.

A) lower; less
B) lower; more
C) higher; less
D) higher; more

Question 53

U.S. cola companies entered the global market because of

A) fully-exploited domestic markets for cola.
B) lower labor costs in the emerging markets.
C) economies of scale that offset research and development costs.
D) an increase in the return on investment from their U.S. bottling plants.

Question 54

A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar.

Question 55

The motivations for expanding into international markets include each of the following opportunities EXCEPT

A) increasing the size of the firm's potential markets.
B) increased return on investment.
C) gaining a competitive advantage through location.
D) favorable tax concessions and economic incentives by home-country governments.

Question 56

Which of the following is NOT a factor pressuring companies for local responsiveness?

A) the need for local repair and service to customers
B) customization due to cultural differences
C) government pressure for firms to use local sources for procurement
D) availability of low labor costs

Question 57

If a firm chooses to expand internationally, it must attempt to compete in all the major world markets, or else lose its competitive advantage.

Question 58

As U.S. firms multiply across the globe it has become apparent that the American method of managing and motivating employees is adaptable to almost every culture.

Question 59

U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness due to

A) increasing rejection of American culture across much of the world.
B) the sophistication of the international consumer due to the Internet.
C) customization required by cultural differences.
D) the increasing loss of economies of scale.

Question 60

The business of a U.S. manufacturing firm which exports products to India could be at risk if relations between India and the United Kingdom were to deteriorate.

Question 61

A global corporate-level strategy emphasizes

A) differentiated products.
B) economies of scale.
C) sensitivity to local product preferences.
D) decentralizing control and limited monitoring.

Question 62

Under industry structural analysis (chapter 2), ____ rivalry is viewed as detrimental to profitability. Under the model of national advantage (chapter 8), ____ rivalry is viewed as ____ as it results in competition and surviving firms are able to compete against global rivals.

A) low; low; beneficial
B) low; low; detrimental
C) high; high; beneficial
D) high; high; detrimental

Question 63

Firms with core competencies that can be exploited across international markets are able to

A) achieve synergies and produce high quality goods at lower costs.
B) enter new markets more quickly.
C) enhance their market image and brand loyalty among local consumers.
D) meet local government requirements more quickly than their international competitors.

Question 64

A global corporate-level strategy differs from a multidomestic corporate-level strategy in that in a global strategy,

A) competitive strategy is dictated by the home office.
B) competitive strategy is decentralized and controlled by individual strategic business units.
C) products are customized to meet the individual needs of each country.
D) the firm sells in multiple countries.

Question 65

In France, fine dressmaking and tailoring have been a tradition predating Queen Marie Antoinette. Cloth manufacturers, design schools, craft apprenticeship programs, modeling agencies, and so forth, all exist to supply the clothing industry. This is an example of the ____ in Porter's model.

A) strategy, structure and rivalry among firms
B) related and supporting industries
C) demand conditions
D) factors of production

Question 66

The four aspects of Porter's model of international competitive advantage include all of the following EXCEPT

A) factors of production.
B) demand conditions.
C) political and economic institutions.
D) related and supporting industries.

Question 67

Which pair of industries would NOT be considered as "related and supporting" under Porter's diamond model?

A) Japanese cameras and copiers
B) Italian leather and shoes
C) U.S. computers and software
D) All of the above are related and supporting

Question 68

A multidomestic corporate-level strategy is one in which

A) a corporation chooses not to compete internationally but where there are a number of international competitors in the firm's local marketplace.
B) the firm produces a standardized product, but markets it differently in each country in which it competes.
C) the firm customizes the product for each country in which it competes.
D) the firm competes in a number of countries, but it is centrally coordinated by the home office.

Question 69

All of the following are international corporate-level strategies EXCEPT the ____ strategy.

A) multidomestic
B) universal
C) global
D) transnational

Question 70

In addition to the four basic dimensions of Porter's "diamond" model, ____ may also contribute to the success or failure of firms.

A) national work ethic
B) educational requirements
C) government policy
D) national pride

Question 71

In Porter's model, a specialized factor of production would include

A) abundant natural resources.
B) a large workforce.
C) an extensive highway transportation system.
D) workers with advanced engineering skills.

Question 72

A large domestic market can provide the country's industries a chance at dominating the world market because

A) they have been able to develop economies of scale at home.
B) they have access to abundant and inexpensive factors of production.
C) the related and supporting industries will have been developed.
D) the nation's culture and educational system will be adapted to producing the labor force needed for the industry.

Question 73

A multidomestic corporate-level strategy has ____ need for global integration and ____ need for local market responsiveness.

A) low; low
B) low; high
C) high; low
D) high; high

Question 74

To maximize profitability, the best international corporate-level strategy to use always

A) is the multi-domestic strategy.
B) is the transnational strategy
C) is the global strategy.
D) depends on the product or service being offered.

Question 75

Optimal economies of scale in the international market for a standardized product derive from

A) the ability to have production facilities similar to those already used in the home market.
B) effective investment in research and development.
C) access to a low-cost labor force in the host market.
D) rapid advances in new technology with unique demands in each host market.

Question 76

Factors of production in Porter's model of international competitive advantage include all of the following EXCEPT

A) labor.
B) capital.
C) infrastructure.
D) technology.

Question 77

A fundamental reason for a country's development of advanced and specialized factors of production is often its

A) lack of basic resources.
B) monetary wealth.
C) small workforce.
D) protective tariffs.

Question 78

International corporate-level strategy focuses on

A) the scope of operations through both product and geographic diversification.
B) competition within each country.
C) economies of scale.
D) sophistication of monitoring and controlling systems.

Question 79

The location advantages associated with locating facilities in other countries can include all of the following EXCEPT

A) lower cost labor.
B) access to critical supplies.
C) access to customers.
D) evasion of host country governmental regulations.

Question 80

Japan, due to a lack of undeveloped land, would be an unusual choice of location for a U.S. cattle company to set up local grazing operations. This limiting factor would be identified in what part of Porter's determinants of national advantage?

A) Factors of production
B) Demand conditions
C) Related and supporting industries
D) Firm strategy, structure and rivalry