Deck 7: International Strategy: Creating Value in Global Markets

Question 1

Which one of the following is one of Theodore Levitt's assumptions supporting a pure global strategy?

A) Consumers are willing to pay more for specific product features.
B) Customer needs and interests are becoming more dissimilar.
C) If the world markets are treated as heterogeneous, substantial economies of scale are easily achieved.
D) MNCs can compete with aggressive pricing on low cost products that meet the common needs of global consumers.

Answer 1

D

Question 2

Many U.S. multinational companies set up maquiladora operations south of the US-Mexico border primarily

A) to sell products into the growing Mexican market.
B) to help diversify their product
C) to avoid paying taxes in the US
D) to take advantage of the low cost of labour.

Answer 2

D

Question 3

As in the case of Siebel Systems, elements of a global strategy may facilitate the competitive advantage of differentiation by

A) increasing the freedom of individual business units to adapt to local tastes.
B) creating a worldwide network to achieve consistent service regardless of location.
C) offering flexibility in applying R&D to meet country-specific needs.
D) tailoring products to meet country-specific needs.

Answer 3

B

Question 4

High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?

A) global
B) multidomestic
C) transnational
D) overall cost leadership

Question 5

By the end of the 20^th century, the world's population exceeded 6 billion, with Canada representing

A) less than 0.5 percent
B) slightly more than 5 percent
C) about 320 million
D) less than 3.2 million

Question 6

All of the following are risks associated with a global strategy except

A) a firm with only one manufacturing location must export its product-some of which may be a great distance from the operation.
B) the geographic concentration of any activity may also tend to isolate that activity from the targeted markets.
C) concentrating an activity in a single location makes the rest of the firm dependent on that location.
D) the pressures for local adaptation may elevate the firm's cost structure.

Question 7

All of the following are limitations of a multidomestic strategy except

A) less ability to realize cost savings through scale economies.
B) greater difficulty in transferring knowledge across countries.
C) single locations may lead to higher tariffs and transportation costs.
D) may lead to "overadaptation" as conditions change.

Question 8

Microsoft decided to establish a corporate research laboratory in Cambridge, England

A) because England is an ally of the United States.
B) because they could access technical and professional talent available in Cambridge.
C) because the local language is English.
D) because the company views the United States as a risky place to expand due to the actions of the U.S. Department of Justice.

Question 9

Firms following a global strategy strive to offer ______________ products and services as well as locate manufacturing, R&D, and marketing activities in _____________ locations.

A) a wide variety of; several
B) a wide variety of; few
C) standardized; several
D) standardized; few

Question 10

Which of the following is a disadvantage of a transnational strategy?

A) less ability to realize cost savings through scale economies
B) limited ability to adapt to local markets
C) unique managerial challenges in fostering knowledge transfer
D) single locations may lead to higher tariffs and transportation costs

Question 11

When Dofasco approached the cultural differences of operating in Mexico, Dofasco's motto "our strength is people" was a problem because

A) it did not translate into Spanish.
B) Latin American customers wanted a focus on the product.
C) Mexican workers typically expect more hierarchical structures and want managers to supervise.
D) Mexican workers like a "flat organization" with no supervision.

Question 12

Pressures to "reduce costs" require that

A) a company should not trade idiosyncratic preferences in product features for higher economic returns.
B) a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects.
C) the manager should follow a multidomestic strategy to maximize the economic benefits to the company.
D) the company needs to supplement the local foreign economy in a manner specified by the local government.

Question 13

Lingo Media of Toronto was mentioned in Chapter Seven as being a good example of a small company

A) that competes in industries in which consumer preferences vary substantially in each country.
B) that has high visibility in both Canada and foreign markets.
C) selling entertainment programs into the Korean market.
D) penetrating the Chinese market for ESL teaching materials.

Question 14

Since Molson's investment in Kaiser in Brazil, that company's market share in Brazil has

A) increased to second place.
B) stayed the same.
C) fallen to third place.
D) increased to fourth place.

Question 15

At the time Molson invested into the Brazilian beer market in 2002, the Brazilian market was

A) monopolistic.
B) consolidated.
C) fragmented.
D) dominated by U.S. brewers.

Question 16

Low pressure for local adaptation combined with low pressure for lower costs would suggest what type of strategy?

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

Question 17

All of the following are limitations of a global strategy except

A) limited ability to adapt to local markets.
B) the ability to locate activities in optimal locations.
C) the concentration of activities may increase dependence on a single facility.
D) single locations may lead to higher tariffs and transportation costs.

Question 18

According to Michael Porter, firms that have experienced intense domestic competition are

A) unlikely to have the time or resources to compete abroad.
B) most likely to design strategies aimed primarily at the domestic market.
C) more likely to design strategies and structures that allow them to successfully compete abroad.
D) more likely to demand protection from their governments.

Question 19

In Michael Porter's framework all of the following factors affect a nation's competitiveness except

A) factor endowments.
B) demand conditions.
C) related and supporting industries.
D) policies that protect the nation's domestic competitors.

Question 20

Rivalry is intense in nations with conditions of ________ consumer demand, ___________ supplier bases, and ____________ new entrant potential from related industries.

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

Question 21

Typically, intense rivalry in domestic markets does not force firms to look outside their national boundaries for new markets.

Question 22

International expansion can extend the life cycle of a product that is in its maturity stage in a firm's home country.

Question 23

In order to realize the strongest competitive advantage, firms engaged in worldwide competition must

A) require that all of their various business units follow the same strategy regardless of location.
B) ensure that all business units follow a strategy strictly tailored to their respective locations.
C) pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results.
D) attempt to use the strategy that was most successful in their home country.

Question 24

Demanding domestic consumers tend to push firms to move ahead of companies in other countries where consumers are less demanding and more complacent.

Question 25

During the 1990s, western telecommunication firms frequently sold its earlier generation telephone switches to developing countries at lower costs, and used the revenues for R&D.

Question 26

The text mentions Canadian firms Lingo Media and Hydrogenics as having directed all their efforts to overseas markets with

A) transfer prices.
B) dividends.
C) little local presence at home in Canada.
D) intra-corporate inflows.

Question 27

With regard to "factor conditions," the pool of resources that a firm (or nation) has is much more important than the speed and efficiency with which these resources are deployed.

Question 28

Prior to Molson's investment in Brazil, they had merged with Carling O'Keefe-this merger did not yield significant accomplishments.

Question 29

Many international firms are increasing their efforts to market their products and services to countries such as India and China as the ranks of their middle class continue to increase.

Question 30

Units coordinate their activities with headquarters and with one another, units adapt to special circumstances only they face, and the entire organization draws upon relevant corporate resources. These are all attributes of which type of strategy?

A) a global strategy
B) a transnational strategy
C) an international strategy
D) a multidomestic strategy

Question 31

The textbook's description of the international expansion of Edmonton-based engineering firm Stantec Inc. is a good example of expansion through

A) joint venture.
B) strategic alliance.
C) wholly owned subsidiary.
D) franchising operation.

Question 32

___________ occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house.

A) Offshoring
B) Strategic alliance
C) Outsourcing
D) Wholly owned subsidiary

Question 33

In Michael Porter's "diamond of national advantage," there are four broad attributes that, as a system, constitute a nation's competitiveness in an industry.

Question 34

The form of entry strategy into international operations that offers the lowest level of control would be

A) franchising.
B) licensing.
C) joint venture.
D) exporting.

Question 35

A domestic corporation considering expanding into international markets for the first time will typically

A) start off by implementing a wholly owned foreign subsidiary so it can maintain standards identical to those at home.
B) consider licensing or franchising its operations.
C) consider implementing a low risk/low control strategy such as exporting.
D) form a joint venture with a reputable foreign producer.

Question 36

The difference between a franchise and licensing contract is that

A) a franchise contract has a broader range of factors and is usually longer in duration.
B) a franchise contract must include a foreign government.
C) a licensing contract covers more aspects of operations.
D) a franchise contract involves less control and less risk.

Question 37

IMAX claims that every new theatre that opens somewhere in the world lowers the cost of production of its unique movies.

Question 38

Which of the following describes the most typical order of entry into foreign markets?

A) franchising, licensing, exporting, joint venture, and wholly owned subsidiary
B) exporting, licensing, franchising, joint venture, and wholly owned subsidiary
C) licensing, exporting, franchising, joint venture, and wholly owned subsidiary
D) exporting, franchising, licensing, joint venture, and wholly owned subsidiary

Question 39

An advantage of international expansion is that it can enable a firm to optimize the location of every activity in its value chain.

Question 40

Differences in foreign markets such as culture, language, and customs can represent significant management risks when firms enter foreign markets.

Question 41

Typically, the best method of entry into a foreign market is the establishment of a wholly owned foreign subsidiary so that the parent organization can maintain a high level of control.

Question 42

Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy than those in which more value is added downstream (closer to the customer).

Question 43

According to the text, Canadian firms around the world were targets of animal rights groups who did not approve of seal hunting in Newfoundland.

Question 44

A key tenet of a transnational strategy is improved adaptation to all competitive situations as well as flexibility by capitalizing on communication and knowledge flows throughout the organization.

Question 45

Among Theodore Levitt's assumptions that would favour a global strategy is that consumers around the world are becoming less price-sensitive.

Question 46

Within a worldwide market, the most effective strategies are neither purely multidomestic nor purely global.

Question 47

Canadian steel company Dofasco looked at cultural challenges in expanding and decided to stick to its famous motto: "our strength is people."

Question 48

Multinational firms following a transnational strategy strive to optimize the trade-offs associated with efficiency, local adaptation, and learning.

Question 49

Corporations with multiple foreign operations that act very independently of one another are following a multidomestic strategy.

Question 50

The need to attain economies of scale encourages multinational firms to operate under a multidomestic strategy.

Question 51

Two opposing pressures that managers face when they compete in foreign markets are: cost reduction and adaptation to local markets.

Question 52

To address the challenges of a multidomestic strategy, Maple Leaf Foods customizes its prepared meats to meet local tastes.

Question 53

Explain Michael Porter's "diamond of national advantage."

Question 54

Explain how the two opposing forces facing MNC managers, cost reduction and local adaptation, create pressures to operate with a global or multidomestic strategy, respectively.

Question 55

A multidomestic strategy is the most appropriate strategy for international operations because it drives economies of scale as far as possible and provides a middle of the road product appealing to the largest number of consumers in every market.

Question 56

Discuss why international expansion is a viable diversification strategy that is being pursued by many firms.

Question 57

A multidomestic strategy would likely include the use of high volume, centralized production facilities to maximize economies of scale.

Question 58

Dispersion of value chains across different countries mainly occurs through offshoring and outsourcing.

Question 59

Summarize the most important benefits and risks associated with diversification into global markets.

Question 60

In a global strategy a firm operates all its businesses under a single common strategy regardless of location.

Question 61

What are some of the primary benefits of transnational strategies?

Question 62

According to Theodore Levitt, what are the three assumptions that favour the pursuit of a "pure" global strategy?

Question 63

What are the six basic types of entry strategies for international expansion?

Question 64

Discuss how the global dispersion of value chains has influenced the traditional modes of international expansion.