Deck 9: Global Strategies and the Multinational Corporation

Question 1

By factor conditions in his 'national diamond', Porter means either the growth of local resources or their unusually strong absence which can lead to the development of innovative substitutes.

Answer 1

True

Question 2

It is becoming more common for firms to separate decisions on where to produce from decisions on where to invest.

Answer 2

False

Question 3

The primary source of scale economies nowadays is the cost of developing new products.

Answer 3

True

Question 4

The growth of world trade has exceeded growth in the world's economies.

Question 5

A criticism of the national diamond is that it is so general it does NOT produce testable (falsifiable)predictions.

Question 6

Firms try to locate production of each stage of the value chain in those countries where transport costs to the next stage are the lowest.

Question 7

Porter's national diamond framework identifies four factors that determine a company's competitive advantage within a sector.

Question 8

The two main mechanisms for expanding internationalization are cultural collaboration and military rivalry.

Question 9

Long-term agreements between gas producers and gas pipeline companies are an example of a strategic alliance.

Question 10

By strategy, structure, and rivalry, Porter means things such as intense domestic competition - e.g., good restaurants in France.

Question 11

Being international can be a source of competitive advantage.

Question 12

There is no point in making minor changes to a standard product just for the local market.

Question 13

Theodore Levitt was undoubtedly right in 1983: consumer tastes have become the same pretty well across the globe.

Question 14

The theory of comparative advantage is an older name for the theory of competitive advantage.

Question 15

A country has a comparative advantage in those products that make the least use of those resources which it has in abundance.

Question 16

Internationalization occurs through trade and indirect investment.

Question 17

Most MNCs today are trying to reconcile the advantages of national differentiation of products with those of global economies of scale or other gains from global integration.

Question 18

The internet has stopped companies going global from inception.

Question 19

A cut in spending by the French government can have an effect on automakers in the USA and African cotton farmers.

Question 20

National cultural differences matter when the industry or product is close to the consumer - such as in retailing.

Question 21

Internationalization has

A)increased global efficiency but reduced consumer choice.
B)increased global efficiency and growth options for large and small firms.
C)increased global efficiency and growth options, and widened consumer choice.
D)increased global efficiency and growth options but reduced consumer choice.

Question 22

"Psychic distance" is the least between

A)the USA and Canada.
B)the USA and the UK.
C)the USA and the UAE.
D)Guinea-Bissau and Papua New Guinea.

Question 23

Sheltered industries are protected from

A)imports.
B)imports and exports.
C)inward direct investment and imports.
D)direct and Indirect inward investment.

Question 24

Two mechanisms promote internationalization:

A)inter-governmental bond borrowing, and inter-bank capital flows.
B)inter-bank capital flows and trade.
C)inter-bank capital flows and direct investment.
D)direct investment and trade.

Question 25

On expanding into the USA, IKEA

A)kept its markets and products unchanged.
B)made minimal changes to its products and processes.
C)consciously changed its culture but not its products.
D)changed its products but not its culture.

Question 26

For most of the last sixty years internationalization has been

A)a source of increased tension between countries.
B)a source of innovative ideas for firms and individuals.
C)a source of higher earnings for firms and individuals.
D)a source of opportunity for firms and individuals.

Question 27

Underlying both direct investment and trade are the quests to

A)exploit foreign resources, capabilities, and competitive advantage.
B)exploit foreign resources, capabilities and markets.
C)limit foreign competitive advantages.
D)limit foreign companies' ambitions.

Question 28

In its first, largely European, phase of internationalization, IKEA

A)kept its markets and products unchanged.
B)made minimal changes to its products and processes.
C)consciously changed its culture but not its products.
D)changed its products but not its culture.

Question 29

Hairdressing is traditionally an example of

A)a domestic industry.
B)a multi-domestic industry.
C)a declining industry.
D)a sheltered industry.

Question 30

International business strategy has largely identified and solved the main issues faced by practical business people in the twenty-first century.

Question 31

Consumer electronics (laptops, personal devices etc.)are an example of

A)a multi-domestic industry.
B)a global industry.
C)a trading industry.
D)the phishing industry.

Question 32

Multi-domestic industries

A)are distinguished by their focus on products for the domestic sector.
B)have very high transport costs.
C)supply standard products around the world with instructions in the local language.
D)internationalize though direct investment.

Question 33

Competitive advantage is achieved when a firm

A)achieves higher profit margins than its rivals.
B)matches its strongest resources & capabilities to the key success factors of the industry.
C)achieves the highest asset turnover ratio in the industry.
D)b and c.

Question 34

Internationalization opens

A)borders for foreign workers.
B)doors for commercial spies.
C)domestic markets to foreign competitors.
D)a and c.

Question 35

Developing new products that truly foster and exploit innovation to the maximum possible within the firm is the toughest challenge facing top managers of large multinationals today.

Question 36

In international industries competitive advantage often means a firm will

A)emerge from a strong national environment in this industry.
B)overcome natural disadvantages in this industry, so that only the very strongest firms emerge internationally.
C)use Porter's diamond as a strategic roadmap.
D)pawn Porter's diamond and trade on the margin (but close out before margin call).

Question 37

In global industries

A)trade and direct investment are both important.
B)firms trade commodities globally.
C)capital is traded globally.
D)employees move globally.

Question 38

An international firm's competitive advantage depends not only on its resources and capabilities but also on the national environments in which it operates.

Question 39

Sheltered industries are protected by their

A)perishability.
B)transport difficulties and high transport costs.
C)very small size of operation and lack of scale economies.
D)any of the above.

Question 40

Trading industries are distinguished by

A)the widespread practice of importing and exporting.
B)the widespread practice of moving capital investments from one country to another.
C)the tendency for employees to move from one country to another.
D)all of the above.

Question 41

"Appropriating the returns to a resource" means

A)having some of the resources and capabilities needed to able to earn a higher potential profitability from your unique resources.
B)having all of the resources and capabilities needed to earn a higher potential profitability.
C)obtaining workers for the lowest wage possible.
D)ensuring that capital earns the full cost of capital.

Question 42

The advantage of alliances is that they

A)allow firms to economize on resources.
B)allow firms access to specialized resources or capabilities.
C)a and b.
D)keep all strategic options open.

Question 43

For a modern country innate resources include

A)management, developed capital markets and an efficient legal system.
B)a large home market, and good transport and communication facilities.
C)large military forces and a space capability.
D)a and b.

Question 44

That Tata Motors should stay in India and export its cars round the world shows that

A)where a firm's competitive advantage is based on national resource advantages it should not move production abroad.
B)if a firm's advantage is based on a strong local market it should keep production there.
C)exporting is the optimal strategy for tata.
D)most companies should follow the cost leader's example.

Question 45

Alliances usually go wrong if

A)firms squabble over the contributions and returns from the alliance.
B)each firm really wants to acquire the other's core capabilities.
C)the firms are customer and supplier.
D)either a or b.

Question 46

When considering where to locate production globally,

A)exporting firm-specific competitive capabilities from home territory is easy.
B)exporting firm-specific competitive capabilities from home territory is practically impossible.
C)exporting firm-specific competitive capabilities from home territory requires close attention and may not even be possible.
D)none of the above.

Question 47

Besides demand conditions, the other factors in Porter's national diamond are

A)strategy, structure, and rivalry, such as intense domestic competition.
B)factor conditions, such as the scarcity or abundance of certain resources.
C)related and supporting industries, such as clusters of complementary or supporting industries.
D)all of the above.

Question 48

Being international can be a source of competitive advantage if

A)your product or service is tradable.
B)there are significant economies of scale in your industry.
C)your customers only consider local conditions.
D)a and b.

Question 49

For the theory of comparative advantage, a country's innate national endowments include its

A)climate, labour, and exports.
B)climate, labour, and its steel industry.
C)climate, minerals, history, and culture.
D)climate, labour, and its financial wealth.

Question 50

The diagram illustrating the optimal location of value-chain activities shows that

A)at least five factors need to be considered.
B)having the lowest costs is the main factor.
C)each stage can be looked at on its own.
D)b and c.

Question 51

Tradability refers to the idea that

A)some products or services are almost impossible to export or import.
B)some goods have to be produced where they are consumed: eating a meal in a restaurant would be a good example.
C)a and b both illustrate the idea of tradability.
D)all other answers are wrong; tradability simply means the shipping cost as a percentage of the sales price.

Question 52

International strategic alliances allow

A)governments to share national resources.
B)retailers to control their suppliers.
C)strong firms to dominate weak ones without having to buy them.
D)firms to share resources and capabilities.

Question 53

Comparative advantage refers to

A)a country's absolute efficiency in producing goods or services.
B)a country's relative efficiency in producing goods or services.
C)a country's total efficiency in producing goods or services.
D)a country's inefficiency in producing goods or services.

Question 54

Porter's national diamond identifies some factors that

A)determine a country's competitive advantage for a sector.
B)determine a country's national income.
C)determine the growth rate of a country's national income.
D)determine the growth rate of its exports.

Question 55

An advantage of internationalizing can be

A)to learn from the fiercest competition or most demanding customers in the world.
B)to drive the fiercest competitors in the world into bankruptcy.
C)to teach the most demanding customers in the world a lesson.
D)a and b.

Question 56

Knowledge-based assets are best exploited through

A)replicating the product or service in other countries or markets.
B)internationalizing the product or service.
C)a focus strategy.
D)moving employees around every two years.

Question 57

Competing strategically means

A)defeating the Gauls, Goths, and barbarians.
B)using profits from one country to subsidize a price war in another country.
C)answer b and subtler versions of the same principle.
D)using tactics drawn from military manuals.

Question 58

Firms can use a value chain analysis of their industry

A)as the basis of their customer segmentation.
B)to divide and locate production between countries with different natural resources that suit each stage of production.
C)to identify the profitability of production at each stage of the firm value chain.
D)to definitively categorize their suppliers.

Question 59

The people who might profitably use a Porter's national diamond analysis are

A)policymakers, such as politicians and civil servants.
B)the boards of companies when deciding where to locate their major resource centres (Corporate HQ, R&D labs, Marketing etc.).
C)venture capitalists when influencing where a start-up company should locate itself.
D)all of the above.

Question 60

A country has a comparative advantage

A)in producing milk if its cows are heavy milk producers.
B)in producing mobile phones if it has a big timber industry.
C)in producing those products or services that make intense use of those resources in which it has a relative abundance.
D)in producing those products or services that make intense use of those resources for which it has the lowest domestic demand.

Question 61

International retailing has generally NOT succeeded because

A)it should be a pleasurable experience that varies with national cultural differences.
B)it should be a pleasurable experience unless you have no money.
C)retailers find it hard to get the same products at the same prices around the world.
D)retailers find it hard to replicate the same logistic systems around the world.

Question 62

The "triad doctrine" no longer works because

A)the triads were wiped out in the 1990s.
B)linking to organized crime doesn't work because it is actually not well organized.
C)the world now has more than three major economic centres.
D)in reality there is no such thing as an economic centre of activity.

Question 63

If a rival uses cash flows from one country to finance aggressive pricing in another,

A)this is illegal under world trade organization rules.
B)now is the time to attack his high-price markets and grow your market share there.
C)you must retaliate in the price war - or drop all your strategic goals in this country.
D)stay out of this price war.

Question 64

Transnational corporations (TNCs)differ from multinational corporations (MNCs)in that

A)they have different kinds of internal financial reconciliation processes.
B)TNCs are a globally integrated network of independent profit centers.
C)TNCs are a globally integrated network of independent resources and capabilities.
D)there is no real difference.

Question 65

Many MNCs are 'captives of their history' because

A)structure follows strategy, and their original strategies may now be irrelevant.
B)once you have established them successfully, it is hard to change both international structures and strategies.
C)strategy follows structure, so they have to adapt their global strategies to the reality of global political structures.
D)a and b.

Question 66

A symbol of TNCs acting differently from MNCs is

A)creating or moving divisional or corporate headquarters out of the firm's country of origin.
B)developing product logos that are globally recognizable.
C)listing the company's shares on several global stock markets.
D)all of the above.