Deck 15: Global Production, Outsourcing, and Logistics

Question 1

In international business,a relatively high level of fixed costs can make it economical to perform a particular activity in several locations at once.

Answer 1

False

Question 2

In recent years,time-based competition has lost its importance in international business.

Answer 2

False

Question 3

The production and logistics functions of an international firm are independent of each other.

Answer 3

False

Question 4

Industrial products have few national differences in consumer taste and preference,hence the need for local responsiveness is reduced for such products.

Question 5

Flexible manufacturing technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

Question 6

A wide product variety makes it easier for a firm to increase its production efficiency and thus reduce its unit costs.

Question 7

The level of output at which most plant-level scale economies are exhausted is referred to as the minimum efficient scale of output.

Question 8

With the advent of flexible manufacturing technologies and mass customization,manufacturing in each major market in which the firm is active is becoming less attractive.

Question 9

A firm that improves its quality control cannot reduce its costs of value creation simultaneously.

Question 10

In recent years,the trend among U.S.firms is to outsource the "production" of certain service activities to developing nations where labor costs are lower.

Question 11

When flexible manufacturing technologies are not available,a firm can manufacture products customized to various national markets at a single factory sited at the optimal location.

Question 12

Currency appreciation can transform a low-cost location into a high-cost location.

Question 13

W.Edward Deming believed that achieving better quality requires the commitment of everyone in a company.
A. V. Feigenbaum. Deming argued that management has the responsibility to train employees in new skills to keep pace with changes in the workplace. In addition, he believed that achieving better quality requires the commitment of everyone in the company.

Question 14

In terms of Six Sigma,the higher the number of "sigmas," the greater the number of errors.

Question 15

The concept of economies of scale tells us that as plant output expands,unit costs decrease.

Question 16

In international business,production and logistics functions need not accommodate demands for local responsiveness.

Question 17

In terms of minimum efficient scale of output,the "unit cost curve" rises with output until a certain output level is reached,at which point further increases in output realize little reduction in unit costs.

Question 18

The objectives of reducing costs and increasing quality in a firm are independent of each other.

Question 19

In international business,when consumer demand is prone to large and unpredictable shifts,the firm that can adapt most quickly to these shifts will gain an advantage.

Question 20

Flexible machine cells,a flexible manufacturing technology,cannot be used for mass customization.

Question 21

Since refined sugar has a low value-to-weight ratio,even if it is shipped halfway around the world,their transportation costs account for a very small percentage of total costs.

Question 22

The drawback of a just-in-time inventory system is that it leaves a firm with excess unsold inventory that it has to write off against earnings or price low to sell.

Question 23

_____ refers to the activity that controls the transmission of physical materials through the value chain,from procurement through production and into distribution.

A) Promotion
B) Recruitment
C) Logistics
D) Benchmarking
E) Inshoring

Question 24

Good electronic data interchange systems provide corporate-level managers with the information they need for coordinating and controlling decentralized materials management groups.

Question 25

In recent years,the outsourcing decision in international businesses has gone beyond the manufacture of physical products to embrace the production of service activities.

Question 26

Firms typically use electronic data interchange (EDI)via the Internet to coordinate the flow of materials into manufacturing,through manufacturing,and out to customers.

Question 27

The complexity of transfer pricing decisions enhances internal suppliers' ability to manipulate transfer prices to their advantage,passing cost increases downstream rather than looking for ways to reduce costs

Question 28

A source of improvement in the capabilities of a foreign production site is the pressure to customize a product to the demands of consumers in a particular nation.

Question 29

When substantial investments in specialized assets are required to manufacture a component,a firm will prefer to contract it out to a supplier rather than make the component internal

Question 30

A firm that enters long-term alliances may limit its strategic flexibility by the commitments it makes to its alliance partners.

Question 31

A firm that sources its product components from internal suppliers has fewer subunits to control than a firm that sources from independent suppliers.

Question 32

Proprietary software solutions to implement electronic data interchange systems now dominate the market for global supply chain management software.

Question 33

Under a just-in-time inventory system,a company can reduce the amount of working capital it needs to finance inventory,freeing capital for other uses and/or lowering the total capital requirements of the enterprise.

Question 34

An important objective shared by both production and logistics functions of an international firm is to:

A) increase profits by lowering quality.
B) increase foreign competition.
C) lower costs by dispersing production activities.
D) decrease inventory turnover.
E) stock excess inventory on hand.

Question 35

Which of the following is true about production and logistics in international businesses?

A) The term production cannot be used to denote service activities.
B) Developing nations are outsourcing the "production" of certain service activities to the United States.
C) In an international firm, production and logistics are closely linked.
D) The production functions of an international firm can only be located in its home country.
E) Demands for local responsiveness create pressures to centralize production activities.

Question 36

Other things being equal,when fixed costs are substantial and minimum efficient scale of production is high,the arguments for concentrating production at a few choice locations are strong.

Question 37

A major aspect of a transnational strategy is a belief that valuable knowledge resides in a firm's domestic operations instead of its foreign subsidiaries.

Question 38

Champion Works Inc.is an animation company,headquartered in the U.S.The CEO of the company has decided to outsource some of the production to companies in developing countries,as the firm seems to be losing out on its competitive advantage.This decision to shift functions or processes to less developed countries is due to their:

A) strong intellectual property rights laws.
B) lower labor costs.
C) accessibility to better technology.
D) sophisticated infrastructure.
E) currency appreciation.

Question 39

The strategic role of establishing a foreign production facility is to produce labor-intensive products at as low a cost as possible.

Question 40

A second strategic objective shared by production and logistics is to increase product quality by eliminating defective products from both the supply chain and the manufacturing process.In this context,quality means _____,implying that the product has no defects and performs well.

A) affordability
B) flexibility
C) reliability
D) adaptability
E) patentability

Question 41

Which of the following statements is true about performing a manufacturing activity in several locations at once?

A) A manufacturing activity must be performed at multiple locations when the fixed costs of setting up a production plant are high.
B) Performing a manufacturing activity in several locations makes it difficult for a firm to accommodate demands for local responsiveness.
C) Producing in multiple locations reduces the bargaining power of a firm against manufacturers.
D) The larger the minimum efficient scale of a plant relative to total global demand, the greater the need for decentralizing production to multiple locations.
E) Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.

Question 42

Which of the following is a consequence of adverse changes in exchange rates?

A) It brings more foreign direct investment into the country.
B) It decreases the dollar cost of products exported from the country.
C) It alters a country's attractiveness as a manufacturing base.
D) It transforms the country into a low-cost location.
E) It decreases the amount of imports brought into the country.

Question 43

Six Sigma refers to a statistically based philosophy that aims to:

A) increase defects.
B) lower productivity.
C) increase the costs of value creation.
D) eliminate waste.
E) increase cost per unit.

Question 44

Which of the following is a drawback of ISO 9000 certification?

A) It is bureaucratic and costly for many firms.
B) It is an impossible standard to achieve.
C) It is losing its prominence in international business.
D) It is ineffective in Europe.
E) It is ineffective in bringing about quality improvement.

Question 45

Which of the following location externalities is favorable for foreign direct investment in a country?

A) Presence of supporting industries
B) Market saturated with other foreign competitors
C) Lack of intellectual property rights laws
D) Presence of a communist political system
E) Adverse changes in currency exchange rates

Question 46

Uniway Technologies Inc.has based its manufacturing units in the country of Lanthania.The country's stable economic and political environment has helped the firm gain competitive advantage by lowering its production costs and improving product quality.Other things being equal,the benefits realized from such a strategy can be typically referred to as _____.

A) economies of scope.
B) location economies.
C) diseconomies of scale.
D) economies of power.
E) learning economies.

Question 47

Which of the following is a consequence of improved quality control?

A) Greater warranty costs
B) Higher scrap costs
C) Direct reduction in unit costs
D) Decreased productivity
E) Reduced inventory turnover

Question 48

The effect of improved quality control is to lower the costs of value creation by reducing production and:

A) decreasing inventory turnover.
B) decreasing after-sales service costs.
C) increasing scrap costs.
D) increasing warranty costs.
E) increasing time spent on fixing defects.

Question 49

The principal tool that most managers now use to increase the reliability of their product offering is _____,a statistically based methodology for improving product quality.It is a direct descendant of the total quality management philosophy.

A) Six Sigma
B) lean manufacturing
C) just-in-time inventory
D) ISO 9000
E) mass customization

Question 50

The level of output at which most plant-level scale economies are exhausted is known as _____.

A) mass customization
B) breakeven point
C) minimum efficient scale
D) just-in-time
E) lean production

Question 51

To be able to accommodate demands for local responsiveness,a firm should:

A) ignore national differences in consumer tastes and preferences.
B) decentralize production activities to the major national or regional markets.
C) ensure that the manufacturing processes in all units are inflexible.
D) standardize the product coming out of all manufacturing units.
E) refrain from hiring host country managers.

Question 52

Uvicon Inc.and Bionor Inc.are firms that compete against each other in the global market.Uvicon Inc.has a high level of fixed costs and high minimum efficient scale,while Bionor Inc.has a low level of fixed costs and minimum efficient scale.In this scenario,which of the following is true?

A) Uvicon Inc. will be better prepared to hedge against potential adverse moves in currencies than Bionor Inc.
B) Uvicon Inc. will benefit from centralizing its production activities and Bionor Inc. from decentralizing.
C) Uvicon Inc. will have more bargaining power over contract manufacturers than Bionor Inc.
D) Uvicon Inc. will be better enabled to adapt to changes in consumer demand in regional markets than Bionor Inc.
E) Uvicon Inc. will be better prepared to accommodate demands for local responsiveness than Bionor Inc.

Question 53

The concept of _____ tells us that as plant output expands,unit costs decrease.One reason is the greater utilization of capital equipment.

A) minimum efficient scale
B) lean production
C) Six Sigma
D) economies of scale
E) total quality management

Question 54

Which of the following statements is true of Six Sigma?

A) The higher the number of "sigmas," the higher the number of errors.
B) At Six Sigma, a production process would be 90 percent accurate.
C) Six Sigma work standards are based solely on numbers or quotas.
D) It is almost impossible for a company to achieve Six Sigma perfection.
E) Six Sigma is the modern successor to ISO 9000.

Question 55

Pink Polka Fashion Inc.,a multinational clothing brand,has plans to expand in the European Union (EU)marketplace.In order to be able to do so,the EU requires that the:

A) firm adopt techniques of total quality management.
B) firm achieve six sigma.
C) firm uses just-in-time inventory system.
D) firm patents its designs and technology.
E) firm's products be certified under ISO 9000.

Question 56

A statistically based philosophy that aims to reduce defects,boost productivity,eliminate waste,and cut costs throughout a company is known as _____.

A) ISO 9000
B) just-in-time
C) Six Sigma
D) lean production
E) total quality management

Question 57

Which of the following is true of W.Edward Deming's beliefs about the total quality management philosophy?

A) He suggested that the quality of supervision should be improved by allowing more time for supervisors to work with employees.
B) He argued that management should embrace the philosophy that mistakes, defects, and poor-quality materials are acceptable.
C) He believed that work standards should be defined as numbers or quotas.
D) He believed that achieving better quality requires the commitment of only the top management.
E) He recommended that management should create an environment in which employees will fear recommending improvements.

Question 58

The Six Sigma methodology is a direct descendant of the _____ philosophy that was widely adopted,first by Japanese companies and then American companies during the 1980s and early 1990s.

A) total quality management
B) enterprise resource planning
C) business process reengineering
D) just-in-time
E) business process outsourcing

Question 59

Which of the following best describes the relationship between the number of "sigmas" and the number of errors?

A) The higher the number of "sigmas," the greater the number of errors.
B) If the number of "sigmas" is a positive value, then the number of errors is always a negative value.
C) The higher the number of "sigmas," the smaller the number of errors.
D) The number of "sigmas" is independent of the number of errors.
E) If the number of "sigmas" is negative, then the number of errors is always positive.

Question 60

Manufacturing firms should typically aim at lowering the costs of value creation by:

A) decreasing inventory turnover.
B) stocking huge amounts of inventory.
C) lowering the quality of products.
D) increasing after-sales services cost.
E) reducing production costs.

Question 61

Mass customization reconciles the two goals of:

A) mass production and long production runs.
B) standardization and economies of scale.
C) high fixed costs and single production facility.
D) low cost and product customization.
E) local responsiveness and decentralized production.

Question 62

Which of the following statements is true of flexible manufacturing technologies?

A) The idea of manufacturing in each major market is becoming attractive due to these technologies.
B) They fail to produce multiple models from the same line.
C) They are used to reconcile the goals of large volumes and standardized output.
D) They decrease the utilization of individual machines.
E) They allow firms to customize products to national differences at a single facility.

Question 63

Which of the following is an implication of a mass production system?

A) It results in short production runs
B) It fails to realize economies of scale
C) It reduces the number of defects and eliminates waste.
D) It helps to accommodate consumer preferences for product diversity
E) It creates massive inventories that have to be stored in large warehouses.

Question 64

_____ refers to the production of a variety of end products at a unit cost that could once be achieved only through bulk production of a standardized output.

A) Lean production
B) Just-in-time
C) Mass customization
D) Specialized asset
E) Dynamic capability

Question 65

Amber Engineers Inc.wants to be able to customize products for different national markets and in turn increase its customer responsiveness.However,the fixed costs associated with its production are high.Hence,these functions will be performed most efficiently if Amber Engineers Inc.:

A) sets up a production facility that is well suited for mass production.
B) establishes multiple manufacturing facilities in each major national market.
C) increases each manufacturing unit's minimum efficient scale of output.
D) adopts flexible manufacturing technologies to help achieve mass customization.
E) locates its production unit in countries that have drastic fluctuations in exchange rates.

Question 66

Which of the following is true of high value-to-weight ratio products?

A) They tend to have greater weight than other products.
B) Their transportation costs account for a very small percentage of total costs.
C) They tend to be inexpensive.
D) There is great pressure to produce these products in multiple locations close to major markets.
E) These products gain weight as raw materials get processed during transportation.

Question 67

Which of the following is a consequence of using flexible machine cells?

A) It fails to adapt to the production of different products.
B) It generally results in stockpiles of partly finished products.
C) It improves capacity utilization and reduces wastes.
D) It increases setup time for complex equipment.
E) It adds to the cost structure of a firm.

Question 68

Which of the following statements is true about minimum efficient scale of output?

A) With lesser utilization of capital equipment, the chances of a firm realizing economies of scale increases.
B) A plant must avoid operating at the minimum efficient scale of output to realize all major plant-level scale economies.
C) When the minimum efficient scale of production is low relative to global demand, it will be economical to manufacture a product at a single location.
D) An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness.
E) A low minimum efficient scale increases the risks against potentially adverse fluctuations in exchange rates.

Question 69

A _____ includes a grouping of various types of machinery,a common materials handler,and a computer to control the production of a family of parts or products.

A) specialized asset
B) dynamic capability
C) turnkey project
D) flexible machine cell
E) just-in-time inventory

Question 70

A product's value-to-weight ratio affects location decision primarily because of its influence on:

A) transportation costs.
B) shelf life.
C) work-in-progress.
D) inventory turnover.
E) capacity utilization.

Question 71

Producing a standardized product in large volumes will:

A) result in diseconomies of scale.
B) increase production efficiency.
C) increase production costs.
D) result in shorter production runs.
E) result in a high minimum efficient scale of output.

Question 72

Flexible manufacturing technologies enable companies to:

A) establish multiple manufacturing facilities in each major national market.
B) build large inventories.
C) achieve product standardization across markets.
D) increase their work in progress.
E) produce customized products without a significant cost penalty.

Question 73

Which of the following is a consequence of a low minimum efficient scale?

A) It prevents a firm from utilizing capital equipment fully.
B) It enhances the need to centralize production in a single location or a limited number of locations.
C) It prevents a firm from accommodating demands for local responsiveness.
D) It increases the unit cost of products.
E) It allows a firm to hedge against currency risk by manufacturing the same product in several locations.

Question 74

A firm with a wide product variety will find it:

A) difficult to achieve shorter product runs.
B) difficult to increase its product sales.
C) difficult to reduce its unit costs.
D) easy to realize economies of scale.
E) easy to reach optimum production efficiency.

Question 75

Technological factors are making it feasible for firms to concentrate manufacturing facilities at optimal locations.The major brakes on this trend are:

A) differences in endowment factors.
B) transportation costs and trade barriers.
C) rising national differences in consumer tastes and preferences.
D) growing free trade areas and democracy.
E) declining fluctuations in exchange rates.

Question 76

Which of the following is true of products with high value-to-weight ratios?

A) They are expensive to transport.
B) They tend to increase in weight after processing
C) They tend to be restricted under trade barriers.
D) They are expensive and do not weigh very much.
E) They have a low inventory turnover.

Question 77

Two product factors impact location decisions.They are the product's value-to-weight ratio and:

A) whether the product serves universal needs.
B) the product's life cycle.
C) the product's packaging.
D) the availability of flexible manufacturing technology.
E) whether the product is produced using environmental friendly methods.

Question 78

Which of the following is an objective of lean production?

A) Reducing the quality of a product to keep unit costs low
B) Reducing setup times for complex equipment
C) Replacing customized production with mass production
D) Decreasing utilization of individual machines through scheduling
E) Increasing the level of minimum efficient scale of output

Question 79

Flexible manufacturing technologies help a company achieve mass customization,which increases its _____.

A) cost structure
B) waste
C) customer responsiveness
D) learning effects
E) externalities

Question 80

Adopting flexible manufacturing technology to produce a wide variety of end products results in:

A) increased setup times for complex equipment.
B) increased utilization of individual machines.
C) reduced quality control.
D) increased unit cost of products.
E) diseconomies of scale.